Environmental economics is the application of the principles of economics to the study of how environmental resources are managed. economics is divided into microeconomics, the study of the behavior of individuals and small groups, and macroeconomics, the study of the economic performance of economies as a whole. Environmental economic draw from both sides, although more form microeconomics than from macroeconomics. it focuses primarily on how and why people make decisions that have consequences for the natural environment. It is concerned also with how economic institutions and policies can be changed to bring these environmental impacts more into balance with human desires and the needs of the ecosystem.
Conception: Environmental economics follows neoclassical economics in having as its central concern the efficient allocation of scarce resources among competing uses. This branch of economics brings scarce environmental resources into mainstream economic analysis. Environmental economics claims that the environment is a case of non-optimal pricing and it extents market to environmental goods and services. the objective of environmental economics is to identify policies which will move the economic system towards an efficient allocation of natural resources.
Environmental economics Vs neo-classical: Environmental economics is a sub-discipline of neo-classical economics. There are some differences between environmental economics and neo-classical economics. Firstly, the central concept of environmental economics is market failure, which means that market fail to allocate resources efficiently. In environmental economics, externalities are examples of market failures, in which the unfettered market does not lead to an efficient outcome. Secondly, Environmental economics assesses the economic value of the environment. Moreover, environmental economics provides some solutions of environmental problem, which are including environmental regulations, quotas on pollution, taxes and tariffs on pollution, and better defined property rights.
Strength: In addition, it addresses issues of pollution control, the efficient setting of emissions standards, waste management and recycling, the industrial activity of environmental externalities, the conservation of natural resources, the valuation of natural resources, and so on.
Weakness: However, environmental economics forgets that the environment limits the economic activity and ignores the significant interdependency between the economy and the environment, so it indicates that the economy could increase infinitely. In addition, the importance of natural resources is ignored byenvironmental economics. Environmental economics claims that the scarce resource could be replaced by technology or other resources.
Environmental economics Vs Ecological economics: Environmental economics is distinct from ecological economics to the extent that it adheres more closely toconventional, neoclassical economics. That is, it emphasize the desirability of attaining environmental objective by means of using market mechanisms, like adjusting price signals, in order to influence the behavior of households and firms. There is, however, a significant overlap between environmental and ecological economics.
Market: A market is an institution in which buyers and sellers of consumer goods, factors of production, and so on, carry out mutually agreed-upon exchanges. when they buy or sell in a market, people naturally look for the best terms they can get. Presumably buyers would like to pay a low price whereas sellers would prefer high price. what brings all those confliction objectives into balance is the adjustment of prices on the market.
Efficiency: From the standpoint of society at large, production is at an efficient level when marginal benefits equal marginal production cost, this is, when net benefits are maximized no matter to whom those net benefits accrue.
Economic efficiency: The central idea of economic efficiency is that there should be a balance between the value of what is produced and the value of what is used up to produce it. In terminology, there should be a balance between willingness to pay and the marginal cost of production.