Two Possible Approaches to Addressing Externatlities

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1. Hawken, Heal and others discuss the facts that the market doesn’t deal well with the differences between private and social costs (externalities). What are the two possible approaches to addressing externalities, illustrate by economics Pigou and Coarse? What are the policy implications of each?

The two possible approaches to addressing externalities explained by economists Pigou and Coarse are cost incorporation and bargaining.
Under Pigous approach, he discusses that creators of pollution did not bear the full costs of production of the environmental and damages they have produced. Pigou studied the inadequacies that came from the difference between social and private cost actions. Pigou’s externality suggested that the variations among social and private cost actions should be fixed with taxes. The private activities cost would be adjusted to equal the social activities cost. For instance, if a company is polluting the air with CO² emission, it would be taxed at the same level as social cost and to the damages they have created in the atmosphere.
Coarse concentrated on property rights, in which goods and services could only be purchased or sold if they were owned. Coarse observed externalities ascending due to the fact that property rights were lacking. If no one owns the goods or services, then they are not controlled. He proposed that natural policy, which would ensure individuals or businesses, would own these property rights. The property right would allow the market to regulate operations, and a bargaining method to be put in place for individuals producing the pollution, and for the individuals affected by it.
Pigou and Coarse each suggested potential methods to increase the enticement of the well-being of huma...

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...eases more resources such as food, water, space will be needed to sustain them. The Earth only has limited amount of natural resources and will no longer be able sustain human population and will eventually deteriorate.
All the problems that Diamonds suggest are essential to reduce the environmental footprint while benefiting societies. Overpopulation will diminish natural resources by making the Earth an unlivable habitat for all living organisms. This brings us to the next point, that biodiversity is essential. All living organisms are indispensable to maintain the Earth ecosystem. Societies need to raise awareness on these issues and work together to reduce or annul pollution, preserve natural resources, diminish population to preserve our only living habitat. It is essential that societies take action in solving these problems or the damages may be irreversible.

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