An Earth Day Wish

The environmental movement has brought some good things.  In particular, policymakers are much more prone (in some cases forced to) think about environmental costs.  Market failures with respect to pollution have been profound in the past and continue to be so.  There is a clear role for government to play in protecting the environment.

My wish for this Earth Day is for one thing: balance.  If I had been asked 50 years ago what the greatest need was with respect to the environment, I would have said (had I been alive) that we need mechanisms to internalize environmental costs.  A lot of those mechanisms are in now in place, though we need a much greater reliance on market-based approaches grounded in property rights, and we are not anywhere near an optimum, I think.

But today, the greatest threat is radicalism among environmentalists.  The radicals are, principally, not those who love the earth, but those who hate capitalism.  They are discredited Marxists taking cover amongst true environmentalists because there is nowhere else for them to go.

So if I were a candle-lighter, I would light a candle for those who are actually trying to advance the cause of humanity (much of which is still—because of lack of economic growth— in a dreadful  state) by promoting the balanced, sustainable development of the earth for all its peoples.

4 thoughts on “An Earth Day Wish

  1. Sven, what are the “profound” market failures with respect to pollution? I ask because I suspect–though I am willing to be convinced otherwise–that the problems you have in mind may be due at least partly to some combination of government mismanagement and the inherent limitations of human knowledge. Pollution levels are inversely correlated with the growth of wealth, which itself is directly correlated with economic freedom (i.e., lack of government regulation and interposition in the market). By the transitive law that would seem to imply that pollution levels would go up with more expansive government and go down with less expansive government. True?

    Moreover, as Adam Smith and F. A. Hayek have pointed out, human beings know a lot less about the world than they commonly believe they do. That is not anyone’s fault; it is simply a (putative) fact of the human condition. But it does mean that they will regularly miss beneficial opportunities that in hindsight seem obvious and undertake detrimental projects that in hindsight seem equally obvious. It would seem that problems with pollution might fall into this category. These should not be considered “market failures,” unless the standard of “market success” is perfection and the actors in the market omniscient.

    1. I think that the indirect feedback on pollution you mention are real, but they seem sort of second-order to me, swamped by the direct pollution externalities.

      I think negative external health effects of pollution exceed the optimum level, suggesting that pollution is still under-taxed in a Pigouvian sense.

      I would also argue that transportation in the US is not anywhere close to the User Pays Principle. Here I’m talking more about infastructure expenses like roads rather than pollution.

      I generally think we are over-taxed in the US, but I have long favored stiffer taxes in the energy sector, especially if we were to add in reasonable estimates of climate change externalities.

  2. Sven:
    I routinely teach a course on environmental policy and politics. One of the biggest surprises for my students (most of whom are environmentalists) is how successful policy has been in reducing air pollution and (although the data is a big spotty) water pollution. They all tend to assume that the environment is worse today than it was on the first Earth Day.
    A second big surprise stems from the lectures I give on corporate environmental practices. They are shocked to learn that many corporations have invested heavily in environmental management systems to achieve goals “beyond regulation.” They are surprised to learn about the role of trade associations in this process. When we talk about the dissemination of ISO 14001, the international standard for environmental management systems, they are once again surprised, particularly when they learn that this has been largely a market-driven phenomenon.
    The past two decades—in particular—have witnessed the emergence of a system of environmental governance that brings together regulators, firms, trade associations, standard setting organizations, and other nongovernmental organizations in ways that no one could have imagined when Nixon created the EPA in 1970.
    The role of markets and trade in driving improvements in environmental performance is quite stunning. I doubt that we could ever have a world without regulation—many firms are organizationally incompetent or work on such thin profit margins that they simply can’t invest in environmental management. But the system that has emerged is impressive and reveals that profit seeking firms can often do good while doing well.
    We have yet to see if the global recession is going to have negative impacts. There is some evidence that it may. Nonetheless, despite the gnashing of teeth among many environmentalists, things have evolved in ways that are quite positive.
    If interested, I will plug my recent book entitled Governing the Environment. About one-third of it is devoted to the above-mentioned phenomena.

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