Environmental Concern and Market Failure (Essay Sample)

[Environmental Concern and Market Failure]
[Name]
[Institutional Affiliate]
Current consumers are concerned with environmental issues making them to prefer in purchasing the so called "Environmentally friendly products" for this reason, several marketing managers have come up with marketing strategies in order to find the response to the consumers environmental needs, because of the influence that the environmental concern may have on the influence of consumption habits of the consumers. The environmental concern relates to water in that clean water in any organization is due to the clean environment around it. A poor environment will definitely a dirty water, stagnant water around any organization can also make the environment look bad (Jeanrenaud, 1997).
The cause of market failure is because of the inefficiencies that arise during the allocation of services and goods. This is because of the failure of a price mechanism in accounting for all the costs incurred and benefits involved when consuming or providing a particular good or product. When it actually happens, the optimally social goods will neither be supplied nor produced by the market, instead, the market will under or over produce. The structure of market itself is what can cause a failure, and as a result, several markets are unlikely to succeed and hence require interventions (Dwivedi, 2006). 
According to Dwivedi (2006), Market failure can be caused by several factors including positive and negative externalities. An externality is the effect caused by consumption or production of a particular good towards `a third party. A positive externality is described as the positive spillover that arises as a result of producing or consuming a specific services or goods. For instance, a good organization will provide quality goods and services to its consumers. A negative externality is the effects of negative spillover to the third party. For instance, a substandard good may negatively affect the consumer. Market failure can also be caused by Environmental concern, which are the effects that an environment may have on the organization, therefore these concerns should be taken as important considerations as well as sustainable developments.
This source of market failure has become a global issue and concern. This is observed by how several governments and organizations as well as the supra-nationals across the globe intervene in specific markets. Worldwide economists are always concerned with how to solve the problem of market failure by coming up with possible means and corrections. Governments also come up with policy interventions including taxes, bailouts, wages, subsidies, price controls and regulations to solve the problem of market failure (North & Officinal Internacional del Trabajo.1997)
As seen above, there is net loss of Economic welfare from price P2, which is raised far above the marginal cost.
Most arguments based on economics are that intervention of governments in solving market failure in most instances are not capable of handling externalities nor provide public goods. Public goods include education, research and development, welfare programs and public health, domestic and national security, roads, research and development as well as clean environment among others. There are two distinct aspects that are related to public goods, "nonrivalrous consumption" and "nonexcludabilty consumption" which means that the benefits of goods and services should also be extended to the nonpayer’s. The second aspect nonrivalrous consumption will assume that entrepreneurs will manage ion excluding monocontributors from show watching. An externality will occur when the actions of a given individual affects the well being of another individual making the relevant costs and benefits not to be reflected in the market prices. Lack of property rights can also market failure through Opportunism. Organizations or individual groups may as well begin to exploit absence of private ownership. For instance, because there is a boundary aligning a given song, other groups or individuals may begin stealing the song resulting to overproduction of the song and ultimately market failure (Dwivedi, 2006).
Policy recommendations to cub the problem of market failure into successful governance and finally protecting the environment is the best policy recommendation in regulating negative externalities. The initiatives should always adhere to particular codes of conducts, which are responsive, tr...