Environmental Policy’s Impact on Economic Growth

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Table of Contents

Introduction
Discussion
Unemployment
Economic Growth
Conclusion
References

Introduction

Environmental policy includes laws plus policies that address air and water pollution, drinking water quality, oil and chemical spills, smog, land preservation plus management, as well as wildlife protection. It targets to balance environmental protection as well as the conservation of natural resources with other policy objectives, for instance, reasonably priced energy and economic growth. State and Federal rules cover water and air quality, land conservation, waste management, oil and chemical spills, and drinking water quality. Some policies control activities by private persons, organizations or companies. For instance, a company that has to discharge wastewater routinely may require acquiring a federal permit. It would be needed to adhere with rules as well as requirements within the permit in compliance with environmental regulations. The rules and regulations are different in their provisions depending on issues. A concept called oligopoly refers to when few companies control the market. Yet, no single one of them keeps the others from wielding major influence over the sector plus they all sell products a little different. Prices in such a market are average due to the availability of competition. This paper looks at how oligopoly and convention theory are different approaches to economy as well as the proofs that environmental policy has no major impact on economic growth and employment.

Discussion

Conventional economic theory holds an individual should at all times pay the least possible taxes and wages, charge the maximum price and rent, never give anything away it convenes some hidden potentially over compensatory individual benefit. The beliefs in this theory include sustained economic growth is the path to people’s progress and that free markets lead to the most effective as well as socially optimal distribution of resources. Other beliefs include economic globalization increases economic efficiency, lowers consumer prices, create job opportunities, spurs competition, increases economic growth, as well as consumer choice. The government is believed to have a main responsibility of providing infrastructure needed for advancement of commerce plus enforcement of the rule of law regarding property rights and contracts.

The above beliefs have their basis on the assumptions ingrained in the classical economics theories. For instance, human beings are motivated by self-interest which is displayed mainly via a desire for financial gain (Pratt & Valleti, 2021). An action is most beneficial to the society if it results in the most financial return to individuals or firms (Selwyn & Leyden, 2021). Competitive behavior is more reasonable for firms or individuals than cooperative behavior which means that a society must be built based on a competitive cause. Lastly, human being’s progress is determined by increases in the value of what the society members consume, plus ever higher levels of consumer spending advance the wellness of society by stimulating more economic output.

The ideologies assume that individuals are naturally motivated by greed. According to the theories and beliefs, to be a human being is to have a drive to obtain. The beliefs also try to show that the consistent pursuit of greed plus acquisition results in socially optimal outcomes. It is in the interest of the society to honour, encourage and reward the mentioned values. When it comes to oligopoly, the concept shifts to a few individual companies that control the market. Nevertheless, no one company keeps the others from wielding major impact over the sector plus they all sell products a little different. Prices in such a market are average due to the availability of competition. When a single company sets a price range, other companies react to maintain competitiveness. For instance, if one cuts prices, others do the same too. Unlike in perfect competition, prices in oligopoly are often greater.

Due to zero dominant force in the sector, organizations are tempted to work with one another instead of competing which ensures that non-established businesses stay out of the market. This state ensures that they function as if they were one company. The United States Department of Justice in 2012 alleged that Apple and several book publishers had colluded and determined prices for the e-books. It was alleged that they planned to raise the price for e-book downloads from ten dollars to fifteen dollars. A United States District Court took the government’s side on the issue and the court of Appeal too did the same. In a free market, fixing prices is unsustainable. If a single company undermines its competition, others follow suit quickly. Those that lower prices to the extent they not gaining any profits become unable to stay in business for a long time (Head & Spencer, 2017). Due to this, players in oligopolies compete in quality and reputation and not price.

Environmental regulation in the US has been accused of resulting in a range of undesirable economic effects. It is stated that it is too unreasonably priced, decreases economic growth, ruins competitiveness, as well as widespread layoffs plus closure of plants. It is even stated at times that it forces companies to opt for more accommodating nations. The view that environmental regulations hurt the United States’ economy is firmly established (Wang & Werning, 2020). It is now the centrepiece in the series of occurrences over several years ago to roll back the same rules that have caused a dramatic improvement in the quality of the environment.

Unemployment

One common belief about the environmental policy is that it results in layoffs as well as closure of plants and reduces the level of competition in the market. The evidence for this is unemployment which results from logging limitations in the Pacific Northwest to secure habitat for the spotted owl that put many unfortunate individuals out of employment. However, looking at the whole country, it turns out that few layoffs plus plant closures happen because of environmental rules. For numerous important reasons, environmental policy is not likely to harm competition in any major way. A major reason why the popular perception is inaccurate is that environmental protection costs for many industries are small. According to a Census Bureau data, in 1991, the total pollution control costs amounted to only two per cent. Expenditures of such size are not large enough to result in layoffs or plant closures. A number of industries face larger environmental policy expenditures but these are highly capital-intensive industrial sectors where rivals face the same fate

It is important to have proof before making a claim on how environmental policy affects employment. According to (Burns et al., 2020), mass layoffs during 1987 to 1990 attributed to environmental as well as safety regulations made up only one per cent of the two thousand five hundred incidents in that period, only four were a result of environmental policy (Maron et al., 2018). Employees were around five hundred times more probable to get laid off due to the seasonal and contract completions than due to the policy. Model alterations account for fifty times the layoffs due to the policy. Additionally, the pollution control industry on its own is relatively labour-intensive in contrast with the rest of the economy based on studies of the labour intensity of various sectors. Therefore, a rise in demand for environmental safety tends to raise the labour demand in the end which shows that it is the labour’s friend instead of enemy.

Lastly, environmental safety expenditures seem not to impact the competition among the US industries in the international market. Strong support for this inclusion is offered in a recent survey that looked at various academic studies of the potential consequences of environmental. The results of the survey showed that there is no proof of major impact of environmental policy in relation to competition (Maron et al., 2018). At around two per cent of value added, the costs do not appear to be large. Furthermore, most trading partners of the US have alike policies which means that their industries experience comparable pollution-control expenditures (Popp, 2019). Even more compelling are researches showing that the policies in various nations are less important than other factors that influence decisions regarding investing in new plant plus equipment. Multinational organizations do not look for nations with non-existent policies to reduce on the funds spent by polluting more.

Because of the less regulation costs as percentage of added value, it would not make an economic sense if a company moves a plant abroad to escape environmental policies. Multinationals are very sensitive to charges of exploiting the surroundings in developing nations, plus generally establish practices that compare favourably with those in their facilities in the US (Kraft, 2021). Where a plant is moved to abroad, it is always because of market reasons or gain more access to cheaper labour and raw materials. Companies also move plants to ensure that customers in those countries are served better. It is not impossible to find one or two companies that move their plants to avoid policies. It is noteworthy to remember that the above points do not mean that particular regulations in specific instances fail to cause unemployment, impaired international competition level or plant closures.

Economic Growth

Another popular view about environmental policy is that it reduces the economic growth. It is believed that costs incurred as a result of the environmental protection put out of place other productive investments (Burns et al., 2020). Over a period of time, the cumulative decreases in investments aimed towards productive pursuits in the economy begin to add up to a sum that affects macroeconomic conditions. For instance, capital stock size, labour productivity, wages as well as employment. Numerous economic scholars have examined the long haul effects of environmental policy expenditures. By doing that, they utilize modelling mechanisms that differ from the easier ones normally utilized to calculate the compliance expenditures of personal regulations. Approximating long-term impacts for a whole economy is a much more difficult exercise. Methods for assessing the short-term expenditures of personal environmental policies focus on the particular markets as well as activities directly influenced by the rule.

For instance, to compute the regulation costs regarding air pollution control for cement kilns, the evaluation would investigate economic situations in the market like the level plus elasticity of demand, supply characteristics, as well as the direct expenditures of compliance. However, the technique cannot probably reveal if the basic environmental regulation will negatively impact the whole nation’s economic growth in the long run. This is actually dependent on various factors in the economy plus on the combined effects of various environmental plus other regulations. The method developed by economists for assessment of the nationwide impact of the rules and regulations in the long run is known as CGE modelling. The models from this technique have numerous dozens industry sectors which include households that offer labour and consume output.

They have features that make them appear attractive for assessing long term impact of different policies. One of the features includes the ability to enable to substitution among different sectors in the industry. For instance, in case environmental rule or regulation costs are high in one sector, the more expensive the output that results in the increase in demand for substitutes. In CGE models also the proportion of capital formation alters due to the household incomes as well as savings rates change. As a result of the feature, it is probable to mimic the long-term effects of regulations that decrease incomes plus thus capital formation. Obviously, this kind of modelling is restricted to present-day technologies for production as well as pollution control (Palm et al., 2019). It is unable predict cost-reducing techniques in products or amenability that may be innovated in the years to come. The models aggregate as well the industry sectors to enable task manageability, so that distinctions that are key cannot be observed or assessed. However, as a tool for predicting a highly inexact future, plus how it might be changed by different guidelines, this kind of modelling is the ideal method.

Some of the claims can prove to be wrong when looking at the available data. For instance, it turns out that very few layoff plus plant closure cases happen because of environmental rules. For numerous important reasons, environmental policy is not also likely to harm competition in any major way. A major reason why the popular perception is inaccurate is that environmental protection costs for many industries are small. According to a Census Bureau data, in 1991, the total pollution control costs amounted to only two per cent. Expenditures of such size are not large enough to result in layoffs or plant closures. A number of industries face larger environmental policy expenditures but these are highly capital-intensive industrial sectors where rivals face the same fate.

Apart from the consequences of environmental policy, the paper has also looked at oligopoly and conventional economic theory. Conventional economic theory holds that an individual should at all times pay the least possible taxes and wages, charge the maximum price and rent, and never give anything away it convenes some hidden potentially over compensatory individual benefit. The beliefs in this theory include sustained economic growth is the path to people’s progress and that free markets lead to the most effective as well as socially optimal distribution of resources.

Conclusion

In conclusion, environmental protection is perceived to have its impacts on the economy of a country and the world. From the paper, we have seen that a common belief about the environmental policy is that it results in layoffs as well as closure of plants and reduces the level of competition in the market. The evidence for this is unemployment which results from logging limitations in the Pacific Northwest to secure habitat for the spotted owl that put many unfortunate individuals out of employment. Apart from unemployment, we have also seen that another popular view about environmental policy is that in the end it reduces the economic growth. It is believed that costs incurred as a result of the environmental protection put out of place other productive investments. Over a period of time, the cumulative decreases in investments aimed towards productive pursuits in the economy begin to add up to a sum that affects macroeconomic conditions. For instance, capital stock size, labour productivity, wages as well as employment.

It is assumed that individuals are naturally motivated by greed. According to the theories and beliefs, to be a human being is to have a drive to obtain. The beliefs also try to show that the consistent pursuit of greed plus acquisition results in socially optimal outcomes. It is in the interest of the society to honour, encourage and reward the mentioned values. When it comes to oligopoly, the concept shifts to a few individual companies that control the market. Nevertheless, no one company keeps the others from wielding major impact over the sector plus they all sell products a little different. Prices in such a market are average due to the availability of competition. When a single company sets a price range, other companies react to maintain competitiveness. For instance, if one cuts prices, others do the same too. Unlike in perfect competition, prices in oligopoly are often greater.

References

Burns, C., Eckersley, P., & Tobin, P. (2020). EU environmental policy in times of crisis. Journal of European Public Policy, 27(1), 1-19. Web.

Head, K., & Spencer, B. J. (2017). Oligopoly in international trade: Rise, fall and resurgence. Canadian Journal of Economics/Revue Canadienne D’économique, 50(5), 1414-1444. Web.

Kraft, M. E. (2021). Environmental policy and politics. Routledge. Web.

Maron, M., Brownlie, S., Bull, J. W., Evans, M. C., von Hase, A., Quétier, F.,… & Gordon, A. (2018). The many meanings of no net loss in environmental policy. Nature Sustainability, 1(1), 19-27. Web.

Palm, R. I., Hodgson, M. E., Blanchard, R. D., & Lyons, D. I. (2019). Earthquake insurance in California: environmental policy and individual decision-making. Routledge. Web.

Popp, D. (2019). Environmental policy and innovation: a decade of research. National Bureau of Economic Research. Web.

Prat, A., & Valletti, T. M. (2021). Attention oligopoly. American Economic Journal: Microeconomics, Forthcoming. Web.

Selwyn, B., & Leyden, D. (2021). Oligopoly-driven development: The World Bank’s Trading for Development in the Age of Global Value Chains in perspective. Competition & Change, 1024529421995351. Web.

Wang, O., & Werning, I. (2020). Dynamic oligopoly and price stickiness (No. w27536). National Bureau of Economic Research. Web.

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