Solving transportation externalities, economic approaches, and their risks

Abstract

The impact of human activity on the environment is an ongoing concern not only in the natural sciences but also in economics. Special attention is focused on the transport system, which is one of the largest producers of so-called externalities. However, its regulation may mean a serious disruption of global logistics links, which are crucial for maintaining international and national trade, gross domestic product formation and, therefore, to maintain the economic level to which mankind is accustomed to and which brings a quality of human life that is the highest in the human history. The article, therefore, examines possible economic approaches and theories to the problem of the relationship between human activity and the environment and the possible reduction of negative externalities. Typical approaches to dealing with externalities include the theories of the English economist Arthur Pigou, who proposed the application of various taxes and subsidies to limit the so-called social costs, whereas the extreme solution is the explicit prohibition of certain activities. In contrast to this approach is the theory known as the environmental Kuznets curve, which states the relationship between environmental damage and the economic performance of a given geographical area. It must be respected that the reduction of negative externalities, or their so-called internalisation, cannot be expected to be a trivial solution. The application of additional taxes or subsidies can lead to many unintended consequences, which may ultimately have a greater negative economic impact than the externalities themselves. Therefore, the conclusion of this article is devoted to a discussion of the potential risks of such regulatory interventions from the government position.

Keywords

• externalities
• internalisation of externalities
• transportation system
• environmental kuznets curve
• pigouvian tax
• gross domestic product
• environment