Economic Mechanisms for Environmental Protection: Business versus Market Transaction Costs

By Ayerbe, Conchita Garces; Gorriz, Caremen Galve | International Advances in Economic Research, May 2003 | Go to article overview
Save to active project

Economic Mechanisms for Environmental Protection: Business versus Market Transaction Costs


Ayerbe, Conchita Garces, Gorriz, Caremen Galve, International Advances in Economic Research


Abstract

This study presents theoretical arguments and evidence that attempt to show the contribution of economic mechanisms typical of a business for resolving problems of environmental protection. Firstly, a brief synopsis is given of the classic solutions that environmental economics proposes for correcting environmental externalities. Next, the benefit of expanding these two mechanisms is discussed so that they include those intermediate mechanisms for which it is not possible to clearly establish if they are developed within the domain of the market or the business. The study's focus resides in the fact that the explicit expansion of the range of solutions proposed from a macroeconomic point of view establishes a connecting point between environmental economics and business economics, an area in which academic attention to environmental matters has been significantly less. (JEL D23, K32)

Introduction

The first vestiges of environmental worry in economic thinking goes back to the start of the 1970s when environmental economics was formed as a specific area in general economics. The basic argument of environmental economics is found in the problem of externalities associated with the use of common property natural resources. Given that there is no meaningful price that represents the value of these resources, their conservation or improvement does not offer individual monetary rewards. Likewise, individual degradation actions or uncontrolled consumption are not penalized through the imposition of costs. The consequence is immediate: the particular economic decisions that affect that common property natural resources do not consider the impact (externality) caused to the rest of the co-owners.

Based on this argument, the solution proposed by environmental economics has the basic objective of defining the appropriate economic mechanisms for internalizing the externalities. In order to achieve this objective, two types of mechanisms have been proposed: the interventionist solution and the market solution. In general, environmental economists have reduced the core of their discipline to discussing the benefit of each one of these two mechanisms. Nevertheless, resolving the problem of environmental externalities must be completed by the efforts of business organizations. In the following pages, the authors will defend this argument according to the underlying hypothesis that business constitutes an alternative mechanism that, in certain circumstances, allows contributing to the internalization of environmental externalities at a comparatively lower cost.

Classic Economic Mechanisms for Correcting Environmental Externalities

Environmental economics is concerned with the relationship between economic activity and the surrounding economic framework developing according to the principles of sustainability. The most commonly accepted definition of sustainable development is established in the Brundtland Report by the World Commission on Environment and Development [1987, p. 8]. It is development that satisfies present needs without compromising the capacity of future generations to satisfy their own needs. To do so, it studies three basic areas: resolving the problem of externalities, optimizing inter-generational assignment of non-renewable resources, and valuation of non-market resources. For the purposes of the arguments shown in this study, the primary question is the first one. From this point of view, there are two approaches in the literature that propose solutions to the problem of externalities: the Pigovian approach and the Coasian approach.

Even though environmental economics was not considered a differentiated area of economics until the 1970s, the ingredients that served as a basis for establishing the two approaches date back much farther. Specifically, the Pigovian approach appears with the work The Economics of Welfare, published by Pigou in 1920.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Economic Mechanisms for Environmental Protection: Business versus Market Transaction Costs
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.