Economy and Environment

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Economy and Enviornment

In the contemporary world enviornmental issues are well known to individuals, firms, governments and other social groups in society. However, high economic growth is essential and prefered by goverments of all political persuations to maintain high standard of living first and within that frme work to address enviornmental issues by technological solutions to minimize cost to the enviornment at least cost to the private sector. That is, witiin the current economic models and theory market failure is the main cause of enviornmental problems and market mechanisms can solve the problems adequately by internalizing the enviornemtal values in monetary terms in to prices.

However, some economists do not agree that market instruments will not be enough to adress enviornmental issues adequately because in their perspective enviornmental issues are not mainly due to market failure because of the uncertainity of information and also the nature of enviornmental problems are not only market failure but also arises due to ecological sustainability and scale issues and other sociological and institutional factors.For example green house effect is a global problem and it cannot be solved adequately by market mechanism alone because of the problems of uncertainity of the effects and the problems of monetary valuation and internalizing the cost in to market prices. In this context, economy and enviornmental issues are complex issues and economic growth must take in to accout the enviornmental constraints which can be a limiting gactor to future growth potential as it depletes ecessively the natural capital and it becomes unsustainable if the enviornmental issues are not addressed within the frmework of the economic system and its ability to adapt to the enviornmental and future generational equity and distributional issues.

In other words, high economic growth rates in the context of the current enviornmental ans social cost and uncertainities of outcomes must be addressed to be sustainable and investment in in the natural infrastructure and conservation is important for the next generationa to enjoy the same quality of life and standard of living of the present generation. In effect the economy must be seen as a part of the ecology and it interects with enviornment and the abilty of the enviornment as a complemetary resirce than a subsitutable resource must be recognized. As well, the current economics must deal with allocation efficiecy, fair distribution and scale which are higly interdependent but they are separate issues and there is trade off netween these economic issues to devise policy instruments based on a mixure of price signals, taxes and welfare payments, property rights detemined socially not by the ability to pay alone. As well a country can use international agreements, using  appropriate regualation, education campaigns, democratic community involvement, cultural and religious practices, which encourages enviorpnmntally concious behavior and life style is necessary rather than solving the enviornmental issues by technological means alone.

As mentioned above, economy and envionment are interdependent and there is trade off and it must be borne in mind high economic growth in the current world situation may not be sustainable and there must be a new way to adequately address economic and enviornmental problems in a broder sense than using the current economic models which are not complex and dynamic enough to reflect the real world complexities.

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