In this paper we analyze an economy in which self-protection choices made by
economic agents to face environmental degradation generate environmental negative
externalities on other agents. By self-protection choices we mean choices that
agents may do to protect themselves against some form of social degradation (e.g.
crimes, lack of leisure, depletion of social capital) or environmental degradation
(air and water pollution, loss of biodiversity, growing scarcity of green areas, etc.).
The notion of self-protection choices is not new in the literature. Hirsch (1976)
was the first to introduce the concept of defensive consumption, that is, consumption
induced by a growth in negative externalities. The notion originally proposed
by Hirsch concerned a wider set of choices than those induced by environmental
deterioration. The concept, however, has become particularly popular in the environmental
literature where there is a major debate on how the Gross National Product
as a measure of welfare should be corrected to take into account defensive expenditures
and environmental depletion.