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Getting the Prices Wrong: The Limits of Market-Based Environmental Policy

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Author Info
Frank Ackerman (The Global Development And Environment Institute at Tufts Universty)
Kevin Gallagher (The Global Development And Environment Institute at Tufts Universty)

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Abstract

Market based policies are fast becoming the recommended policy panacea for all the world’s environmental problems. Implicit in such recommendations is the theory that free markets, adjusted for externalities, can always create an “efficient” allocation of society’s resources. As a result, many contemporary policymakers advocate rolling back regulations in order to let the market protect the environment. There is a fundamental distinction between the use of the market as a tool to help achieve society’s goals, and as a blueprint for society’s goals; the market is a reasonable policy tool but not a reasonable blueprint. The market as blueprint fails because there are significant public purposes that cannot be achieved by prices and markets alone. Five major arguments show that getting the prices right is often a narrow or meaningless objective; society may intentionally and appropriately choose to “get the prices wrong” in order to pursue more important goals.

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Publisher Info
Paper provided by EconWPA in its series Development and Comp Systems with number 0106005.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 18 pages
Date of creation: 13 Jun 2001
Date of revision:
Handle: RePEc:wpa:wuwpdc:0106005

Note: Type of Document - PDF; pages: 18; figures: n/a. Other working papers available at www.gdae.org
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Related research
Keywords: Economic theory; Environmental Policy; Sustainability;

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Find related papers by JEL classification:
Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
O0 - Economic Development, Technological Change, and Growth - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December. [Downloadable!] (restricted)
    Other versions:
  2. Gustafsson, Bo, 1998. "Scope and limits of the market mechanism in environmental management," Ecological Economics, Elsevier, vol. 24(2-3), pages 259-274, February. [Downloadable!] (restricted)
  3. Diamond, Peter A & Hausman, Jerry A, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall. [Downloadable!] (restricted)
  4. Bromley, Daniel W., 1998. "Searching for sustainability: The poverty of spontaneous order," Ecological Economics, Elsevier, vol. 24(2-3), pages 231-240, February. [Downloadable!] (restricted)
  5. Ackerman, Frank & Moomaw, William, 1997. "SO2 emissions trading: does it work?," The Electricity Journal, Elsevier, vol. 10(7), pages 61-66. [Downloadable!] (restricted)
  6. Richard Howarth & Richard Norgaard, 1993. "Intergenerational transfers and the social discount rate," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(4), pages 337-358, August. [Downloadable!] (restricted)
  7. Frank Ackerman, 2002. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor and Francis Journals, vol. 9(2), pages 119-139, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paragahawewa, Upananda H, 2006. "Market-Based Approaches to Pollution Control in the Lake Taupo Catchment in New Zealand," 2006 Conference, August 24-25, 2006, Nelson, New Zealand 31975, New Zealand Agricultural and Resource Economics Society. [Downloadable!]
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