Natural resources people — foresters, river masters, biologists, botanists, agronomists, farmers, rock climbers and miners — understand almost instinctively that wise management of natural resources takes a blend of wisdom in commercial sectors and by government. Still, every once in a while some newly-minted Ph.D. in economics, or some economist who recently learned that governments own 86% of the land in Nevada, put forth a “bold proposal” to let the markets resolve environmental issues. Let pricing do it, they say.
Jeffrey Sachs, director of the Earth Institute at Columbia University, gives a short interview to the Wall Street Journal’s economics bloggers, in which he details why pricing cannot do the entire job, with examples:
Sachs: Pricing plays a role. Certainly with carbon emissions we need a price. But it’s almost never enough when we’re talking about really big technological changes. When you think of the computer industry and its roots in defense, when you think of the Internet with its root in defense and the National Science Foundation, when you think about drug development and the crucial role of the National Institutes of Health – one major industry after another has always relied, and needed to rely, on a mix of public and private actions.
When we’re talking about something as basic as a sustainable technology this is going to be inevitable. Think about how we’re going to climb out of the mess on nuclear power for example. We need a nuclear power industry in this country but it’s tied up in knots. Pricing by itself isn’t going to do it. There has to be public acceptability, there has to be sense of security that a regulatory framework, safe storage and nonproliferation protection is in place. These are just too complicated to be solved by a price.
For many other things, such as watershed management, there isn’t even a price that turns them into a market. The issues of watershed management involve different rights of upstream and downstream users, and different types of users. [like agriculture, households and industry.] The right price is going to be different. Pricing plays a role, but so does basic science, eminent domain, right of passage and liability.
Sachs is widely experienced in international economics, and in alternative economics. As an advocate of free markets generally, he’s pretty deep into development ideas. You won’t always agree with his opinions, but you’d do well to pay attention to what he says and the data upon which he bases his opinions.
Teachers, this is a short answer that covers a wealth of issues in your economics courses.