According to Adam Smith (Year), in a system where the market is determined by the relationship between demand and supply, both buyers and sellers seeks to maximize their own benefit, there exist 'invisible hands' that can direct resources to where they would be the most valuable. And that is the price.
However, there are occasions when invisible hands don’t work. That is market failure. More specifically, market failure is a situation in which a market isn’t able to allocate the goods and service efficiently. In other words, not all of the existing resources are used effectively. In such situation, government intervention is needed.
There are four main categories of market failure requiring government intervention: λ To provide merit goods
…show more content…
That is to say, one person can’t be prevented from using it; also, if one person is using it, it doesn’t reduce others’ enjoyment of using it. Public goods include fresh air, national defense, street light, etc. It would be impossible to let private markets to provide public due to the free-rider problem. In other words, everyone wants to receive the benefit of it, but no one wants to pay for it. As a result, the goods is not produced at all. That is why government need to provide public goods. For example, everyone wants to be protected and live in security, but no one wants to pay the defense budget spontaneously. If government fail to provide national defense for its citizens, the country would be vulnerable under invasion threat. Therefore, government has to intervene to provide public goods and correct this market …show more content…
That is to say, the interest of the bystander is not taken into account. There are positive and negative externality. For example, the car that one person drives will produce toxic exhaust that will damage others’ health. The others, who are damaged by this negative effect, have no choice but to take it, and they won’t receive any compensation for it. As a result, externalities causes markets to be inefficient and fail to maximize total surplus. Therefore, government must take actions to internalize the externality. For example, it can impose a tax on the producer of the pollution or anything that may harm others’ interest, to reduce the negative effect.
The following part of the investigative work will start from recognizing the issue of contaminate, and then evaluate the current performance of the British government policy of environment in air quality control.
Environmental protection is always a major concern for government. As a worldwide problem, pollution has caused great damage on human health and world environment. And in most cases, this effect is irreversible. Therefore, the intervention of government and use of instrument to tackle the environmental issue is necessary.
Pollution can be divided into different types,