Encyclopaedia of Environment and Development (Volume IV set)

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 Environment and development encompasses different disciplines in the natural and social sciences. There are some misunderstandings about how Economists think about the environment. By examining them here, we hope to explain how economists really do think about the natural environment. Economists believe that the market solves all problems subject to very restrictive conditions and they are usually not all satisfied simultaneously in the real world. Environmental economists are interested in pollution and other externalities. With a negative externality, such as environmental pollution. thetotal social cost of production may exceed the value to consumers. If the market is left to itself, too many pollution-generating products are made. Similarly, natural-resource economists are interested in common property, or open access resources, where anyone can extract or harvest the resource freely and no one recognizes the full cost of using the resource. Extractors consider only their own direct and immediate costs, not the costs to others of increased scarcity. The result is that the resource is depleted too quickly. So, the market by itself demonstrably does not solve all problems. Indeed, in the environmental domain, perfectly functioning markets are the exception rather than the rule. Governments can try to correct these market failures, for example, by restricting pollutant emissions or limiting access to open-access resources, which can improve welfare and lead to environmental protection and sustainable development via greater efficiency. Economists always recommend a market solution to a market problem. They tend to search for instruments of public policy that can fix one market essentially by introducing another, allowing each to operate efficiently on its own. Not only this, when non-market solutions are considered, Economists still use only market prices to evaluate them. No matter what policy instrument is chosen, the environmental goal of that policy must be identified. The efforts made here can certainly improve better understanding of the environment and development issues such as water resources management; common property resources management; technology, pollution and climate change; poverty, environmental degradation and sustainable development across disciplinary boundaries.