What are the different dimensions of economic environment

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What are the different dimensions of economic environment

Valuation[ edit ] Assessing the economic value of the environment is a major topic within the field. Use and indirect use are tangible benefits accruing from natural resources or ecosystem services see the nature section of ecological economics.

Non-use values include existence, option, and bequest values.

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For example, some people may value the existence of a diverse set of species, regardless of the effect of the loss of a species on ecosystem services. The existence of these species may have an option value, as there may be the possibility of using it for some human purpose.

For example, certain plants may be researched for drugs. Individuals may value the ability to leave a pristine environment to their children. Use and indirect use values can often be inferred from revealed behavior, such as the cost of taking recreational trips or using hedonic methods in which values are estimated based on observed prices.

Non-use values are usually estimated using stated preference methods such as contingent valuation or choice modelling. Contingent valuation typically takes the form of surveys in which people are asked how much they would pay to observe and recreate in the environment willingness to pay or their willingness to accept WTA compensation for the destruction of the environmental good.

Hedonic pricing examines the effect the environment has on economic decisions through housing prices, traveling expenses, and payments to visit parks.

Under this plan, the economic impact has to be estimated by the regulator. Usually this is done using cost-benefit analysis. There is a growing realization that regulations also known as "command and control" instruments are not so distinct from economic instruments as is commonly asserted by proponents of environmental economics.

The main difference an environmental economist would argue exists between the two methods, however, is the total cost of the regulation. Some firms, in this system, can abate inexpensively, while others can only abate at high cost. Because of this, the total abatement has some expensive and some inexpensive efforts to abate.

Consequently, modern "Command and control" regulations are oftentimes designed in a way, which addresses these issues by incorporating utility parameters.

For instance, CO2 emission standards for specific manufacturers in the automotive industry are either linked to the average vehicle footprint US system or average vehicle weight EU system of their entire vehicle fleet.

Environmental economic regulations find the cheapest emission abatement efforts first, then the more expensive methods second. This leads to a lower cost for the total abatement effort as a whole. Often it is advocated that pollution reductions should be achieved by way of tradeable emissions permitswhich if freely traded may ensure that reductions in pollution are achieved at least cost.

In theory, if such tradeable quotas are allowed, then a firm would reduce its own pollution load only if doing so would cost less than paying someone else to make the same reduction.

In practice, tradeable permits approaches have had some success, such as the U. Taxes and tariffs on pollution. Increasing the costs of polluting will discourage polluting, and will provide a "dynamic incentive," that is, the disincentive continues to operate even as pollution levels fall.

A pollution tax that reduces pollution to the socially "optimal" level would be set at such a level that pollution occurs only if the benefits to society for example, in form of greater production exceeds the costs. Some advocate a major shift from taxation from income and sales taxes to tax on pollution - the so-called " green tax shift.

The Coase Theorem states that assigning property rights will lead to an optimal solution, regardless of who receives them, if transaction costs are trivial and the number of parties negotiating is limited.

What are the different dimensions of economic environment

For example, if people living near a factory had a right to clean air and water, or the factory had the right to pollute, then either the factory could pay those affected by the pollution or the people could pay the factory not to pollute.

Or, citizens could take action themselves as they would if other property rights were violated. The US River Keepers Law of the s was an early example, giving citizens downstream the right to end pollution upstream themselves if government itself did not act an early example of bioregional democracy.

Many markets for "pollution rights" have been created in the late twentieth century—see emissions trading. According to the Coase Theorem, the involved parties will bargain with each other, which results in an efficient solution.

However, modern economic theory has shown that the presence of asymmetric information may lead to inefficient bargaining outcomes. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. August Learn how and when to remove this template message Environmental economics is related to ecological economics but there are differences.

Most environmental economists have been trained as economists.Military officials often utilize the PMESII-PT acronym (Political, Military, Economic, Social, Information, Infrastructure, Physical Environment, and Time) as an analytical start point to assess an.

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All outside factors that may affect an organization make up the external environment. The external environment is divided into two parts: economic, and global influences. Indirectly interactive forces may impact one organization more than another simply because of the nature of a particular business.

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