Environmental Economics: A Critique Of Benefit-cost Analysis

摘要

Benefit-Cost Analysis (BCA) is probably the most widely used decision-making tool in environmental policy. Economists believe most environmental problems are essentially problems of missing markets, problems for which economic solutions can be found. One strategy to find these solutions is BCA. Environmental Economics is conceived as an introductory textbook in environmental economics in general with a specific focus on the problems of BCA. In Part I of the book the author explains why markets are so attractive for environmental decision-making. Markets spontaneously evolve towards an equilibrium price at which marginal costs equal marginal benefits and at this equilibrium welfare is maximised (chapters 1 and 2). BCA tries to extend market mechanisms to projects with an important time dimension. Costs and benefits in different time periods are made comparable by means of discount rates (chapter 3). The market logic might function for private goods, but in Part II it is explained that most environmental goods concern missing markets: externalities (chapter 4) and public goods (chapter 5). Under limited circumstances, the market will internalise externalities (Coase Theorem) but these circumstances are rarely met (chapter 6).