Civil Engineering Reference
In-Depth Information
Figure 10.1
A spectrum of economic goods
Pure public
goods
Pure private
goods
Quasi public
goods
Quasi private
goods
1 Indivisible
2 Non-rivalrous
3 Non-excludable
4 Cannot express
a monetary value
1 Divisible
2 Rivalrous
3 Excludible
4 Market price
is available
TAX RELIEF
Public goods overcome the failure of markets to supply goods or services that
generate external benefits. In other words, they enable governments to intervene
to provide resources that market forces would otherwise under-allocate. Equally,
the government could provide tax incentives or subsidies to encourage the private
sector to innovate in a way that will benefit society as a whole, both now and,
more importantly, in the future. There are various tax incentives and subsidies to
encourage research and development across all sectors. For example, developers
are being encouraged to devise ways to clean up contaminated land through the
provision of a 150 per cent tax credit for the costs incurred.
REGULATION, PUBLICITY AND INFORMATION
In each of the corrective actions described so far, businesses are being encouraged
to reduce the incidence of environmental damage, either by responding to modified
price signals that include environmental costs or through the government taking
responsibility by providing public goods or paying subsidies through tax incentives.
In contrast, another set of options is for governments to set regulatory standards or
use their authority to provide information to aid decision-making. As these schemes
are relatively less likely to raise business costs, they are considered rather ineffective
instruments. But in some instances there are few alternative options, and these
mechanisms continue to have a role to play.
GOVERNMENT REGULATIONS
In the history of government intervention in markets there are more examples of
regulation than anything else. This generalisation does not only apply to regulations
designed to improve markets in the construction sector, but also to the economy as
a whole. In this section, therefore, we could address all types of market failure, such
as regulations relating to patents and fair trading. However, we shall concentrate on
those relating to problems of asymmetric information.
To begin with an example that has many implications across the property and
construction sectors, it is the government's responsibility to prevent businesses
denying responsibility for the environmental impact of their products and services.
This seems to be particularly important as we are increasingly aware that habitat
