THE MARKET FAILURES
AND ECONOMY OF THE
ENVIRONMENT
The enviromental limits of private intitiative

1. PRIVATE COST AND SOCIAL COST
1.1 The decisions of the enterprises in presence of social costs
1.2 Individual and social capital
1.3 Demonstrating
1.4 Failures of the market
1.5 Public property

2. DECISIONS OF MARKET AND SOCIAL
DECISIONS
3. OWNERSHIP RIGHTS
4. PROPERTY TYPOLOGIES
4.1 Pure private property
4.2 Almost private property
4.3 Almost public property
4.4 Pure public property

FAILURES OF THE MARKET AND
ECONOMY OF THE ENVIRONMENT
The enterprises decide the quantity of production buying marginal costs
The enterprises have therefore
An incentive to economize resources to be efficient !

FAILURES OF THE MARKET AND
ECONOMY OF THE ENVIRONMENT
When the enterprise uses resources, it does not cost only for itself
(private costs), but for the whole collectivity (social costs) under forms of polluting emissions that produces environmental damages.

But the enterprise doesn't have, in an economy market pure , some incentive to take care of the social costs.
Many environmental property can be freely used without paying any price and therefore they are not subject to the economization.

If the most profitable technologies for the enterprise are the more polluting, it will choose them, and this is not quite perfect from the social point of view!
We have a problem of
DEMONSTRATING

FAILURE OF THE MARKET
In an economy of market, the resources that don't have a price, are not used in efficient way. Besides, tropes are taken place
NEGATIVE and too little demonstrating and POSITIVE demonstrating

The DEMONSTRATING as collateral and in deliberate effects of the production and of the consumption, which revert on different subjects responsible of the action of production or consumption.

The resources that don't have price are
PUBLIC PROPERTY
Used in inefficient way from the market
Public property is in fact characterized by :
. Joined consumption
. Not exclusion

For these property every one enjoys full benefit of use while The costs are supported by community.
There is no incentive to economize the use

To use the enviromental resources efficiently, it is necessary to let who uses the resource “bear the load” of the social costs that produces.
By this they can reconcile a profit and social capital .

For the enterprise
IT IS WORTH THE RULE OF MARKET
DECISION prescribes the production until (profit) the
MARGINAL PROFIT (price) is not equal to the marginal cost

According to
THE RULE OF SOCIAL DECISION
The polluter pays the damages to incorporate the social cost in its private costs
A push to economize the resource

Difference between the private and social costs is given by
DEFECTIVE DEFINITION OF THE
OWNERSHIP RIGHTS
If the ownership is well defined, the owner can exclude the others from the use and he is the only one to enjoy some benefits
A stimulation to economize property

PRIVATE PURE PROPERTY
Exclusive and divisible
. It is subject to rivalry in the consumption
. It goes to the exclusion easily you/he/she can acquire it and can be sold on the market and therefore evaluated through the price.

ALMOST PRIVATE PROPERTY
Not exclusive but divisible
. There is rivalry in the consumption
. The non exclusiveness creates problems of commune ownership ( e.g.
reserve of fishing)
The non exclusiveness blocks the recourse to the market and therefore the economic evaluation must be indirect.

ALMOST PUBLIC PROPERTY
Not exclusive and partially divisible
. Problems of accumulation and excessive exploitation (e.g. Public beach)

PURE PUBLIC PROPERTY
Not exclusive or divisible
. Absence of rivalry in the consumption
. Impracticable exclusion
Difficult economic evaluation also with the principle