The Economics of the Environment
greenhouse gas,are limited by terms of the Kyoto accords, a treaty signed and ratified by most of the world's nations. The treaty requires industrialized nations ratifying it to reduce their emissions of greenhouse gases such as carbon dioxide, which are thought to cause global warming, by 5.2 percent below their 1990 levels. The treaty also requires industrialized nations to assist developing nations with their efforts to reduce emissions of greenhouse gases. The vast majority of the world's nations have ratified the accords. The United States is among a minority of nations that are not participating in them.
A Green Future,
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societySam and Richard.
harmis a reciprocal one. In our first example, it is tempting to conclude that Mary and Jane, by burning fires in their fireplaces, are
harmingSam and Richard. But if Sam and Richard were not located downwind of the smoke, there would be no harm. In effect, Mr. Coase insists that the harm cannot be attributed to one party or another. Sam and Richard
causethe harm by locating downwind of the fireplaces. While there is clearly harm in this situation, we could as easily attribute it to either the generators of the smoke or the recipients of the smoke. Before Coase wrote his article,
The Problem of Social Costin 1960, the general presumption was that decision makers such as Mary and Jane
causethe harm and that they should be taxed for the costs they impose. Mr. Coase pointed out the alternative that Sam and Richard could avoid the harm by moving. Indeed, all sorts of alternative solutions come to mind even in this simple example. Mary and Jane could select types of wood that emit less smoke. They could use fireplaces that emit less smoke. They could make arrangements to time their burning to minimize the total amount of smoke that affects Mary and Jane. The goal, Coase said, is to select the most efficient from the alternatives available.
The Problem of Social Cost,
harmedby the noise inevitably generated by the operation of the airport. As time passes, people are likely to build houses near the airport to take advantage of jobs at the airport or to gain easy access to it. Those people will now be
harmedby noise from the airport. But what is the cause of this harm? By definition, there was no
harmbefore people started living close to the airport. True, it is the airport that generates the noise. But the noise causes harm
harmif someone is downwind of the smoke, the noise from the airport causes damage only if someone lives near the airport. The problem of the noise could be mitigated in several ways. First, people could have chosen not to live near the airport. Once they have chosen to live near the airport, they could reduce the noise with better insulation or with better windows. Alternatively, the airport management could choose different flight patterns to reduce noise that affects neighboring homeowners. It is always the case that there are several potential ways of mitigating the effects of airport operations; the economic problem is to select the most efficient from among those alternatives.
The Benefits and Costs of Noise Reduction,
causesthe harm? Suggest some alternative solutions to the problem.
Demand for Environmental Quality: A Spatial Hedonic Analysis,