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Lo stupore delle prese elettriche

Abbandonare i mercati non risolverà i problemi ambientali

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Poorly functioning markets might lead to environmental problems, but well-functioning markets are the best solution.

Markets set prices.  Prices ration goods. Because environmental goods and services are severely underpriced by markets (in many cases that price is zero), environmental goods and services are overconsumed, underproduced, overexploited, crapped on, however you want to say it. Environmentalists are rightly concerned.

Because environmental goods and services are mispriced in a market based system, market based systems must be to blame for environmental degradation and (here’s where the logic breaks down) therefore, we must abandon market based systems for allocating goods and services.

But to paraphrase Winston Churchill, capitalism is the worst system for allocating environmental goods and services, except for the rest.  I’m always stunned by the misunderstanding and misrepresentation of market systems by environmentalists.

Markets ration scarce goods.  They do so through prices.  The problem with environmental degradation is not that markets lead to overexploitation of environmental goods and services, but rather market conditions fail to allow markets to establish the proper price for environmental goods and services.  If the price is right, people will (usually) make rational decisions.

So, the solution to environmental issues is not to abandon markets and dictate to people the choices they should make, but rather the solution is to establish the correct set of prices that capture the full scarcity value of all goods and services, including environmental goods and services.  In some cases this might happen through the establishment of markets for environmental goods and services (for example, cap and trade) or it might happen through direct pricing of environmental goods and services (for example, emissions taxes), or it might happen through restrictions on use (for example, endangered species laws).

Abandoning markets will not solve environmental problems, because the environment will still be viewed as free.  Prices, or some other representation of value, are still needed, and there is simply no better way to establish prices than through markets.

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