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Pollution and Policies - Teachers' Worksheet

Learning Focus

Appreciating why pollution is an economic problem and developing an understanding of markets, incentives and market failure.

Threshold Concepts

Those pivotal to this learning are:

  • Welfare and Efficiency
  • Incentives

Other threshold concepts used are marginality, general equilibrium and partial equilibrium.

Teaching

1. Give the students a copy of the extract 'Cruise ship waste streams' from the Bluewater report. Ask students to work in groups (of approximately three) to discuss:

  • Why can this be viewed as an economic as well as an environmental problem?
  • What economic concepts are important in bringing an understanding to this problem?

Commentary

The rationale for this task is to encourage students to understand that pollution is an economic problem (an externality) not simply because it is 'bad' environmentally, but because there are 'third party' effects. The other persons (fishermen, swimmers etc.) who are not involved in the market transaction concerned (the market for cruises) are being adversely affected.

As well as externalities, it is important for students to recognise that other economic concepts are involved, for instance the role of incentives and the price mechanism (with water being treated as a 'free' good).

2. Ask students, again in groups, to consult with their economics textbooks and discuss (and produce short notes on) the following questions:

  • What economic policies would they propose to reduce the problem? Why may these work?
  • What are the economic arguments for banning cruise ships from certain environmentally sensitive areas?

3. Give students the short extract 'Violations of environmental laws' from the Bluewater report to read and consider the following:

  • What are the problems identified with the policy being used to control pollution?
  • Do the problems stem from generic difficulties with this policy approach that will apply in other application or are they specific to this case?
  • From an economic viewpoint, should the dumping of greywater be banned everywhere?

Commentary

This task is designed to encourage students to consider the problems with trying to reduce pollution by regulation. Simply passing a law will not necessarily stop the market if there are incentives on firms to 'cheat'. Without adequate policing, the policy becomes optional. The problem of (and cost of) obtaining information is also an important aspect.

The third question is designed to help students realise that, from an economics viewpoint, the fact that 'Greywater can legally be dumped anywhere except the Great Lakes, even though the EPA has found that greywater has the potential to cause adverse environmental effects' does not necessarily mean it should be banned, but it depends on the costs and benefits.

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