1. Problems with the Market: The Environment
Lecture 6
September 21
Problems with the Market: The Environment

2. Example of Environmental problem from individual free-riding
Your Choice
Recyle
Don’t recycle
Everyone else’s choice
Recycle
$50 A
$100 B
Don’t Recycle
-$50 C $0 D
Individual annual cost of recycling = $50
Individual long-term benefit from recycling = $100

3. 1987 TV Public Service Ad Against Pollution

4. Energy Use in the USA and elsewhere, 2005
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
United States
Europe
Japan, SK, Australia, NZ
China
Africa
Latin America
% of global energy use
% of global population

5. negative externality:
Inter-generational
negative externality:
Displacing costs onto future generations

6. Displacing costs onto the powerless
NIMBY externalities:
Displacing costs onto the powerless

7. Census tracks in California by cancer risk from toxins in the air0%
10%
20%
30%
40%
50%
60%
70%
Lowest third of risk
highest third of risk
White
Nonwhite

8. CENTRAL PROPOSITION:
For capitalist firms pollution is not just an accident: In general, the most profitable economic strategies will be the most polluting because they successfully displace costs on others.

9. Lois Gibbs account of her Love Canal experience

10. Total subsidies for energy from the U. S
Total subsidies for energy from the U.S. government = over $700 billion
50% for oil & natural gas
13% for coal
11% for hydroelectric
9% for nuclear
6% for wind and solar

11. Funding for the E.P.A. as a % of the Federal Budget