Environmental Economics, 7th edition

Book Preface

When our descendants look back at the last part of the 20th century, and now at the beginning of the 21st, we want them to be able to say: “That’s when they began to take the degradation of the natural environment, with its threats to human life and the life of the planet, seriously.” Furthermore, we would like them to be able to see that around this time we took serious steps to halt and reverse this process. This book is an introduction to environmental economics, one way of approaching the steps that need to be taken. It’s about the way human decisions affect the quality of the environment, how human values and institutions shape our demands for improvement in the quality of that environment, and, most especially, about how to design effective public policies to bring about these improvements.

Problems of environmental quality are not something new; in fact, history is filled with bleak examples of environmental degradation, from deforestation by ancient peoples to mountains of horse manure in urban areas in the days before automobiles. But today’s world is different. For one thing, many people in economically developed countries, having reached high levels of material wellbeing, are beginning to ask questions: What good is great material wealth if it comes at the cost of large-scale disruptions of the ecosystem by which we are nourished? More fundamental, perhaps, is the fact that with contemporary economic, demographic, and technological developments around the world, the associated environmental repercussions are becoming much more widespread and lethal. What once were localized environmental impacts, easily rectified, have now become widespread effects that may very well turn out to be irreversible. Indeed some of our most worrisome concerns today are about global environmental impacts.

It is no wonder, then, that the quality of the natural environment has become a major focus of public concern. As we would expect, people have responded in many ways. Environmental interest groups and advocates have become vocal at every political level, especially in those countries with open political systems. Politicians have taken environmental issues into their agendas; some have sought to become environmental statespersons. Environmental law has burgeoned, becoming a specialty in many law schools. Thousands of environmental agencies have appeared in the public sector, from local conservation commissions to environmental agencies at the United Nations. At the scientific level, environmental problems have become a focus for chemists, biologists, engineers, and many others. And within economics there has developed environmental economics, the subject of this book.

Environmental economics focuses on all the different facets of the connection between environmental quality and the economic behavior of individuals and groups of people. There is the fundamental question of how the economic system shapes economic incentives in ways that lead to environmental degradation as well as improvement. There are major problems in measuring the benefits and costs of environmental quality changes, especially intangible ones. There is a set of complicated macroeconomic questions: for example, the connection between economic growth and environmental impacts and the feedback effects of environmental laws on growth. And there are the critical issues of designing environmental policies that are both effective and equitable.