Question

Is environmental pollution a failure of “Market”?

Is environmental pollution a failure of “Market”?

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Answer #1

Environmental pollution as such will not lead to market failure but inability of market to recover the cost of damage through pollution leads to market failure. The government or market needs to tax the producer or consumer on the negative externalities or damages caused by the pollution to the society. The negative externalities would cause ill effects on health which would lead to increased costs to society leading to market failure. So if the government or market taxes inorder to recover this cost of negative externality of environmental pollution then it would lead to efficient functioning of the market.

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