07.1.2022

A ‘Right’ Theory of Environmental Economics

Humans cannot harm the environment.

“What constitutes an ‘environmental problem’? At first glance the answer might appear obvious. Issues like air and water pollution, animal extinction, or the over-use of resources, such as might be associated with the ‘tragedy of the commons,’ all come to mind. … If a by-product of production that is emitted into the air ends up giving rise to a divergence between marginal private benefit in the production of the associated product and marginal social costs, then the product output will be greater than its Pareto optimum level. That by-product will then be defined as an air-pollutant.

The ‘social cost’ approach to environmental economics has led to the ‘dehumanization’ of issues related to the environment.

The ‘social cost’ approach to environmental economics has led to the ‘dehumanization’ of issues related to the environment. … Costs are associated with ‘restoration to the environment’ not compensating victims.  … Within this context, pollution problems that are indeed problems create an interpersonal conflict over the use of means and therefore obstruct efficient plan formulation and execution. Pollution is therefore not about harming the environment but about human conflict over the use of physical resources. … Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.

[P]ollution problems that are indeed problems create an interpersonal conflict over the use of means[.]

For [Austrian school economists] then, if the defining characteristic of pollution is that it is the consequence of a human conflict over the use of a resource, then it is logical that both the origin and the solution of the problem is to be found in a lack of clearly defined or enforced property rights. … The focus of the Austrian approach to environmental economics is conflict resolution. The purpose of focusing on issues related to property rights is to describe the source of the conflict and to identify possible ways of resolving it. … If a pollution problem exists then its solution must be found in either a clearer definition of property rights to the relevant resources or in the stricter enforcement of rights that already exist. ”

The focus of the Austrian approach to environmental economics is conflict resolution [and] property rights[.]

Originally published here at the Mises Institute on 18 June 2022.

And check out the related journal article here in the Quarterly Journal of Austrian Economics from 30 July 2014.

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