Free-market environmentalism

Free market environmentalism is an ideology that argues the free market is the best tool to preserve the health and sustainability of the environment. This is in sharp contrast to the most common modern approach of looking to government intervention to help prevent excessive destruction of the environment.

Economics of environmental destruction

Economists view many environmental problems as arising from the negative externalities of industrial production and other activities. An industry may receive the full benefit of producing a pollutant but, in general, they do not pay the full social costs of polluting the environment. This leads to a situation analogous to the tragedy of the commons where the industry keeps all the benefits of an activity itself but shares the costs with all the other members of society. In such a situation it is rational to pollute. As the elementary economics text book by Baumol and Blinder observes When a firm pollutes a river, it uses some of society's resources just as surely as when it burns coal. However, if the firm pays for coal but not for the use of clean water, it is expected that management will be economical in its use of coal and wasteful in its use of water.

Related Topics:
Economists - Externalities - Industry - Pollutant - Social cost - Tragedy of the commons - Economics

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A conventional strategy to try to solve such a commons problem is by governmental regulation to proscribe polluting activities. Free market economists have criticized this approach as being at best inefficient and at worst ineffective. By allowing industries to pollute up to a specified limit, regulators effectively set the value of a clean environment at zero. Research at Amoco concluded that were the money that is currently spent on meeting regulations instead spent on reducing pollution, in ways that the company itself was already able to identify, the net benefits to the environment would be greater. Furthermore, the demands of regulation seldom appeal to the social conscience of industries or individuals and violation is often seen as legitimate business practice.

Related Topics:
Free market - Value - Amoco

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