Property-Rights Approach to the Environmental Problem
The public-goods approach to the environmental problem discussed in chapter 5 represents the basic argument for government intervention. The property-rights idea can be considered as a counterposition. The property-rights approach suggests that if exclusive property rights are adequately defined, the public-good environmental quality can be transformed into a private good, and optimal environmental allocation will be reached. Government intervention, if necessary, is needed only in assigning environmental property titles. With property rights adequately defined, the market will find the correct allocation. Both approaches agree that actually property rights are not adequately defined for the environment as a receptacle of wastes. To change the environment as a common-property resource in its role as a receptacle of waste into a private good by assigning property rights for emissions is consistent with both approaches. Whereas the public-goods approach suggests that, because of the nature of public goods, property rights cannot be specified, the property-rights approach is more optimistic.
KeywordsPublic Good Transaction Cost Marginal Cost Private Good Marginal Abatement Cost
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- 1.It is recommended to take a second look at some common properties. For instance, the village forest in the Swiss Alps may, at first glance, be interpreted as being a common property. A closer analysis often shows that there is a set of rules regulating its use. Thus, the forest may serve as a protection against avalanches, and withdrawal of wood is restricted.Google Scholar
- 2.Note that the curve YT“ in figure 6–1 displays the net benefit for the pollutee. If we were to draw the marginal cost curve for the firm (compare figure 7–1), transaction costs will shift the marginal cost schedule upward.Google Scholar
- 3.This principle was used at the end of the Thirty Years’ War in 1648 when the sovereign determined the religion of subjects.Google Scholar