Thursday, April 25, 2013

"Socially efficient pollution emission level"

From lectures of an Environmental Economics for Environmental Sciences course at Wageningen University. The study is OK (MSc Environmental Sciences), heck, it's great. But you know, right... In every study you get these (parts of) courses, professors (or parts of them maybe), study matter, some slides that just stick into your nose and don't get out.

Economic agents (e.g. firms) may not consider all damages when maximizing private welfare (profits, utility).
Damages from pollution:
  • to the firm: private damages PD(M) (=0?)
  •  to the rest of society: external damages ED(M), also called external cost EC(M)
Damages and benefits at societal level :
  • private + external damages (costs), SD(M)=PD(M)+ED(M)
  • private + external benefits, SB(M)=PB(M)+(0?)

Check my other post about it: How can I "Understand why zero emission is not optimal"?.
Sigh.

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