ECO 3620. Environmental Economics
Market Failure
1.
Natural capital (N)
The environment is a source of raw materials
The environment is a sink for waste materials
Q = f(L,K,N,P)
U = f(X,N,P)
Materials balance model
1st law of thermodynamics
2nd law of thermodynamics
2.
Negative Externality
social cost = private cost + external cost
3.
Public Goods
nonrival
nonexcludable
mixed goods
free rider problem
