What Is Environmental Economics?
Democracies and capitalist, free market societies put much more emphasis on the individual than on the interests of society as a whole. In fact, economics is often a zero-sum game, where every gain is another person's loss. Environmental economics is a subset of economics that examines the functioning of free markets and the new ways to make it profitable to serve the public good.
Features
Environmental economics addresses the difference between what a self-interested individual does in response to market conditions and what is actually in the best interest of society as a whole. In other words, environmental economics posits that free markets often fail to allocate resources efficiently for the greatest benefit of all. Pollution is a classic example where one corporation may not experience tangible costs for its activities, while the adverse affects on the environment are felt by everyone. In other cases, corporations may benefit from exclusive use of public resources that were intended to be enjoyed by all.
Function
The goal of environmental economics is to value such intangible things as the protecting the environment and preventing global warming, and finding ways for market operations to better incentivize these outcomes through new technology and public policy. Most of the efforts center on interdisciplinary studies, bringing together leaders in science, business, government, and of course, economics, and creating curricula that leads to increased understanding of environmental economic principles.
Types
Most of the adherents to environmental economics are classic economists that have pioneered the adaptation of economic understanding to addressing twenty-first century problems with an eye towards pragmatic solutions. Because the realities of affecting these ideas requires the participation of so many fields of activity, though, the lines separating environmental economics from ecology, business and governance can quickly become blurred. And, even within the field as narrowly defined, there are differences between traditional economists and radical Green Economists, who advocate post-capitalist ideology that places sustainability at the center of the economy rather than its periphery.
Significance
Mainstream environmental economics proposes two basic solutions to the inefficiency of free markets. First, environmental regulations enforced by fines can be used to act as an economic force to incentivize reduction of pollution and environmentally damaging practices. There is broad disagreement on how this should be done, either through a quota system or taxes on pollution. Second, they advocate the augmentation of property rights to include free air and water, letting the owners of property to negotiate the costs of infringing these rights with polluters.
Potential
Given that such highly regarded institutions as Harvard University and the World Bank have dedicated environmental economics programs in place, it's unlikely this field of endeavor is going to fade away any time soon. In fact, as climate change intensifies and supplies of natural resources dwindle even further, it's likely the field of environmental economics will only grow in importance. Ultimately, the implementation of its ideas will be in the hands of politicians. While most industries will actively lobby for their own interests, public interest in environmental economics is the best guarantor that meaningful change will occur.
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