Overview
Why did our economic system not react earlier to the environmental crisis?
Research and discuss these two mechanisms, find some examples, and answer the following questions: Are these two mechanisms enough to explain why we did not respond earlier to the problem? Are human biases, listed on pages 159-161 of the book, needed to explain our failures as well? Are there other missing elements that explain our lack of meaningful action? Include sources.
Negative Externality: A negative externality occurs when a company produces a good or service but does not have to pay the full cost for it (for instance polluting the air.) If a good has a negative externality, then the cost to society is greater than the cost the consumer is paying for it. Since the price does not reflect the full cost of the product, negative externalities result in market inefficiencies. The resulting costs are passed on to society, for instance in the form of CO2 pollution.
Tragedy of the Commons: When individuals or corporations neglect the well-being of society (or the group) in the pursuit of profits, something like a "Tragedy of the Commons" can occur. For example, if neighboring farmers increase the number of cows living on a common piece of land, eventually the land will become depleted and not be able to support the cows, which is detrimental to all.