Determination and Compensation of External Costs in Serbia as Parameter of Sustainable Management

Bozo Draskovic () and Jelena Minovic ()
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Bozo Draskovic: Institute of Economic Sciences
Jelena Minovic: Institute of Economic Sciences

Chapter 19 in European Integration Process in Western Balkan Countries, 2012, vol. 1, pp 363-388 from Institute of Economic Sciences

Abstract: The external costs and their inclusion, as a correction factor, to the calculation of the commercial effects of the companies, at micro level, respectively the negative impact of unsustainable use of natural environment at the macro level, still represents the research challenge. The marginalization of external costs leads to maximizing the benefits and profits for market actors whose target function is to maximize profits. Instead of presenting an analysis of examples of companies that do not bear the costs of externalities, in this chapter we have presented the clear case of exploitation of natural resources - phosphates from islands Ocean and Naurua in Polynesia during the first half of the twentieth century. The empirical case of exploitation of natural capital from the above islands is de facto complete and simple model that accurately shows the non-inclusion problem of negative externalities in the calculation of economic efficiency. Analogous to this example, the chapter defines a model of sustainable development, where the empirical data on changes in GDP growth in Serbia in the period: 2002-2011 served as a base values on which the assumed correction of external costs was applied. The results show the viability of the economic and ecological development in the framework of these assumptions. We defined the external costs or social costs of externalities as "the costs of nature", and they are structured so that they make the sum of losses of the environment due to exploitation of non-renewable resources, pollution and the necessary investments for the elimination of pollution costs.

Keywords: social welfare; utility; environmental costs; externalities; GDP; sustainable development (search for similar items in EconPapers)
Date: 2012
ISBN: 978-972-9344-05-3
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