Air and water have long been prototypes of free goods, available in unlimited quantities with no price attached to their use. The Rhine River, with its fairy tales and romantic songs, is an example. It has been used as a common-property resource in a manner similar to the ozone layer and the oceans. Natural resources have been employed in economic activities without consideration of the long-run effects on the life-supporting systems of the planet or the potential losses to future generations. The joint outputs of consumption and production activities have not been factored into the calculation of the economic system. In short, the environment, as the set of natural conditions defining the human living space, has not been taken into consideration by economic theory.
KeywordsPrivate Good Fairy Tale Perfect Competition Free Good International Public Good
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