This essay will explain how air pollution in Beijing relates to the market economy by looking at how one operates. Because modern neoclassical economists form the dominant mainstream school in economics (Himmelweit and Simonetti, 2004, p.86), discussion will be based on the neoclassical model with externalities providing the main focus. Two solutions will then be considered; private or social ownership, and taxation and compensation. It will show how these solutions must operate within the dominant structure that is the neoclassical model of a market. Concluding that for environmental degradation to end, this model needs to change.
A market economy is an economy which has its main way of allocating resources through a market (Himmelweit and Simonetti, 2004, p.82). These resources can be anything with financial value. The neoclassical economic model sees markets operating based on the self-interested choices of individual agents (Himmelweit and Simonetti, 2004, p.86). These agents are generally suppliers or consumers with a self-interest of achieving maximum savings or profits (Himmelweit and Simonetti, 2004, p.91). This extra money is called surplus. In a market economy the most efficient producers offer the best price, thus squeezing out less efficient competitors. Consumers then buy at the cheapest rate. These market forces create a pricing mechanism that regulates the economy. Adam Smith referred to this automatic regulator as the invisible hand (Himmelweit and Simonetti, 2004, p.86). The efficiency of markets can be seen as environmentally positive because cutting costs could mean cutting waste. Ho wever, savings can also be made by having less consideration for social costs like air pollution. These bi-products are called externalities (Himmelweit and Simonetti, 2004, p.98). Externalities are generally overlooked by a neoclassical model that only considers financial issues. One of the externalities of Beijings market economy is air pollution.
In recent years, China has seen spectacular economic growth (Watts, 2005). It has entered the market offering services at cheap prices. This has enticed both consumers and producers. But what are the costs of Chinas efficiency? Economic growth allows more Chinese citizens to own cars. In five years the number of cars in Beijing has more than doubled. This has been blamed for the rapid increase in emissions that contribute to air pollution (Watts, 2005). The externality of more cars is higher air pollution. The Guardian article goes on to claim that pollutants in the sky over China have increased by about 50% during the last 10 years (Watts, 2005). There are fears that air pollution could quadruple within fifteen years unless the rise in energy consumption and automobile use can be slowed (Watts, 2005). Another sign of economic growth is energy consumption. Energy has a value which is regulated by the market economy however, its externality, air pollution, is not. So how do w e force the market economy to take responsibility for its externalities? One option is private or social ownership.
Because markets are structured and run by money, some believe that ownership of vulnerable resources will fix the problem (Himmelweit and Simonetti, 2004, p.101). This may work if the resource is something that can be privatised and controlled. In theory, an owner would have an interest in keeping their resource sustainable. There are many reasons as to why this may or may not work, but the main issue, for the purpose of this essay, is that air is a shared resource, its a public good and no one can be excluded from its consumption (Himmelweit and Simonetti, 2004, p.103). Therefore, there is no control or financial incentive to maintain or improve it. Because the market economy is governed by economic agents, it seems that the best form of regulation would be attaching financial value to the externalities. If ownership isnt the answer then maybe taxation and compensation is.
Taxation could be used against polluters (Himmelweit and Simonetti, 2004, p.103) by attaching a penalty to externalities, thus giving them status in the market. The main problem is how much to charge. This uncertainty is created by the financially diverse world we live in. As Himmelweit and Simonetti point out, richer people may chose higher taxes and still pollute, or not need compensation to live with pollution (2004, p.107). This can be seen with the statement that China is home to 16 of the planets 20 most air-polluted cities (Watts, 2004). China, being a poor country, tolerates such pollution for their economys sake, whereas richer nations, such as England, choose not to. This can be seen in Table 1 that shows water quality considered either good or fair in Englands estuaries in 2005 was roughly 93% of the water tested (The Open University, 2009, p.16). On the other hand, 70% of Chinas rivers and lakes are so toxic that they cannot be used for drinking water (Watts, 200 4). A Marxist would consider this to demonstrate a clear class divide.
From exploring these options, it would appear that the problem is the neoclassical market economy. The economy is governed by economic agents. Our financially diverse world has particular agents that are more sovereign than others (Himmelweit and Simonetti, 2004, p106). Therefore, the more money you have in a market economy, the louder your voice is, the more choice you have over your life, and the more you have to lose should it fail. It seems that for as long as the neoclassical markets dominate our world that agency over air pollution and other externalities will always be restricted. Hinchliffe and Woodward highlight this by saying; economists need to be wary of those economic models (like the dominant neo-classical model) that tend to ignore environmental degradation (2004, p.157). Until we change this and other flaws in the neoclassical model, such as its belief that a market is able to satisfy all important wants (Himmelweit and Simonetti, 2004, p.86), then suffering and environmental degradation will continue. After all, a market cannot revive someone who has died a premature death from breathing poisonous air.
This essay has explored the neoclassical model of a market economy. It has highlighted its positives and negatives showing how it is related to air pollution in Beijing by defining externalities. Two solutions have been presented to control these externalities; private and social ownership, and taxation and compensation. However, both solutions have flaws, the main one being the overriding structure that they have to operate within; the neoclassical model of a market economy. This model, although positive in some aspects, can be shown to perpetuate the Marxist polarised view of class. As long as it exists there will always be a power imbalance. The end result is human suffering for the less sovereign on a tragic scale.
References
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Himmelweit, S. and Simonetti, R. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
Hinchliffe, S. and Woodward, K. (2004), DD121, the natural and the social: uncertainty, risk, change, Milton Keynes, The Open University.
The Open University (2009) Assignments Booklet 2009E, DD121, Milton Keynes, The Open University.
Watts, J. (2005) Satellite data reveal Beijing as air pollution capital of the world, The Guardian, Monday October 31 2005. Reprinted in The Open University, 2009, DD121, Assignments Booklet 2009E, Milton Keynes, The Open University.
Watts, J. (2005) Satellite data reveal Beijing as air pollution capital of the world, The Guardian, Monday October 31 2005. Reprinted in The Open University, 2009, DD121, Assignments Booklet 2009E, Milton Keynes, The Open University.
Watts, J. (2005) Satellite data reveal Beijing as air pollution capital of the world, The Guardian, Monday October 31 2005. Reprinted in The Open University, 2009, DD121, Assignments Booklet 2009E, Milton Keynes, The Open University.
Watts, J. (2005) Satellite data reveal Beijing as air pollution capital of the world, The Guardian, Monday October 31 2005. Reprinted in The Open University, 2009, DD121, Assignments Booklet 2009E, Milton Keynes, The Open University.
Watts, J. (2005) Satellite data reveal Beijing as air pollution capital of the world, The Guardian, Monday October 31 2005. Reprinted in The Open University, 2009, DD121, Assignments Booklet 2009E, Milton Keynes, The Open University.
Watts, J. (2005) Satellite data reveal Beijing as air pollution capital of the world, The Guardian, Monday October 31 2005. Reprinted in The Open University, 2009, DD121, Assignments Booklet 2009E, Milton Keynes, The Open University.
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