Next week we'll be beginning our discussion of externality theory, which allows us to look at the inefficiency created when costs are created by a market but are not accounted for in the price of the good. Once we understand the cause of the inefficiency, we can develop measures to address it.
Externality theory is easily understood in the context of pollution in its many forms. Here is a study suggesting that white pox disease in elkhorn corals is attributable to improperly treated human waste. We can categorize solutions into two broad groups: "command-and-control" (standards) and incentive-based systems.
What are the external costs associated with this pollution?
What solutions might work?