Business’s Traditional Attitudes Toward the Environment
➢ Traditionally, business has regarded the natural world as a free and unlimited good – pollution and the depletion of natural resources are the results.
➢ The “tragedy of the commons”: Damage to the environment can also be explained as the result of a situation in which each person’s or business’s pursuit of self-interest can make everyone worse off – the reverse of Adam Smith’s invisible hand.
Business’s Traditional Attitudes Toward the Environment
➢ The spillover effect: Economists’ term for disparity between private industrial costs and public social costs.
➢ In viewing things strictly in terms of private industrial costs, business overlooks spillover.
➢ So business often derives a profit from a product without considering the overall social cost – the damage the product or the production process has caused to the environment and human populations.