chapter  Chapter 11
18 Pages

An Economic Approach

WithTore Söderqvist, Lars Bergman, Per-Olov Johansson

This chapter offers an economic approach to groundwater contamination. It provides a general presentation of groundwater contamination as an economic problem. Human-made contamination of groundwater is often an unintentional effect caused by people’s behavior in, for example, agricultural or industrial production, or in their private consumption as households. The market and contamination stories may give nice descriptions of the economic problem due to groundwater contamination. Economists like to show that the supply function is the logical behavioral outcome of profit-maximizing producers and that the producers’ supply functions are, roughly speaking, identical to their marginal cost functions. The appearance of an ecological economics shows that even an integration may be possible. Especially for enforcing input controls, economic instruments, and in particular permit markets, may be promising. They can induce a cost-effective situation at low information costs. A necessary condition for well-fimctioning markets is a large number of agents on the market.