1. This course is prepared under the Erasmus+ KA-210-YOU Project titled
«Skilling Youth for the Next Generation Air Transport Management»
Sustainability
Management in Aviation
The economic perspective – ‘Externalities’ and
environmental policy – Part I
Prof. Dr. Frank Fichert
Worms University of Applied Sciences
2. ‘Markets’ are a crucial element of the economy
In general, the buyer as well as the seller benefits from each
market transaction – because it is based on a voluntary mutual
agreement.
However, sometimes A’s action has a direct effect on B. There is
no agreement on this effect – and hence no market transaction.
Economists refer to this as an externality.
And externalities might cause a market failure that needs to be
corrected by a specific policy.
The economic perspective – Part I 2
Externalities
3. There are many ways to classify externalities:
Positive externalities (external benefit)
vs. negative externalities (external cost, or social cost)
Externalities between firms and/or households.
Number of affected entities (and temporal perspective)
…
The economic perspective – Part I 3
Externalities
4. Some examples for negative externalities:
Noise (by airline – or by neighbor with motorcycle)
Pollution (e.g. air or river)
Carbon emissions
…
The economic perspective – Part I 4
Externalities
=> Please think about examples for positive externalities and then continue with
video/slides ‘Sust S/V 02-02’
