Question

An environmental awareness program was launched in a certain community and all residents in the community were asked to contribute to its functioning. After a month, the program had to be discontinued due to a lack of funds. Why did the program not receive sufficient funds? Explain your answer.

Answer 1

The Environmental awareness program did not receive any funds and it had to be discontinued because environment is a non-market good and is a sub-category of public good i.e. everyone uses the environment to live in. This leads to the free rider problem which is a type of market failure which occurs when people take advantage of using a common resource without paying for it. No particular individual would have the incentive to provide funding for the environmental awareness program because paying for it would not directly benefit him or her., but would benefit the society as a whole. Instead they would think that if their neighbours pay for the same, they can take the benefit without paying at all. In this way, market failure would arise and nobody would want to pay for it. So, the free rider problem is the reason the environmental awareness program did not receive any funds.