Post
Topic
Board Economics
Re: Knowledge check: If a government had only 2 functions,what would they be?
by
halfawake
on 17/05/2013, 07:18:52 UTC
People love to talk about market forces solving all problems, but protecting the environment is something that market forces do a very poor job at protecting.  See global warming on a global scale, or overfishing, it's the economic principle of externalities - also referred to as "the tragedy of the commons".
You know how to fix the tragedy of the commons, right?

Well, my memory of economics tells me that the way of fixing the tragedy of the commons would be to build the externalities into the price of whatever is being sold.  In other words, if you were to use gasoline as an example, put a large tax on it to account for the fact that it contributes to global warming.  Over the long run, this will result in a situation where people will drive less, and use smaller cars, thus use less gas. 

So, in this case, the solution is government intervention.  The same idea would apply for many other cases of tragedy of the commons, ie: some species is being overfished?  Declare an area off limits for fishing for a set period of time.  So on and so forth.  I like minimalism in government, but environmental protections like these are regulations that I fully support.