Environmental Economics in Theory and Practice. Authors; (view Nick Hanley, Jason F. Shogren, Ben White. Pages PDF · Market Failure. Nick Hanley. Request PDF on ResearchGate | Environmental Economics in Theory and Practice | Introduction - The Economy and the Environment: Two Parts of a Whole . Environmental. Economics. In Theory and. Practice. Second edition. Nick Hanley. University of Stirling. Jason F. Shogren. University of Wyoming and. Ben White.
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ECOLOGICAL ECONOMICS ELSEVIER Ecological Economics 23 () Book reviews Environmental Economics in Theory and Practice. introduction . 3rd ed. p. cm. Rev. ed. of: Natural resource and environmental economics / Roger Perman, .. the economic theory and practice of valuing environmental ( and. Environmental Economics in Theory and Practice is an ideal text for students taking advanced courses in environmental and natural resource economics.
The resulting gap between normative and positive law is of more than theoretical importance. For example, if courts were to recognize homesteading of owned but unused property, they would frustrate the efforts of conservationists like Ted Turner or environmental organizations like Ducks Unlimited who download up millions of acres of critical habitat for the specific purpose of leaving it unused.
What Courts? Unfortunately, the courts we have now are not always diligent in upholding property rights.
For example, consider how U. Suppose, for example, I own a property that I intend to use for farming. A new regulation then defines part of it as a protected wetland, no farming allowed. No matter—the Fifth Amendment would, on the face of it, seem to require that I be compensated for the loss to my farming operation.
Yet in practice, U. Unreasonable searches and seizures, whether they are stop-and-frisk searches for drugs by local police or searches of cell phone records by the NSA, are violations of property rights. Part of the reason, I am sure, lies in the selection of judges by political appointment or popular election. It is not just Democratic judges who are shaky in their support of property rights. If Austrian environmental economics is to rest on a solid institutional foundation, the issue of how to get better courts and judges deserves more attention.
What Standards of Proof? Even with clear definitions of property rights and courts truly dedicated to enforcing them, plaintiffs would have to prove violations of their rights in each specific case. Rothbard and other Austrian writers have clear ideas about the standards of proof that courts should apply, but again, these often differ from current practice.
For example, in many, if not most, civil cases, the prevailing standard of proof is preponderance of evidence, also known as balance of probabilities.
Austrian writers instead tend to favor beyond a reasonable doubt. The distinction is hardly trivial.
Imagine a case in which plaintiffs claim that their property is being harmed by climate change. Would a court be convinced by existing scientific evidence that climate change is harmful and that human activity contributes to it? Quite possibly yes, if the standard of proof were preponderance of evidence, but no, if the standard were beyond a reasonable doubt.
The choice between negligence and strict liability is another example. However, most Austrians prefer the less frequently applied standard of strict liability, which requires people to take responsibility for harm they cause even when it is unintentional.
Taking these three issues together—what property rights, what courts, what standards of proof—we see that there is a major gap between existing institutions for defining and enforcing property rights and the ideal versions of Austrian theory.
The gap matters, especially when we move from theory to policy. Unless Austrians can at least outline the crucial institutional bridge between the ideal and the possible, they risk falling into what Harold Demsetz , p. This nirvana approach differs considerably from a comparative institution approach in which the relevant choice is between alternative real institutional arrangements.
In practice, those who adopt the nirvana viewpoint seek to discover discrepancies between the ideal and the real and if discrepancies are found, they deduce that the real is inefficient. Users of the comparative institution approach attempt to assess which alternative real institutional arrangement seems best able to cope with the economic problem; practitioners of this approach may use an ideal norm to provide standards from which divergences are assessed for all practical alternatives of interest and select as efficient that alternative which seems most likely to minimize the divergence.
To argue that an ideal set of courts could do a better job of resolving environmental problems than can existing government regulations is to follow the nirvana approach, yet writers like Rothbard, Cordato, Dawson, and others tread perilously close to doing just that. That is all the more striking, since Austrians are quick to condemn neoclassical economists when they slip into nirvana mode. Consider the economics of antitrust.
The traditional neoclassical approach has been to compare existing market processes with the ideal construct of perfect competition. The Austrian approach instead, is to compare the messy details of real-world markets with the even messier institutions of real-world antitrust law and policy. Dominick Armentano, an alumnus of the South Royalton conference, has used this comparative institutional method to build a strong case for antitrust repeal.
Armentano, The bottom line here is that if Austrian environmental economics is to be fully persuasive, its policy proposals need to be better rooted in a comparison of the existing policy regime with alternatives that have real institutional meat on their normative bones. As we will see in the next section, the property rights approach to environmental issues has made more progress in this regard when dealing with some kinds of environmental issues than with others.
Examples abound. National organizations like the Nature Conservancy and local ones like the San Juan Preservation Trust, in the small community where I live, protect millions of acres of critical habitat. In doing so, they use a full range of property rights tools, including not just downloads, but also conservation easements, mitigation banks, and more.
Dolan, Terry Anderson and Donald Leal of the Property and Environment Research Center show how the property rights approach has led to better coordination of the varying interests of ranchers, farmers, hunters, and conservationists in the American West. In an urban context, property developers use covenants, easements, and other devices to coordinate the conflicting interests of individual owners in condominiums and planned developments.
David Zetland has detailed how markets and property rights can help coordinate the overlapping plans of farmers, homeowners, and industry for use of scarce water resources. However, there are limits.
The property rights approach works best when the number of parties involved in environmental dispute are few and proximate. When they are many and remote, neither face-to-face bargaining nor common law litigation works well. Many of the most important environmental issues of our times fit this pattern, including urban smog, acid rain, ozone depletion, ocean acidification, and anthropogenic climate change.
I will refer to this class of problems as environmental mass torts. These do not arise solely from the shortcomings of laws and courts as they now exist.
On the contrary, it would be even harder for pollution victims to prevail before an ideal court that followed the rigorous standards proposed by Rothbard and those who follow his lead. This is the case, provided that: a the polluter has not previously established a homestead easement; b while visible pollutants or noxious odors are per se aggression, in the case of invisible and insensible pollutants the plaintiff must prove actual harm; c the burden of proof of such aggression rests upon the plaintiff; d the plaintiff must prove strict causality from the actions of the defendant to the victimization of the plaintiff; e the plaintiff must prove such causality and aggression beyond a reasonable doubt; and f there is no vicarious liability, but only liability for those who actually commit the deed.
Later in the same article, Rothbard , pp. He limits compulsory joinder of defendants to cases where polluters have acted in concert, and joinder of plaintiffs to cases where each plaintiff actively and voluntarily participates and common interests predominate.
Consider how these standards would work out in the case of a hypothetical Vermont farmer, call her Nancy Norman, who claims that acid rain is harming her maple trees. The testimony would have to establish her contentions beyond a reasonable doubt. She would have to prove strict causality, not just regarding the point that acid rain in general damaged her trees, but that each individual defendant contributed causally to the damage. He must establish that he was damaged and emitter A did it, and not emitter B.
This is almost always an impossible task. Taking all of these considerations together, Rothbard acknowledges that an individual pollution victim would have no chance at all of prevailing in a tort action against multiple, remote polluters: The prevalence of multiple sources of pollution emissions is a problem.
How are we to blame emitter A if there are other emitters or if there are natural sources of emission? Whatever the answer, it must not come at the expense of throwing out proper standards of proof, and conferring unjust special privileges on plaintiffs and special burdens on defendants. Rothbard, , p. But if you took that same bag of garbage and burned it in a backyard incinerator, letting the sooty ash drift over the neighborhood, the problem gets more complicated.
The violation of property rights is clear, but protecting them is more difficult. And when the garbage is invisible to the naked eye, as much air and water pollution is, the problem often seems insurmountable The only effective way to eliminate serious pollution is to treat it exactly for what it is—garbage.
What we need are tougher clearer environmental laws that are enforced—not with economic incentives but with jail terms.
The bottom line: There can be no coordination unless the property rights of both polluters and their victims are clearly defined and diligently enforced. In the case of environmental mass torts, that appears to be a practical impossibility, as proponents of the property rights approach themselves acknowledge. It turns out to be incapable either of ensuring equal justice for polluters and victims, or of resolving the coordination problem.
Much of the reason, I think, is that these writers take an excessively legalistic approach. Yes, property rights are important, but it is wrong to focus on direct negotiations backed by tort law as the principal mechanism through which they achieve coordination.
Something is missing. Fortunately, we do not have to look outside Austrian framework to find the missing piece. That being the case, we can restate the problem as one of how to bring the price system to bear on the problem of environmental mass torts.
Where property rights are adequately defined and enforceable, prices arise naturally from the interplay of supply and demand. Hayek uses the market for tin as an example.
Sellers expand supply when the price is higher than their estimated cost of production.
Consumers download more when the price is below the maximum they are willing to pay for an additional unit.
Coordination occurs without the need for face-to-face negotiation or even the knowledge of who your customers are or why they want your product. The law is there as a backstop, but only as a last resort in cases of fraud or breach of contract.
Most of the time, mutual self-interest and the desire to protect commercial reputations are sufficient to ensure that the parties carry out their agreements. Things are not so simple, though, when the legal backstop is missing, as it is when property rights are murky and enforcement is impracticable.
Since prices and markets do not emerge naturally in such a setting, the only choices are to get along without them altogether or to take artificial measures to bring them into play. Shogren and Ben which are later applied to the economics of non- White. Houndmills et al.: Macmillan Press, renewable resources Ch.
ISBN hard- Ch. It is somewhat odd that the chapters on the This is a modern textbook on environmental economics of resource exploitation are technically economics. It covers m a n y of the more recently much more demanding than any of the other discussed topics in environmental economics such chapters. Although Hanley, Shogren and White as environmental valuation. It even has a small claim that the b o o k is aimed 'at final-year under- chapter on the economics of sustainable develop- graduates in environmental and resource econom- ment.
However, as I will argue in this review, ics, graduate students and professionals' alike, Hanley, Shogren and White's b o o k still falls short there should never be a break in the skill require- of being suitable as a textbook for teaching and ments within a textbook. O f course, the econom- learning ecological economics. F r o m an other parts of environmental economics, but the ecological economics perspective, it starts rather authors could either have made the part on re- promising with Ch.
Two Parts of a Whole', where inter- more advanced. It then, however, shifts towards the environmental costs and benefits, respectively. It gives both an introduction to boundary pollution problems Ch.
These chap- the techniques of valuation and a critical assess- ters discuss in a very well written style economic ment of their reliability and validity problems. The order of the detailed discussion of this topic. To give but one example of the to the economics of natural resource exploitation shortcomings: It is not possible to do justice to in Ch. All rights reserved. The same applies to Interest and Inflation Free Money: Only the Protects the Earth. Renewable Resource Economics.
The Economics of Forestry Exploitation. The Theory of Non-market Valuation. Methods for Valuing Environmental Costs and Benefits. The Economics of Sustainable Development. Back Matter Pages About this book Introduction This book provides a thorough and coherent review and discussion of environmental economics theory with an appreciation of empirical problems.
It will be particularly suitable for undergraduate and postgraduate courses in environmental and resource economics and professionals. Particular emphasis is placed on analysing recent empirical studies from all over the world and each chapter develops the main theoretical results and recent developments necessary for complete understanding of the applications. The book is clear and succinct with separate chapters to look into economic models in more depth.