Question

Why the market tends to fail when dealing with environmental issues? It is said many externalities in environmental economics have features that are similar to that of public goods. We know that the provision of some public goods such as lighthouse can be solved through the market rather effectively. What makes environmental goods such as clean air different from lighthouse? Why is it more difficult to solve the provision of clear air through the market? （Please state your opinion and explain why)

Answer 1

The market tends to fail when dealing with environmental issues because of the profit motive of the organisation.

The profit motive is a big reason why all the organisations, business houses, and the corporate sector failed in the establishment of a sustainable environment and an approach to maintain a system where there is a perfect balance between the business and the environment.

Externalities play an important role in the establishment of an approach of sustainable development under the organised environmental issues in the economy when it is related with the public goods then the approach of externalities expands to the extent of its effectiveness on the critical issues related to the environment.

In this context, there is an issue which is discussed under the provision of public goods and the other thing is light House.

Clean air is the responsibility of the government for the public but it is not possible to the market forces because it is not a profitable venture or investment, in any case, therefore, some issues which are not at all related with any rate of return then it is least considered by the corporate houses and this is the main problem why market failed to establish a proper solution with the involvement of business and corporate houses for the environment.

LightHouse is the best example which can relate it with the public goods and it is not at all provided by the corporate houses and from the side of the market because it is not a profitable venture so the corporate social responsibility must be acted positively in the society for the establishment of sustainable environmental issues.