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early 1980s. In 2005-2006 GDP growth reached 6.6 percent from an average of 3.8 percent per annum in the 1980s. During this period, the share of population below poverty line has fallen from 62.6 percent in 1983-84 to 44.3 percent in 2000. Economic theory provides rationale for government expenditure; correcting market failure and improving are the two primary ones. When a market economy fails to allocate resource efficiently, market failure occurs. One such example is the case of ―externalities.‖ Government can curb negative externalities (for example, pollution) and promote positive externalities (for example, education and health) by means of regulation, taxation and subsidy, and public provision. Hence, the justification of government provision of pure ―public‖ good is clear. PovertyPoverty reduction considerations may also lead the government to provide ―private goods‖- those which are disproportionately consumed by the poor – through transferring resources to a targeted group of people who are unable to make provisions by themselves due to market failure. Theoretically, a market based economy can distribute income in a socially unacceptable ways, and in these cases the government often feels obligated to protect the poorest vulnerable segment of the society through interventions. Food and housing services are some of the main antipoverty program. But none or very few society has managed to reduce poverty through direct welfare transfers alone. Education and health expenditures which help reduce human poverty and increases employability and productivity are indirect but more sustained way of reducing poverty.
The second set of cause and effect takes us to the issue of shrimp management policy. The specific structural adjustment policies here involve promotion of non-traditional exports and privatisation. Availability of cheap labour and supply of a product of nature helped shrimp producers and exporters to benefit from market opportunities outside. Shrimp culture in the coastal region of Bangladesh has resulted in many negative environmental consequences. One of them is increased salinity of soil and the another is loss in biodiversity (resulting from shrimp seed collection and throwing away of by-catches).
As pointed out by Ahmed (1995), the changes in preliberalisation practices in agricultural markets have been quite substantial in Bangladesh as compared to some other South Asian countries. Besides impressive improvement in macroeconomic indicators (Bhattacharya and Titumir 1998b; Zohir 1997), subsidies in food and fertilisers had been drastically reduced. The gap between domestic and world prices of rice declined sharply and Bangladesh was able to abolish the rationing system. Opening of import and export of foodgrains to private sector was completed. Bangladesh was able to transform the domestic and external trades in 5 fertiliser from a strong public monopoly to a healthy competitive structure. Table 1 presents the selected indicators of liberalisation and their change over time in Bangladesh. This Table has been adapted from Table 1 of Ahmed (1995).
It should be noted that there are direct and indirect impacts of SAP as long as fertiliser policy
institutional support for setting up downstream factories Shrimps now account for about 9 per cent of total national exports (Talukder 1999) and this sector grew at rate of around 9 per annum during the last decade (Bhattacharya et al. But existing figures show that exports. This Table is an extended version of Ahmed (1998)’s Table 3. privatisation and so on) factors influenced the boom in the production of shrimps in Bangladesh. optimistic and a reformist view: Pessimistic view: shrimp culture is unsustainable because the negative externalities are systematic.speedy customs clearance . endemic and irreversible. Thus both internal (historical existence of shrimp farming in a small scale. In the literature the direct impact of SAP is only 6 studied. SHRIMP MANAGEMENT POLICY AND ENVIRONMENT Before the extensive shrimp culture practices that exist today traditional bheri/gher aquaculture was practiced in the coastal belt of Bangladesh. existing literature mainly include perception and case studies on socio-economic. In 1950 more than 100 farms were involved in shrimp farming through trapping and rearing wild shrimp fries that came with tidal wave. catch and the number of ghers have been increasing and given the fact that shrimp cultivation is extensive in nature we can expect employment to have decreased in this sector (Toufique and Hasan 1998). 1999). Optimistic view: shrimp generates income. At the same time production of rice became unprofitable due to water-logging that resulted from poor drainage. The coastal embankment project of the sixties eroded this practice and made these lands suitable for rice cultivation.fiscal incentives for exports .leasing of private and khas land in favourable terms . Shrimp farming gathered momentum during the transition from a more inward looking development strategy characterised by high degree of regulation and control on international trade to a strategy that promoted investment in export-oriented activities by private agents. politico-economical and a bit on environmental consequences of shrimp farming. Reformist view: there are negative environmental externalities but they can be taken care of . Literature on scientific study of the impact of environment is scant and of limited coverage. we do not ha ve reliable estimate of total employment of labour force in this sector.zero tariff access of imports .income tax rebate 13 . Existing literature reflects three views: pessimistic. Table 2 draws the timeline for the process of the liberalisation in the fertiliser market in Bangladesh. 5.1. promotion of non-traditional exports. Direct impact relates to changes brought to the use of fertiliser whereas indirect impact relates to use of budgetary savings. employment and foreign exchange and their benefits outweigh the associated costs. In the seventies the farmers began to produce shrimps in the polders in response to strong demand for shrimps in the international market.is concerned.cheap credit . This triggered off the boom in shrimp culture and its adverse impact on the environment followed. It should be noted that a large proportion of the labour force in the shrimp processing sector is women. However. Evidence on Environmental Degradation due to Shrimp Culture As rightly observed by Bhattacha rya et al. production of rice turning unprofitable and the like) and external (favourable conditions in the international market. The following incentives were given to the shrimp sector in the process of pursuing an export-led growth strategy: . (1999). Therefore the culture of shrimp has to be banned.
Here are the findings of some secondary studies: . found loss in vegetation and livestock: Half of jackfruit and mango trees were destroyed and one-third of cattle heads disappeared in the shrimp polders during 1987-90.30.Manju 1996 found income loss for the peasant households due to shrimp culture. . It has been found that the benefit (measured by the foreign exchange earnings from shrimp exports) of shrimp cultivation well exceeds the costs of shrimp cultivation. There are direct (land degradation. He has found that the benefits of shrimp culture far exceeds its cost. Income losses occurred from decline in rice productivity. The strong policy conclusions that can be drawn from this exercise is that the gher owners can be taxed by an amount which (as a percentage of the .Manju 1996 applied a before-after approach to identify what might be called forced livelihood diversification. their consequences for development and their impact on the environment and interventions recommended have been summarised by Bhattacharya et al. On the other hand the net returns also decline but they are still positive when environmental costs are incorporated in the calculation. Some limitations of this study have been made explicit: only on-site costs of shrimp culture were considered and some broad assumptions were made and findings from other countries had to be considered. Table 5 and Table 6. These costs are not always immediate and therefore spread over time. This is a moderate view trying to minimise the concerns raised by the first view and maximise the benefits expressed in the second view. Table 4: Annual Profitability of shrimp-rice farming As can be seen from these Tables that net returns. In village Chalbunia. the environmental costs of shrimp cultivation would be in the range of 21-30% of total benefits. by applying a with-without approach. The results are presented in Table 4. Farm level study was not done to estimate environmental costs.through policy intervention.Adnan (1991). The rate of return declines due to incorporation of the environmental costs but it is still greater than unity. (1999) are based on macro aggregates. To be precise. social impact and so on) costs of shrimp cultivation. loss of poultry and livestock and erosion of homestead vegetation and social forestry. . health hazards and mangrove destruction and so on) and indirect (loss in biodiversity. Manju (1996) found that post-shrimp income level of local peasant households was only 62% of the pre-shrimp level. 14 . (1999) in Table 3. Note that the estimates by Bhattacharya et al. from shrimp farming are still positive and it seems that shrimp culture is still a profitable activity under all farming systems. Assuming that such cost could be as high as 30% of the benefits from shrimp culture we have included the environment cost of shrimp culture at the farm level by multiplying the value of catch by . (1999) makes an attempt to incorporate environmental costs in measuring the economic costs and benefits of shrimp cultivation. The actions mentioned in the literature. We can now look into his estimates by transplanting environment costs almost in a surgical way. after taking into account environmental costs into considerations.A scientific study sponsored by Nijera Kori (1996) found increase salinity and soil degradation and vegetation loss. Economic Costs and Benefits Bhattacharya et al. Talukder (1999) on the other hand estimated the financial costs and benefits of shrimp culture at the farm level and under different farming systems but he ignored all environmental costs. the percentage of population belonging to the category of rice-cultivators decreased from 33% to 13% while corresponding percentage for those involved in shrimp-cultivation increased from 20% to 32%.
i. looking through the World Bank documents. In the near absence of quantitative estimates. No mangrove forest has been destroyed as a result of the project Note that this is a finding based on the report provided by a local consultant hired by the World Bank. unfortunately. opinion may vary on the extent of the impact but in general most will agree that it is a serious ma tter of concern. Unless we have access to the report prepared by the local consultant we cannot go any further rather than endorsing the World Bank view. In this section we will focus on World Bank’s changing views on environmental degradation due to shrimp culture in the coastal region of Bangladesh. However. not possibly because new quantitative findings based on fancy models started to come up but possibly because by that time public concern on the environmental impact of shrimp cultivation was getting increasingly binding. the entire report has nothing much to say on the environment than what has been quoted above. On the contrary. It also aimed at generating foreign exchange earnings and increasing incomes and economic activities in the coastal areas. However.value of catch) can lie between the numbers in g and f. one can find that such concern was missing initially. The environmental impact of shrimp culture was gradually recognised by the World Bank. This endorses the importance of environmental issues that was cropping up and gradually getting prominence. p. as the analysis of the previous section suggests. 10): there are no environmental effects caused by the projects. improve capacity utilisation of the shrimp processing industry and improve marketing of shrimp. The NGOs played a strong role in this regard. The changing perception of the World Bank can be best depicted by evaluating its experience with the shrimp culture project and its plan regarding the Fourth Fisheries Project. the tax rates should adequately maintain the incentives for investing in shrimp farming. This is the classic tax-subsidy solution for internalising externalities of environmental degradation. The only problem of pursuing such policy is measurement and implementation (political contestation). The project expected to strengthen fisheries administration and extension services. The report has the following to inform about its environmental impact (World Bank 1994. have been fairly well documented. at least in qualitative terms. The World Bank report does not question these findings or any limitations involved in generating these findings. the total cost of the shrimp culture project was US$36. have been minimized or eliminated by the project interventions.. the project admitted of learning the lesson that ―the NGOs role in organizing and motivating shrimp farmers facilitated the achievement of project objectives‖ (p. What becomes clear is that the World Bank commissioned a project component for studying the impact of the project intervention on the environment. The land use pattern and the ecological balance have not changed as a result of project interventions. This is possibly the initial stage of World Bank’s growing concern on involving the local people in . It was evaluated that the project was ―largely successful in achieving the objectives‖. the tax rate can lie between the rates of return when environmental costs are not taken into consideration and when the environmental costs are taken into consideration. such as water-logging and uncontrolled cuts in embankments for the constellation of sub-standard inlet structures. The project aimed at intensifying the production of brakish water shrimp in the coastal areas through the introduction of improved water management and related shrimp culture practices. modify land lease policies. some of the diverse effects which existed under pre-project conditions. 13). The tax revenue thereby collected 18 can then be spent on those who suffered from environmental degradation in one way or the other. Also. Approved in 1986. But. The Response of the World Bank The effects of shrimp cultivation on the environment.7 million. initiate procedures for controlled salt water intake in polder areas for the purpose of shrimp culture. e.
It is entirely a desk-review based work. 4-5). Getting back to the issue of environment some questions can be raised. CONCLUSION This report has made an attempt to improve our understanding of the impact of SAP on the environment in Bangladesh. 4): Unplanned shrimp farming development has led to degradation of agricultural land and negatively affected the livelihoods of local people Thus land degradation due to shrimp cultivation has been admitted by the World Bank so is the adverse impact of shrimp cultivation on the local population. By construction. Thus. 37) makes the following point: the traditional shrimp culture even though did not affect environment in Cox’s Bazaar. However. One important issue mentioned in the document relates to land use conflicts where the poor social groups are the losers (p. The length of the project was short – five years and in the initial years it was delayed and hampered by land tenure conflicts. 4). Rahman and Azad (1995. 4): The contrasting demands of rice farmers and those involved in shrimp farming have generated frequent conflicts in which poorer social groups in shrimp farming areas have often been the losers Some environmental aspects of shrimp cultivation and its adverse impact on the local people have also been explicitly mentioned in the document (p. The document admitted that ―the expansion of shrimp farming has raised important issues regarding land and water use in the coastal areas.g. created some problems. The report admitted that ―a longer implementation period would have been more appropriate‖.development efforts. p. such as harvest was prolonged and it affected transplantation of Aman crops. particularly “White Spot” may continue to threaten the shrimp culture The adverse impact of biodiversity brought about by collection of wild shrimp fry has also been recognised (pp. The project appraisal document also admitted of the outbreak of fish diseases (p. we can assume that not enough evidence was available for the study on environment impact assessment. The project could do nothing as he managed to take long-term lease from the beginning of the project Thus there is an explicit inconsistency between World Bank’s evaluation of the impact of the project on environment and BIDS’ evaluation of the environmental impact of the same project. We scanned through World Bank documents and other relevant literature that directly or indirectly dealt with similar issues.‖ (p. Let us leave the matter here and see World Bank’s strategy for the Fourth Fisheries Project as long as shrimp culture is concerned. due to unplanned culture. This is important because many environmental costs are unevenly spread over time and may show up after a long gestation period. a part of the project area in Khulna (e. This is exactly what is missing in the World Bank report. The project appraisal document for the Fourth Fisheries Project (World Bank 1999) reflects the shift in World Bank view not only on the impact of shrimp culture on environment but also on its impact on more pressing social issues. mainly because of the presence of an 20 outsider leaseholder who. this is not an exercise in environment impact assessment. A BIDS evaluation of the same project does not endorse the view expressed in this report. The planned activities of the project were also obstructed by him for which the environmental condition of the area further deteriorated. there have been a number of negative environmental consequences of it in Khulna region especially in non-project areas. Hanirabad and Munkia in polder 20) was also affected. The various meetings of the SAPRI consultative process have generated a picture that shows how SAP policies were thought to have affected the environment. This report found sufficient . 4): outbreak of diseases. Thus we would take the above conclusion about the environmental impact assessment of the project with caution.
For example. Initially the environmental impact was either ignored or 24 considered to be of secondary importance. Therefore there is nothing apparently wrong in increasing shrimp production as long as it is not done in an unplanned manner. Very few will disagree with the objectives of increasing food production and also of pursuing an export-led growth path in a globalised world. The issue is how do we make up for land degradation and there are other policies that may work well as compared to reducing the use of fertilisers by removing subsidy. Serious quantitative study on environmental impact assessment is missing. Advocacy and awareness work and World Bank’s attitude to environment somehow vindicates this. The impact of environmental first falls on its victims – i. shrimps. Therefore. however. albeit gradually. use of spurious fertilisers and inefficient use of various type of fertilisers. These had serious impact on the quality of land: nutrient content in soil declined and fertility of land eroded. Of course. Reduction of subsidy on fertilisers have resulted in (i) improper mix in the use of fertilisers. In the shrimp sector this resulted in rapid increase in shrimp production. The general approach of the NGOs has been those of generating awareness and promoting advocacy at the grassroots level. Such strategy helps to promote local resistance to environmental degradation and this is where the civil society should play a major role. the local people. This is more due to numerical ignorance than due lack of our interest in it. Now the question is how the civil society can participate in the policy formulation process. The negative effects or externalities of increasing shrimp production are loss in biodiversity and increasing salinity of soil. Privatisation was promoted to boost up exports. This took us to the issue of fertiliser policy. The problem is that the victims are not homogenous – they are differentiated and therefore they have different . They are the one who can describe how it affects their life and livelihoods and hence their voices have to be heard first. Adherence to these policies has generally resulted in excessive use of fertilisers. We have also provided available evidence on the effects of SAP policies. As long as the fertiliser policy is concerned we have seen some lapses in the existing policy and therefore there is a room for improvement in this policy. withdrawal of subsidy and liberalisation of imports. and (ii) insufficient use of fertilisers to compensate for nutrient losses.evidence in the existing literature to support the explana tion that came out from the consultative process. Gradually. A total ban on shrimp production will have strong macroeconomic effects and at the same time an unbridled production of shrimp will have serious environmental consequences. environment and equity. the issue of fertiliser subsidy has to be reconsidered on the ground of efficiency. The NGOs are playing an important role by serving in various committees of the government at various levels. 23 We have seen that the pressure to increase food production has resulted in adopting policies such as excessive emphasis on (rapidly) increasing yield. there are other related environmental concerns but these came up clearly from the consultative exercise. We have also seen that the objective of pursuing an export-led growth strategy has led to adoption of policies such as promotion of non-traditional exports. the Bank became environmentally cautious. Therefore we have looked at the inadequacy of the SAP policies more in qualitative terms. Existing evidence shows that shrimp culture is highly profitable even when environmental costs are taken into consideration at the farm level. controversy can arise on the extent of the effects. encouraging farmers to use organic fertilisers through NGOs or the government’s agricultural extension networks. particularly in the Fourth Fisheries Project. there can hardly be any dispute on that. This is already taking place in one form or the other. This took us to the issue of shrimp management policy. for example. e. Again. As long as shrimp cultivation is concerned we have seen the World Bank taking a more cautious approach. These committees are formed either for formulating policies or for implementing them.
2. Bangladesh now subsidises mainly nitrogen. Since economics is about how to deal with scarce resources.capabilities to withstand environmental degradation. 4. 3. The imbalance in general subsidy levels has to be removed/reduced. 6. potassium 25 type of fertilisers. The issue of fertiliser subsidy has to be reconsidered not only on the ground of efficiency and equity but also in the context of its relation to environment. Environmental economics is a subfield of economics that looks at environmental issues in relation to economic development and sustainability. Thus what is needed is a community response to environmental degradation and the civil society should work for that. Existing laws relating to shrimp production has to be strictly enforced. This can be done by the NGOs or by the government’s agricultural extension networks. Civil Society and the NGOs 7. so farmers over-apply it and under-apply phosphate. Why do we need environmental economics? It makes sense to use economics in environmental policies due to the fast depletion of natural resources. there are environmental problems which affects every body (arsenic contamination of ground water) in a negative way whereas there are environmental problems that does not affect everybody in a negative way – there are losers and gainers. . Substantive quantitative study on environmental impact assessment is required for formulating environmental policy. RECOMMENDATIONS Fertiliser Policy 1. Shrimp Policy 5. 8. The Role of Government. The latter is crucial for long run conservation of soil fertility and hence it has to be subsidised more. The NGOs and the civil society at large should promote local resistance to environmental degradation. it can often be useful when tackling environmental problems. and how they impact the local and global economies. Of course. either positively or negatively. Shrimp production will have to be done in a planned manner (for example. Promoting community response towards the right direction can help to decrease environmental degradation. zoning). To halt the process of land degradation the farmers should be encouraged to use organic fertilisers. not in a haphazard way. A regulatory framework has to be designed and maintained for expected performance of the fertiliser market. Environmental economics looks largely at environmental policies in countries. making the environment a scarce resource.
Consumers and producers enjoy the gains from this equilibrium. an unregulated market leads to equilibrium price and quantity determined at the intersection of the supply. The external costs of Q1 is equal to the vertical distance between MPC and MSC at Q1. A market failure is said to have occurred when distortions prevent the price mechanism from allocating resources efficiently. Environmental regulation is designed to get firms to internalize the externality by considering the external costs of production. fewer recreation opportunities.One of the basis of environmental economics is to look at various causes of market failure. environmental economics views a healthy market as functioning such that all resources are distributed in such a way that society welfare is maximised. Ideally. or marginal private cost (MPC) curve and the demand curve: P1. The consumer surplus is shown by area abcd. Unfortunately. If firms face a . A cause of market failure is that positive and negative externalities are ignored. production of Q1 generates negative externalities such as fewer healthy days. The producer surplus is shown by area fgh. The full cost to society of production of Q is the marginal social cost curve: MSC = MPC + MEC. Looking at the standard demand and supply diagram with pollution. Q1. Environmental economics tries to highlight these failures so that nations can implement regulation to better steer the market. resulting in welfare loss.
beauty. then social costs will be greater than private costs. Negative externalities (external costs) lead to an over-production of those goods that have a high social cost. economists refer to this as market failure because resources will be allocated inefficiently. and air quality but this loss is usually not quantified and included in the price of the timber that is made from the trees. If there is a positive externality. As a result. . good quality soil to grow crops on. the logging of trees for timber may result in society losing a recreation area. individual entities in the marketplace have no incentive to factor in these externalities. Libertarians who believe in a free market respond that the existence of market failure should not lead to government intervention. The regulated product market will have a higher price and lower quantity. More of this activity is performed than would be if its cost had a true accounting.constant pollution tax on each unit of output so that they face production costs equivalent to the MSC curve then the new market equilibrium will be P2. in the case of positive externalities. then one will have higher social benefits than private benefits. For example. Implications If there is a negative externality. For example. thereby creating a negative externality. and dollar voting. In either case. private agents will engage in too much of the activity.) Theory The ideas of social cost. Q2. (The marginal rate of transformation in production will not be equal to the marginal rate of substitution in consumption due to the effect of the externality and as a result Pareto optimality will not occur—see welfare economics for an explanation. externalities. They prefer to rely on tradition. they will engage in too little. Environmental pollution is an example of a social cost that is seldom borne completely by the polluter. and market failure are often used as an argument for government intervention in the form of regulations. shade. when a supplier of educational services indirectly benefits society as a whole but only receives payment for the direct benefit received by the recipient of the education: the benefit to society of an educated populace is a positive externality. In the case of negative externalities. community pressure.
Because the marginal social cost curve (MSC) is above the marginal private cost curve (MPC). under which price (P) equals MR. In the real world.F to 0. The socially optimum level of output is Qs where marginal social costs (MSC) is equal to marginal revenue (MR). the attainment of social optimality requires that the full social costs must be considered. (This diagram assumes perfect competition. this diagram illustrates the case of a negative externality.This can be illustrated with a diagram.A. If the marginal social cost curve was below the marginal private cost curve.D to B. hence.) This will yield a profit shown by the triangular area 0. and an enormous problem of modern civilization. The amount of output.C. i. Profits will decrease also. Qp minus Qs. rooted in profit maximizing behavior of businesses. rejected Pigou's confusing terminology of externalities and provides several hundred pages of empirical data to support his argument that social costs are systemic.A.F.e. they are usually not or cannot be internalized and must not be considered as accidental minor aberration from the "optimal norm" that can be fixed with ad hoc measures. Profit-maximizing organizations will set output at Qp where marginal private costs (MPC) is equal to marginal revenue (MR). . since "internalizing the externality" hurts profits. It is clearly profitable for the firm to pollute. it would be a positive externality and social optimality would require a greater output than Qp rather than a reduction of output. future generations or society at large. Institutional ecological economists in the tradition of Karl William Kapp provide a different definition of social costs.e. Kapp.F.C. The amount of the externality will decrease from C. that share of the total costs of production that is not born by producers but is shifted to 3rd parties. But if externalities are present. from 0. i. indicates the excess output due to the externality.
the producer only considers his/her own private costs and benefits.Externalities and the environment – the basics For environmental economics.g. This is known as the “tragedy of the commons” Public goods (indivisible common resources . the private equilibrium of supply and demand is not the same as the social equilibrium which includes all costs. The result is a loss of allocative efficiency and shown by a reduction in economic welfare Environmental externalities generally arise for three reasons: Common resources (not privately owned . In a completely free market. A negative externality occurs where a transaction imposes external costs on a third party (not the buyer or seller) who is not compensated by the market.e. one of the most important market failures is caused by negative externalities arising from either production or consumption of goods and services.e. ocean fisheries) – commonly owned resources may lack the protection of property rights and are susceptible to overexploitation because the marginal cost of extracting the resource for a private economic agent is close to zero. .e. The market failure arising from negative externalities is shown in the diagram below. a producer will have no incentive to control pollution because it is external – i. the air) Future generations (sources of externality including carbon emissions – greenhouse effects – contributions to global warming which threatens future sustainability) Dead fish on a polluted beach – the external costs of pollution – but who should pay? In these cases.g.
because the marginal cost of doing so is zero. The absence of well defined and legally protected property rights lies at the heart of the problem. he or she ignores the external costs borne by others. but summed over all agents.Economists argue that market failures provide a rationale for policy intervention to improve economic efficiency. intervention is only justified if the benefits exceed the costs “The Tragedy of the Commons” The contribution of each economic agent is minute. the example is used of a stock of common grazing land used by all livestock farmers in a small village. they do not bear the entire social cost of their actions. If each seeks to maximize individual benefit. these actions degrade the resource and may cause severe long term damage The ―tragedy of the commons‖ is a metaphor used to illustrate the potential conflict between individual self-interests of producers and consumers and the common or public good. The root cause of any tragedy of the commons is that when individuals use a public good. Each farmer keeps adding more livestock to graze on the Commons. the result is a depletion of the soil and a fall in the value of the resource for all users. The resource may become irretrievably damaged. . A tragedy of the commons can occur even without complete and permanent destruction of a resource – the term can be used to describe any situation where what was perceived as a renewable resource becomes less valuable because of over-exploitation. an example of a public bad. But since market failures are pervasive. But because the commonly-owned resource is then over-exploited. In the original version of the term.
The Economics of Waste The UK government wants more waste being disposed of through incineration rather than dumped in landfill sites. the commons are preserved and can be used indefinitely). suppliers need to cooperate over a period of time so that fish stocks can start to rise again. Individuals within a group have two options: cooperate with the group or defect from the group. Because waste is normally regarded as a de-merit good creating external costs. less waste in the UK is being land-filled – down from 82% to 72% for municipal waste between 1999 and 2004 and from 50% to 44% for industrial and commercial waste between 1999 and 2003. alter incentives and. cause a change in the behaviour of consumers and producers.stm Over-fishing of the oceans – e.bbc. Defection happens when an individual decides to use more than his share of a public resource. in other words to achieve a ―de-coupling‖ of waste generation from rising economic activity. the current crisis in the EU fishing industry – see http://news. there is justification for some form of government intervention in the market to change market prices.uk/1/hi/sci/tech/4996268. Cooperation happens when individuals agree to protect a common resource. A successful waste strategy will bring about .g. the long-term impact on the Brazilian rain forest and the effects of illegal logging see http://news. This is the essence of attempts to reform the European Union Common Fisheries Policy.creating other externalities for users of waterways further downstream Logging of forests – e.uk/1/hi/business/4842808.stm Fly-tipping of waste products on public land – perhaps a response to the landfill tax? E-mail spamming on the internet! Game theory and the tragedy of the commons The tragedy of the commons can be linked to the prisoner's dilemma that is a core part of game theory.bbc. An alternative to regulation by government is to create a market in property rights in order to control the impact of economic activity on the environment – for example establishing a carbon trading emissions scheme or introduction tradable fishing permits for the EU fishing industry. hopefully. Cooperation has the potential to maximize every individual's benefit in the long run (i. Over two million tonnes of edible food is dumped by retailers in Britain each year.co. the 'tragedy' does not happen.g. Thus in the case of fish stocks. while defection maximizes an individual's benefit in the short run at the expense of destroying it in the long run. usually into landfill sites According to data released by DEFRA. The main aim is for the volume of waste to grow less quickly than GDP.co.e. It has restated its strategy and at the top of the waste hierarchy is the desire to reduce the amount of waste created in the first place from the production and consumption of goods and services.Good examples of the tragedy of the commons: Burning of fossil fuels – carbon emissions – contributing to global warming Pollution of waterways .
recycling rates are abysmally low and well below the levels needed to meet UK and European Union targets. Government policy needs to be more effective in enhancing the incentives for individuals and businesses to recycle more of their waste products. Some local authorities have a superb record in raising awareness and interest in recycling products. . But in other areas of the UK.sizeable increases in waste recycling and composting.