Market failures in allocating resources
The concept of market failure suggests that the ways in which particular resources are allocated are not efficient, and it leads to numerous complications (Sloman, Norris, & Garrett 2014). The situation is especially problematic in this area because the quality of social welfare is not sufficient. Stern insists that it is the most problematic market failure in history, and it would be reasonable to conduct a global economic analysis because it is quite evident that possible risks are enormous, and the future of this sector is uncertain (Stern 2007).
It is imperative to mention that market factors play a vital role in such situations. For instance, changes in prices could have a long-lasting impact, and allocation becomes much more complicated. The level of efficiency is not sufficient when externalities are not priced appropriately.
Possible regulations also have an enormous impact, and related mechanisms may not be capable of operating correctly. The lack of information may also be regarded a critical issue because parties are not aware of possible risks and other factors that could affect their operations. The fact that the development of new technologies may also contribute to such issues also should be noted (Garnaut 2008). For example, carbon prices can be viewed as an example. It can be seen that price has an enormous impact, and taxes also increase (see Table 1).
Table 1. Sub-optimal equilibrium.
It is possible to state that the same approach can be applied to other areas, but the level of efficiency varies (Tradable pollution permits n.d.).
Tradable pollution permits.
The governments may try to utilize indirect taxations on goods that have particular external costs. It may also be reasonable to subsidize appropriate externalities, and this approach can be critical. Tradable pollution permits also should be considered, and they may be bought or sold by enterprises. Intervention related to prices of emissions can be quite useful (Garnaut 2011). Regulations are also vital in most cases, and they should be well-developed to ensure that possible complications are avoided.
Impact of human activity on environment and economics
It is necessary to understand that human activities could lead to many implications, and the need to develop environmental interventions may occur. The primary reason for human activities is to earn profits by utilizing available resources. However, the issue that should not be disregarded is that consequences are severe most of the time, and such actions may damage the economy in the long-term. The problem occurs when resources cannot be restored.
Environmental activities also should be discussed. It is understandable that one may think that they hurt the economy because they would not be required if necessary measures were taken, and possible risks avoided. However, new job spots are created, and other benefits also should be acknowledged. Other consequences of such actions may be quite intriguing. For instance, it can be seen that the consumption of water in Australia has dropped significantly from 97 to 2013, and it has had a lasting impact on the industry and economy as a whole (Economic and environmental progress n.d.).
Economic and environmental progress.
Also, it can be seen that emissions are closely connected to GDP (A ratio of new energy CO2 emissions to real GDP n.d.).
A ratio of new energy CO2 emissions to real GDP.
The primary issue related to international actions is that it may not be an easy task to reach consensus. Moreover, the situation can be complicated by possible conflicts and disagreements. Differences between economies and other factors influence the process of decision-making. Perspectives on particular environmental problems may vary from one country to another, and it can be hard to justify such actions.
It is paramount to understand that it is nearly impossible to address all the problems at the moment because of socio-economic factors. However, it would be reasonable to organize particular committees in some regions that would analyze available evidence and deliver necessary information to the governments (Garnaut 2008). Also, it is important to build long-term relationships and discuss benefits of such actions and why they are required in the long-term.
A ratio of new energy CO2 emissions to real GDP, n.d. Web.
Economic and environmental progress, n.d. Web.
Garnaut, R 2008, Garnaut climate change review. Web.
Garnaut, R 2011, Garnaut Climate Change Review – Update 2011. Web.
Sloman, J, Norris, K & Garrett, D 2014, Principles of economics, 4th edn, Pearson Education, Frenchs Forest, AU.
Stern, N 2007, The economics of climate change: the Stern review. Web.
Tradable pollution permits, n.d. Web.
This assessment on Market Failures and Impact of Human Activities