Philosophy Dictionary of Arguments

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Mause I 415f
Interventions/Environmental Policy/Pigou: Although not originally developed on the basis of environmental problems, Pigou (1920) took the view early on that the market cannot be left to itself in the case of external effects. Rather - so the argumentation - sovereign interventions are required, that contribute to an internalisation of externalities according to polluters since only by means of such state interventions can private and social costs or benefits be covered with the aim of increasing the welfare of society as a whole. In order to prevent the misallocation of scarce (environmental) resources and thus a sub-optimal market supply of private goods, external costs or external income must be internalised by way of taxation (so-called Pigou taxes) or state subsidisation (Hansjürgens 1992, p. 28ff (1); Endres 2000, p. 94ff (2)).
Intervention/Externalities/CoaseVsPigou: Coase 1960 (3): in the case of (environmental) external effects, there are no "polluters" or "victims" per se. Rather, a reciprocal character of external effects is to be assumed, i.e. if environmental impacts are allowed there are disadvantaged people, if these are prevented, there are also disadvantaged people. The reason for this is that environmental problems contain rival claims to use of environmental goods, which can basically be corrected in two possible directions (Hartwig 1992, p. 140 ff.(4); Feess und Seeliger 2013, p. 141 ff.(5)).
Example: An improvement of injured parties leads to costs on the part of the polluters.
Solution/Coase: Coase theorem: if there are no transaction costs, there is no need for government intervention to internalise external effects, as in this case the market leads to an optimal solution of the environmental problem in the form of private negotiations between the parties concerned. (See Transaction Costs/Coase).


1. Bernd Hansjürgens, Umweltabgaben im Steuersystem. Zu den Möglichkeiten einer Einfügung von Umweltabgaben in das Steuer- und Abgabensystem der Bundesrepublik Deutschland. Baden-Baden 1992..
2. Alfred Endress, Umweltökonomie, Stuttgart 2000.
3. Ronald Coase. 1960. The problem of social cost. Journal of Law and Economics 3: 1– 44.
4. Karl-Hans Hartwig, Umweltökonomie. In Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik, Hrsg. Dieter Bender, Hartmut Berg, Dieter Cassel, Günter Gabisch, Karl-Hans Hartwig, Lothar Hübl, Dietmar Kath, Rolf Peffekoven, Jürgen Siebke, H. Jörg Thieme und Manfred Willms, Vol. 2, 5.ed., 122– 162. München 1992.
5. Ebernhard Feess, & Andreas Seeliger. 2013. Umweltökonomie und Umweltpolitik, 4.ed. München 2013.


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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution.
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

EconPigou I
Arthur C. Pigou
The Economics of welfare London 1920

Mause I
Karsten Mause
Christian Müller
Klaus Schubert,
Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018


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Ed. Martin Schulz, access date 2019-06-18
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