The Economics of Environmental Policy

Knowledge and analyses are drawn from a broad range of experts to depict the problem of environmental quality as an economic problem whose resolution requires major changes in economic, political, and legal institutions. The model emphasizes the principle of materials balance in developing public policy which uses these interconnections as a framework. Viewed as an economic problem, environmental degradation is the result of the failure of the market system to efficiently allocate environmental resources among their alternative uses. The government's primary concern is to preserve competition and assure that the distribution of income meets the society's ethical standards, but the market system fails to work for common property resources. The problem of designing institutions for collective action that can efficiently manage common property environmental resources is analyzed. The need to bring environmental resources back into the economic system so that their use can be subject to the same sorts of constraints influencing the use of other resources (land, labor, and capital) is emphasized.

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