Internalizing Externalities

Essay by PaperNerd ContributorUniversity, Bachelor's November 2001

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The only sure way to ensure sustainable economic growth, which does not occur at the expense of the environment, is to pass the costs of repairing any environmental damage on to those who are responsible. Asides from preventing our environment from slipping into an irreparable state, this solution presents benefits to consumer, producer and government alike. As goods that are environmentally friendly will become cheaper than those that are not demand for them will increase, while demand for those that are not will decrease. Since there will be less environmental damage to clean up, governments can pass some this money back to the public by reducing taxes. It's a known fact that the market mechanism is by far the most efficient manner through which to distribute goods, services and money - far more efficient than government beaucracy would ever be. Perhaps most importantly it is the right thing to do.

Currently we develop and prosper at the expense of the environment "“ and that, obviously, cannot go on forever. One of the oddest aspects of government policy is the massive subsidies given by governments to harmful industries. For example, in the US National Forest of Tongrass , Alaska the US Forest Service sells 500 year old trees to be pulped, and then made into throwaway nylon stockings. Promoting this "˜vital' industry the USFS spent $ 389 million building roads and providing other logging infrastructure to the logging companies. However, it only made$ 32 million off it "“ less than $ 2 dollars per 500 year-old tree. Already today the spree of environmentally friendly goods is gaining momentum. For example, in the US the organic agriculture industry has grown tremendously in the last several years. However, environmentally friendly goods, such as organic foodstuffs, come at a premium. If, however, once were...