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March 24, 2016 | Author: | Posted in economics, mathematics and economics


The free market economy maximizes profits for all . However the market cannot always support itself and does end up harming some party or other at times . The article under analysis demonstrates this problem . Profit calculations perhaps point to the capital of Ivory Coast as the best place in which to dispose of industrial garbage from Europe . However what the profit calculations cannot take into account is the effect this waste disposal will have on the men and women who live there . As a result of a decision driven by free market [banner_entry_middle]

principles , six people died and ten thousand others in Ivory Coast are now suffering from fume poisoning . Clearly environmental concerns are a weak front for the free market economy ECONOMIC CONCEPTS

In a free market economy , prices direct everything and create an efficient distribution of resources . However prices do not take into account externalities . An externality occurs in the context of public goods which are goods that have no rivals and that cannot exclude anyone from using these goods . The externality occurs when one party or other does something that has consequences that the party responsible for those consequences does not have to pay for . Externalities arising out of public good can be both positive and negative . A positive externality arises when someone does something that benefits everybody else , though nobody else pays for that benefit . Someone planting a nice garden in front of his house in effect creates a public good as everyone else in the society benefits from the garden environmentally . Negative externalities occur just as often . A manufacturing firm producing waste in its production of goods is a case in point . The government takes charge of disposing of the waste . As a result of government intervention in this respect , things like industrial waste become public goods Businesses do not take into account in their profit calculations the cost of producing industrial garbage because that is a problem for the government . Whether the business produces 600 tonnes of waste or ten the cost to that business is the same , as the government pays for the expenses of disposal . Negative externalities like these distort supply and demand economics


According to the article , European business interests are creating environment problems for Ivory Coast . This is an example of negative externality , where the polluter has no incentive to stop polluting unless some regulatory agency intervenes . This happens because operating in a free market environment as they do , European businesses are concerned only about maximizing profits and if profit generating activities conflict with the environment , then they do not have to worry about that because the Government resolves that conflict for them . The European industrial system continues to produce as long as it is profitable for the system to do so , with no regard whatsoever to the amount of the industrial waste it is producing because waste is a concern for the government . And the Government dumps the waste in Ivory Coast . So the more the European industrial system… [banner_entry_footer]

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