ABSTRACT
As discussed in Chapter 1 and clarified formally in Chapter 2, “ environmental problems” are viewed by the economist as being essentially synonymous with the existence of negative externalities. In this chapter we continue to assume that there is a single, homogeneous residual. Over time, the environmental damages-growing with population and income-associated with the household and firm behavior discussed in the preceding chapter would be expected to lead-and have led-to the creation of governmental institutions to address environmental concerns.
