to other areas. At the other end, the residuals problems involve slow, long-run, persistent changes in ambient environmental quality over the entire globe, affecting multiple political jurisdictions and economic activities.12 Of course, not all situations fit the continuum unambiguously. Some local residuals problems are long-run (persistent), such as the spread of oil from a pipeline leak into a local groundwater aquifer. And a relatively local--in a geographic sense--residuals problem may involve multiple intranational, and even international, political jurisdictions.
By regional is meant other than global. It is necessary to use a word like regional rather than terms pertaining to political jurisdictions, such as nations, states, or cities, because the extent of ambient environmental quality changes resulting from the discharge of materials and energy follow the meteorological, hydrological, and biological systems rather than the boundaries of political systems. The needs for, and ways of, developing regional approaches to residuals management problems constitute one of the main themes of this book.
To gain a better understanding of how a decentralized market-type economy works or should work to produce Pareto efficiency, a simple model is used which takes the circular flow of materials into account. The idea is to try to follow the flow of raw materials from the exploitation of deposits in the environment via production processes and consumption processes and back to the environment in the form of residuals. This model is set out graphically in figure 1-A-1. A similar model could also be developed for energy flows.
In the diagram, five boxes corresponding to production, capital accumulation, consumption, environmental protection, and the environment are shown. Before discussing details, something must be said about the environmental protection agency which is referred to later. It is assumed____________________
AUTHORS' NOTE: This appendix is based on material prepared by Karl-Göran Mäler of the School of Economics in Stockholm, Sweden, 1972.