Why pollution is an example of market failure?

Pollution is best defined as waste. In markets, industry, business, etc., the goal is to be as efficient as possible because that means you're saving money, and that means you're maximizing profits. When a lot of waste is produced, something is obviously not very efficient.

So, in the eyes of a market or economics, this is a huge failure; if we are emitting a lot of pollution, we are actually operating very inefficiently, which means we are wasting massive amounts of money.

For the purpose of illustration, consider this: Apple offers a buyback program for a number of their products, allowing you to exchange your old iPhone or other device for a new one. They are unable to resell your trade-in, but they can send it to a facility where the parts and materials will be disassembled and used to create new iPhones, iPads, and other devices. This is a great decision because many of the materials (such as zinc, mercury, and other rare metals and minerals) are far more affordable to recycle than to extract.

When you consider how much aluminum costs and how many laptops Apple makes, recycling their aluminum saves them a significant amount of money. Refined aluminum, which is used in Apple laptop casings, actually requires 5% of the energy that the process would if it were done from raw Bauxite, the source of aluminum.

Pollution is considered an example of market failure because it results from the failure of markets to allocate resources efficiently. In a market economy, prices are supposed to reflect the true costs of goods and services, including the costs of production and consumption. However, pollution imposes costs on society that are not reflected in market prices. These costs, often referred to as externalities, include environmental degradation, health hazards, and reduced quality of life. Since polluters do not bear the full costs of their actions, they have little incentive to reduce pollution. As a result, pollution levels tend to exceed socially optimal levels, leading to market failure. To address this, governments often intervene through regulations, taxes, or incentives to internalize the external costs of pollution and promote more efficient resource allocation.