Government intervention is sometimes necessary from "summary" of Economics of the Environment by Robert N. Stavins
Government intervention is sometimes necessary in situations where market failures prevent the efficient allocation of resources. Market failures can occur due to externalities, public goods, common-pool resources, and imperfect competition. Externalities, such as pollution, occur when the actions of individuals or firms affect third parties who are not compensated or penalized for the effects. Public goods, like clean air and national defense, are non-excludable and non-rivalrous, meaning individuals cannot be excluded from consuming them, and one person's consumption does not diminish another's. Common-pool resources, such as fisheries and forests, are rivalrous but non-excludable, leading to overuse and depletion. Imperfect competition arises when firms have market power to set prices above marginal cost, leading to deadweight loss and inefficiency. In these cases, government intervention can help correct market failures and promote efficiency. For example, the governme...
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