By Peter A. Victor (auth.)
ISBN-10: 0333136187
ISBN-13: 9780333136188
ISBN-10: 1349015318
ISBN-13: 9781349015313
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Extra resources for Economics of Pollution
Sample text
One final point to be made in this context is that it does not make sense to base public policies on the individual preferences of members of the community if these preferences are expressed in ignorance of most or all of the available factual information. This problem is seldom confronted by economists whose analytical models are very often built upon the assumption of perfect information. This assumption, in one form or another, is necessary for all the normative results derived from the analysis of perfect competition, and without it there would be very little to justify many of the policies proposed by economists to patch up market failures.
First of all there is the virtual impotence felt by the individual in the face of contrary behaviour by so many others. Further- 37 more, to the extent that the benefits of a reduction in pollution are a public good, each individual firm and consumer may have to sacrifice a lot for only a small private gain from reducing its pollution. The constraints on private firms from acting in a 'sociably responsible' way, by reducing the social costs of their activities, are even stronger than in the case of the consumer.
P. , for example that the savings rate is held constant. P. P. per capita are related one to one and the social welfare function relates pollution and per capita consumption. The implications of the growth path OA for social welfare may now be seen from Fig. 7. As the economy proceeds from the origin towards point K on OA social welfare is rising, since the increase in consumption per capita more than compensates for the increase in pollution. This is indicated in Fig. 7 by the continual transition from lower to higher indifference curves.
Economics of Pollution by Peter A. Victor (auth.)
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