‘Turner, Pearce and Bateman. Environmental Economics: An Elementary Introduction. ‘The Johns Hopkins University Press. Baltimore. 1993. Economics and the environment Externalities and public-type goods Extemalities are usually defined as unintentional side-effects of production and consumption that affect a third party either positively or negatively. For ‘example, the factor that pollutes the surrounding, local atmosphere to such an extent that the local incidence of some respiratory illnesses increases, has created a negative externality (external cost). An activity by one agent (the production plant) has caused a loss of welfare to another agent (the people made ill) and the loss of welfare is involuntary and not compensated for. Identifying and assessing the significance of pollution externalities in practice is often a very difficult task. Particularly troublesome issues are raised in situations where people have been exposed to a pollutant in very small doses over prolonged periods of time. Identifying and measuring the risks involved is far from easy, and very often decisions have to be taken on the best available evidence, which may not be very substantial, The crucial feature of externalities is that there are goods people care about (e.g. clean air and water, landscapes, etc.) that are not sold on markets. The majority of environmental goods fall into a category in which market values are not available (publictype goods). Public goods generally have the characteristics of joint consumption and non-exclusion. What this means is that when the good is consumed by one person, it does not diminish the amount consumed by another person, So, for example, one person's consumption of clean air does not diminish any other person’s consumption. Non-exclusion means that one person could not prevent (‘exclude’) another from consuming the resource. ‘The very characteristics of many environmental goods have meant that their ‘true’ value (total economic value) has been underestimated or ignored altogether. ‘They have remained unmeasured and unpriced, and. have therefore been inefficiently exploited. It is also the case, however, that by no means alt negative externalities are due to market failure. Think about the damage (loss of habitats and landscapes, and water pollution due to fertilizers and pesticides) done by agricultural practices to the environment, In this context, it is intervention failure that is significant. The Common Agricultural Policy has involved governments in the European Community intervening, in agricultural markets to control prices and support farmer incomes. One of the consequences has been massive overproduction and related unintended but significant pollution run-off problems (see Chapter 6) Many environmental goods are also common property and/or open access resources. The combination of weak property right (legal) protection against overuse (or complete open access) together with free oF cheap usage of these resources has inevitably led to overexploitation, sometimes to the point of destruction of the stock. Tropical rainforests, marine fisheries and the waste assimilation capacity of seas are all examples of such overexploited resources (ee Chapter 15). 25