October 21, 2017 

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HOMOGENEOUS: In general, the notion that everything has identical characteristics. For example, a neighborhood might have a homogeneous culture, meaning everyone has similar income, religious preferences, and political views. In economics, it is used in a couple of different ways. One is for production, such that two or more goods are homogeneous if they are physically identical or at least viewed as identical by buyers. Another is for mathematical equations, such that an equation is said to be homogeneous if the independent variables are increased by a constant value, then the dependent variable is increased by a function of that value. In a marketing context, this is a market characterized by buyers with similar needs and wants. This group is targeted with an undifferentiated targeting strategy. The company uses only one marketing mix to satisfy this group of buyers.

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Scraping Up The POLLUTION

One of Shady Valley's featured factories is Mona Mallard's Duct Tape Industries. It's the world's leading producer of duct tape -- that shiny, seemingly omnipresent, cloth-like tape that's used for everything EXCEPT ventilation ducts. Mona Mallard's Duct Tape Industries also employs thousands of voting, taxpaying Shady Valley residents. The amount of campaign money, legal and otherwise, contributed by Mona Mallard herself to Shady Valley politicians is, well, incalculable. All of this means that our little pedestrian exploration through the backlot dumping ground of Mona Mallard's Duct Tape Industries main production plant puts us on very, VERY sensitive turf. The reason, of course, is that the duct tape plant has been discarding sticky, toxic, gooey junk onto the ground. This is a potentially hazardous situation, not only because this sticky, toxic, gooey junk appears to be leaking into the Shady Valley River, but because a Mona Mallard's Duct Tape Industries security guard is headed in our direction. Rather than confront this guard, I suggest we spend our time exploring the problems of pollution. RUN!

Is It Pollution, Or Isn't It?

If put to a vote, I suspect that a majority of us would agree that the sticky, gooey junk dumped behind the Mona Mallard's Duct Industries plant is pollution. After all, it's a waste product that's fouling up what would be an otherwise clean environment. You shouldn't be too hasty, however, in casting your vote for or against. Let's see why.

Pollution is some sort of waste material spewed into the environment. The sticky, gooey junk from the duct tape plant is certainly a good candidate. Noxious gases coming out of car mufflers is another. Being a waste material and being spewed into the environment, though, only sets the stage for pollution.

To be more specific, pollution occurs if we have damage or harm caused by waste material that's spewed into the environment. If there's no harm, damage, or what balding, bespectacled economists would note as opportunity cost, then there's no pollution.

Here's an example to illustrate the point. One of our biggest sources of water pollution in the good old U. S. of A. is municipal sewage. This sewage contains organic material with the potential to foul up a body of water. It can lead to dead fish, obnoxious odors, sick people, and all sorts of other damages.

This sewage is not necessarily harmful under all circumstances. If, for example, you dump just a tiny bit of sewage, like that created by one house in one day, into a really big body of water, like Lake Michigan, then it's likely to cause little or no harm. The reason is both simple and quite important. Our natural environment has the ability to assimilate, break-down, and eliminate some waste materials. The plants, animals, bacteria, and other natural components of Lake Michigan will break up a small amount of sewage, without creating problems for humans or other living things.

The problems from municipal sewage, however, surface when there's more than the environment can handle. For example, if you dump a year's worth of municipal sewage from New York City into small fishing pond, the pond's ability to break down the stuff is overwhelmed. Then the bad things happen.

Some is Worse than Other

The damages caused by waste depends on the sort of waste it is. Here are three alternatives:

  • Degradable. Organic waste, like municipal sewage and the waste from food processing plants, is considered degradable because it can be naturally broken down by the environment. Degradable materials need not be a pollution problem so long as there's not too much.

  • Nondegradable. At the opposite end of the spectrum, lies waste materials that CANNOT be broken down by the environment. Examples include certain metals, like lead, mercury, and chromium, or compounds containing these metals. While these occur naturally in the environment, they pose serious health problems when they're concentrated. This is particularly troublesome in that much of our economy's production is intended to do just that -- increase the concentration of stuff.

  • Persistent. Between degradable and nondegradable, we have waste materials that can and do break down, but the process takes time. Persistent stuff usually includes complex synthetic materials, like pesticides and plastics. Many of the pollution problems of persistent materials result because (1) they're synthetic and our natural environment doesn't know what do with them, and (2) they remain in their synthetic state for years, decades, or even centuries, doing whatever damage they do for a long time.

Time is pretty crucial when we're concerned about pollution damages. A degradable, organic residual might cause a little bit of damage for a short period of time. A nondegradable metal like lead, however, can do it's dirty deed for a long, long period. Even though it causes a tiny bit of damage this year, it continues causing that tiny bit of damage every year we're on this planet.

A big question, as we sludge through Mona Mallard's toxic backlot, is: How significant is our pollution problem? Has it been blown out of proportion by alarmist, environmental nuts? Or will it cause the end of civilization as we know it? Read on.

What Comes Out, Goes Back

Pollution is a fundamental part of life. We depend on our natural environment. We need the air to breath, the water to drink, and the land to grow our food. The natural environment, or what we've referred to as natural resources, provides us with all of the "stuff" we use to satisfy our wants and needs.

But, here's the important part. According to the basic laws of nature, none of the stuff, the "matter," we use to satisfy our wants and needs is destroyed. We might change it around, make it look different, combine it with other things, but it never disappears. If we take a ton of something from the ground, then we have a ton of stuff. It doesn't magically shrink to a half a ton.

What happens to this stuff when we're through with it? After it has done it's needs-satisfying job, where does it go? The answer of course is: Back to the environment -- to the air, water, or land. Some of it goes back almost immediately, and some stays around for years, decades, even centuries. Eventually, though, every ton, every pound, every ounce, every single atom and molecule returns to the natural environment as unneeded, unwanted waste. Some may return during production, some during consumption, and the rest after consumption, but it will return. Therein lies the potential for pollution.

So how do we keep these omnipresent waste materials from doing their damaging deed?

When Markets Fail

Balding, bespectacled economists like to talk about efficiency -- efficient markets that efficiently allocate our scarce resources in the most efficient manner possible. If a market has a lot of buyers and sellers, such that none has any market control, then we usually think of it efficient.

A market might also be inefficient, if (here is a notable exception, one that's pretty darn important to this topic) some of opportunity cost don't enter into the sellers' price. The market has failed to efficiently use our economy's resources. In particular, with the extra cost floating around in the economy, paid by someone who's not connected with the market, then our society uses too many resources to produce too much of the stuff.

Let's see how that works for duct tape. When Mona Mallard's Duct Tape Industries dumps its gooey stuff on the land behind the plant, two things happen.

  • First, Mona Mallard's Duct Tape Industries doesn't pay to dispose of this pollution. That saves cost -- for them. This is good for the duct tape business, but potentially bad for everyone else.

  • Second, if this gooey stuff is in fact toxic, then it's existence in the environment posses a health hazard to people, plants, animals, and other living things. In other words, someone is hurt, harmed, or damaged by this gooey stuff. Those who are hurt, harmed, or damaged pay the cost. It might be medical bills or the psychic harm of an ungly looking river. But, Mona Mallard's Duct Industries doesn't pay.

The cost of producing duct tape is thus less than it would be with ALL opportunity cost included. The price of duct tape is also less that it would be with all opportunity cost included. And buyers buy more duct tape than they would if all opportunity cost is included.

This gives us one solution to pollution problems. Make polluters pay the opportunity cost.

Make 'em Pay

Many pollution problems could be solved if polluters simply paid the cost of their pollution. If Mona Mallard's Duct Industries, for example, paid for the damages caused by that gooey, sticky, toxic stuff, then they would add charge a higher price. Buyers, who pay the higher price, would tend to buy less duct tape, which would mean a cut in duct tape production, and we would end up with less of the toxic, sticky, gooey stuff dumped.

How do you make polluters, like that Mona Mallard's Duct Tape Industries, pay this extra cost? The simplest way is with a tax. While taxes are generally thought of as a "bad" thing, here they can actually do a lot of good. If government slaps a tax on duct tape production, equal to any pollution damage cost, then Mona Mallard's Duct Tape Industries and their duct tape buyers will act like they're the ones suffering. And they are, with the tax.

As such, Mona Mallard's Duct Tape Industries has a big incentive to reduce pollution, because with less pollution, they pay less tax. In fact, Mona's factory will reduce pollution (and thus the tax) until it's more expensive to clean up the toxic, sticky, gooey stuff than it is to pay the tax. Without getting into any complicated mathematical equations, suffice it to say that this would give us that magically state of efficiency -- the opportunity cost of cleaning up the mess would be equal to the opportunity cost of damages caused by the mess.

A Regulation Alternative

Taxes, however, may not be the best way to correct all pollution problems. For some waste materials, pollution damage problems and cost are unknown. We have no way of knowing what sorts of damages result from the whole range of persistent and nondegradable materials returned to the environment each year. Even now, we're only beginning to find out some of the pollution damages from waste products returned to the environment decades ago.

The health problems from asbestos, lead, and mercury are a few that have popped up in recent years. We're still debating the possibilities and potential problems of global warming caused by carbon dioxide and of the destruction of the atmosphere's ozone layer caused by fluorocarbons. The pollution cost of newly-developed synthetic materials may not be known for decades to come.

It's difficult to use a tax without knowing the damages. That's why some potential pollution problems fall under the general heading of government regulation. In some cases, perhaps even many cases, the government is better off just saying: "Thou shalt not pollute."

A Final Word on Pollution Politics

Pollution is an area of our economy that screams out for some sort of government action. The private dealings between third estate consumers and second estate businesses just won't solve the problems. Once again, however, the question of who the first estate represents becomes important. Our little excursion behind Mona Mallard's Duct Tape Industries has a number of real world implications. If the first estate has, in fact, obtained sizable campaign donations from the likes of Mona Mallard, then they're less inclined to force an extra tax on the second estate.

In contrast, third estate control of the first (which does happen from time to time) can cause excessive improvement in environmental quality. "What?" you ask. "How can the environment be too clean?" We can use too many resources to clean the environment too much. While we might have a pristine environment, everyone has dies of starvation.

The answer is a balance. The best public servant is one who seeks a balance between the interests of the polluter and the pollutee -- one who seeks the middle road. While this advice on moderation is important in most areas of public policy, none are more critical than pollution.

The Economics Of Dueling POLITICAL VIEWSxxx A Somewhat Defective Look At PRODUCT SAFETY


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