Environmental economics
Fuller & Stavins (1998), in their article, “how economists see the environment,” argues that numerous misunderstandings are surrounding the environmental economics. These myths have been constructed by people against the economists due to lack of excellent communication between economists and all of the other stakeholders across all disciplines. This article aims to evaluate some of the common misconceptions about how economists perceive the environment. The findings of this article argue that economists do not agree that market solves all of the issues. Indeed, many economists are responsible for analyzing the market failures through some of the methods such as assessing the environmental pollution in which the laissez-faire rule results in inefficiency. Once economists realize that there are market problems their first approach involves making considerations of the viability of the market solutions due to their likelihood of cost-effectiveness. However, use of market-based approach in environmental protection is not a universal remedy. However, it is important to note that economic analysis is essential in determining the distribution of the profits and costs of executing the environmental policy (Fuller & Stavins, 1998). The authors in their study use the cost-benefit analysis method. Similar to what we learned in class, the analysis involves the original compilation of costs of a project along with the benefits and then converts them into monetary terms. This approach helps economists to determine the present value of the future returns as well as expenditures. Conversely, the article claims that economists do not necessarily restrict their analysis directly to this approach, but instead, they use the monetary measurements only when there lacks another useful strategy. The article deduces that there is the need for more significant efforts towards improving communication across the disciplinary borders.
Anderson and Parker, (2013), assert that natural resources and the overall environment are of essence to economists due to their market potential to cause unproductive results. The article aims at assessing the operation costs that lead to under-provision of environmental products as well as excessive utilization of natural resources through determining what hinders innovation to reduce the operating costs. The article findings prove that high operation costs on natural resources result to resources inefficiencies such as pollution, depletion, environmental degradation and overutilization of these resources. As a result, it is evident that markets failures exist and thus there is the need for a solution and most especially one that is driven by government rules. Entrepreneurs are the driving forces behind the evolution of property rights thus causing the transaction costs to reduce while the net benefits of contractors increases as the environmental qualities increases (Anderson and Parker, 2013). As entrepreneurs carry out an environmental accounting, they can account for their contracting services of the environmental assets within the structure of economic activity. Governments are major players in environmental economics as they can obscure the process of lowering the transaction cost through allowing the conflict of interests to establish hindrance to trade exchange. However, the government may also help in the facilitation of environmental entrepreneurship through supporting vigorous ideas of property rights. In conclusion, the article emphasizes the need for environmental entrepreneurship and increased innovative strategies that reduce the transaction expenses of economic trade. This strategy suggestion is because entrepreneurs are continually involved in identifying new methods of capturing value for environmental resources.
References
Anderson, T. L., & Parker, D. P. (2013). Transaction costs and environmental markets: The role of entrepreneurs. Review of Environmental Economics and Policy, 7(2), 259-275.
Fullerton, D., & Stavins, R. (1998). How economists see the environment. Nature, 395(6701), 433.
