Pollution As An Externality
By definition, an externality is an activity of one entity that affects the welfare of another entity in a way that is outside the market mechanism. Pollution is the prime example most economists think of when discussing externalities. There are many different ways to address these from a public economics perspective including emissions fees, cap-and-trade, and command and control regulation. Here we will discuss cap-and-trade as the chosen public response to externalities.
Read more about this topic: Emissions Trading
Famous quotes containing the word pollution:
“Like the effects of industrial pollution ... the AIDS crisis is evidence of a world in which nothing important is regional, local, limited; in which everything that can circulate does, and every problem is, or is destined to become, worldwide.”
—Susan Sontag (b. 1933)