NEGATIVE EXTERNALITIES AND MARKET FAILURES: A CASE STUDY OF INDUSTRIAL WASTE POLLUTION AND THE URGENCY OF GOVERNMENT INTERVENTION
DOI:
https://doi.org/10.58174/ijimes.v1i9.135Keywords:
Negative Externalities, Market Failure, Pigouvian Tax, Industrial Waste Pollution, Government InterventionAbstract
Profit-oriented industrial production activities frequently disregard the social costs imposed on communities and surrounding environments, resulting in negative externalities manifested as industrial waste pollution discharged into river bodies. This study aims to analyze the mechanisms of market failure caused by negative externalities, identify the multidimensional impacts of industrial waste pollution on community welfare, and formulate the urgency of government intervention through appropriate policy instruments. The method employed is a descriptive qualitative case study combined with a systematic review of welfare economics literature, externality theory, and environmental regulatory frameworks. The analysis results indicate that industrial waste pollution causes a drastic deterioration in river water quality, public health disturbances, economic losses for fishermen and affected residents, and an increased household expenditure burden. Market failure occurs because the free market price mechanism fails to internalize social costs into product prices, resulting in inefficient resource allocation and overproduction. The conclusion affirms that government intervention through environmental regulation, Pigouvian taxation, periodic monitoring systems, and strict sanctions are absolute prerequisites for achieving a balance between economic growth and environmental sustainability.
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