Public goods, the free market economy, and international arrangements for the environment, or why is there a price tag on the air we breathe?

The awareness of environmental problems, which developed in the 1970s, led to the signing of a considerable number of international agreements. The present article will explain the reasons why all these agreements have been breached. An explanation that utilizes a model based on game theory will be given special emphasis. The major argument made in the article is that environmental resources are economic and not public goods, as they are erroneously considered. Thus, the establishment of a system of international arrangements (regulations) to allocate environmental resources and monitor their use by imposing fines, restrictions, and taxes on utilization that exceeds permitted levels is doomed to failure. The solution proposed in the article is the establishment of an International Environment Fund (IEF), which will allocate direct economic incentives and derive its funding from the royalties of environmental preservation activities.