Negative Externalities of Market Failure: A Case Study of a Quarry Operator in Guimaras

Lariza Aklemia Z. Albacete Introduction Philippines is a country blessed with vast natural resources. The role of the environment became a very important part of our lives and our countrys economy. These were useful to the businesses because they were able to produce goods that sustains peoples basic needs. Our environment supplies the raw materials for the production of goods which means more job opportunities and income. This will result for a decrease in the countrys unemployment rate that helps for the development and improvement of our economy. Our economy should be improved and be given more attention by our government officials because it is the best solution in eradicating poverty. Businesses contributed a lot in the development of the Philippine economy. Circulation of money, more job opportunities to Filipinos, and taxes were the main contributions of these businesses to our government and economy. Though developments will be attained through these businesses, our environment is at risk because of the negative effects that it may provide. A great possibility may happen that businesses will abuse these resources or will produce something that can destroy our environment. The most common example on this is the environmental degradation and pollution. Environmental destruction and pollution as a major health hazard is one of the major problem that businesses produce and a factor that causes market failure. Market failure occurs when there is an inefficient allocation of the resources. This kind of market failure is called negative externality where the firm does not take any responsibility for the external costs that exist on third parties.

I.

Problem The Negative Effects of Quarrying/Mining Business to the Environment Rapid industrialization and the ballooning population demands for the

construction and development of urban centers.

Quarrying for gravel and sand are the basic

materials in the construction business while mining of rocks for lime production are used in industrial and agricultural purposes and extraction of rock phosphate for fertilizer production used in agricultural production. In every phase of development especially in these kind of business, it is always coupled with environmental risks or problems. Businesses and people in urban areas encounter more problems in relation with environmental pollution, degradation and waste accumulation. Peoples lives are always at risk. Through quarrying and mining, erosion is uncontrollable. Because of the negative effects of this business to the environment and the residents, the government regulates the approval of quarrying permits to operators which can comply with the requirements for approval. The operator has to abide what is being imposed by the government to them that sometimes contributes to the stopping of their operation.

II.

Case Analysis The companys business is involved in quarrying of rocks used in making lime and as

raw materials such as rock phosphate in fertilizer production. Guimaras is blessed with rocks suited for lime and fertilizer production. This business proliferates in Guimaras with a lot of people engaged in lime production, either large scale of small scale. Not only they destroy mountains of rocks, they also practice kaingin system because they cut trees used to cook the rocks to produce lime. Because of the massive destruction of rocks and cutting of trees, the area became unproductive and bare. Although this business gave employment to some residents, but the long term effect was not realized. A few months ago, there was an accident happened in one of the mining sites of the company. A man while walking home, since it was already dark, he accidentally fell in one of the excavations and died. Although the family did not sue the owner, the companys financial obligations to the family of the victim were heavy. Government support and allow some of these quarrying or mining operators because they believe that it could cause progression in our economy. Higher income will be put into local economy because of the business. Though these businesses were supported by the government, many people still oppose because of the possible consequences that they will suffer. Massive quarrying causes erosion that resulting to landslides and flashfloods. Serious health problem may occur to the people because of the toxics, leakage from the disturbed quarrying site into the ground water and contamination of their water. Noise pollution

and destroying wildlife habitats were the other impacts of quarrying in our society. Our environment was in great danger and should be given an immediate action in order to stop these destructions (Banez, Ajon, Bilolo, Marollano, Nivero, et. al, 2010). Problems that were mentioned show a negative externality. The business has produced harmful effects to the third party. The affected people pay a much higher cost to this effect and they were more affected. While the business loses no money in doing this activity instead, they will earn more. Analyzing the companys business if given long a term permit, there will be scarcity of these resources, destroyed environment and polluted island. The purpose of the quarrying business shows developments to economy and when people abused these resources, it will result negative effects and the people will be greatly affected. The firms involved in this kind of activity should think about the society that will be affected and the possible consequences that it will cause.

III.

Conclusion Philippines have been practicing quarrying for many years in support of the countrys

infrastructure and overall economic development. This activity produces rock aggregates, colloquially known as sand and gravel (Martin and Discipulo, et. al, 1996). Disappearance of these businesses might not happen because our government mostly depends on the goods that it produces. Our government should anticipate the future that the Filipinos face if quarrying will not stopped. Our country does not have a strict mining and quarrying laws, then our government agencies involved especially the Department of Environment and Natural Resources, should implement laws and programs to give solutions to these problems but these were not strictly enforced. Businesses that perform massive quarrying should be penalized. Higher taxes should be imposed also to the operators for every quarrying activity that they perform in order to lessen the damage in our environment. These implementations were for the good of everybody and a possibility that the destruction in our surroundings will be lessen.

IV. Bibliography Introduction to Market Failure. tutor2u.net, http://tutor2u.net/economics/presentations/aseconomics/marketfailure/Introduction MarketFailure/default.html (retrieved August 25, 2011) Israel, Danilo. The Silent Dangers of Quarrying. Philippine Institute for Development Studies, http://dirp3.pids.gov.ph/ris/pdf/pidspn0105.pdf (retrieved August 25, 2011)

Quarrying: Advantages and Disadvantages. slideshare, http://www.slideshare.net/cheergalsal/quarrying-378547 (retrieved August 24, 2011)

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