An Economic Perspective on Protecting the Environment

Mark C. Schug and Richard D. Western

A growing number of scientists report that the environment in the developed world has improved in recent years. Since World War II, developed nations have substantially reduced levels of air pollution, increased life expectancy, and improved their water quality. Food production has grown faster than the population. In the United States, more trees now are planted than harvested. Predictions of the forthcoming depletion of fossil fuels, permanently fouled water, unbreathable air and destroyed forests have not been confirmed by events.
There are a number of reasons for the improved environmental situation. New technologies have made it possible to test pollution levels, determine their sources more accurately, and reduce pollution. When the cost of pollution became clear, strong economic pressures resulted to preserve the environment. Government regulations have been used extensively to protect environmental quality. And public concern has made the protection of the environment an important public issue.

Despite progress, very serious threats to the environment still remain. Some important problems are discussed in the pages that follow. The endangerment of many species persists. There is a grave and troubling depletion of fish populations in many parts of the world. A debate continues on issues of the appropriate private use of public lands, population growth and biodiversity. It is also possible that environmental progress to date has been accomplished by dealing with the problems that are easiest to resolve, and that the more difficult tasks need to be addressed by new or different approaches.

This special section addresses a set of important environmental problems that are currently unresolved. The contributors describe how basic principles of economics can be used to further the cause of environmental protection. They suggest that it may be possible to accomplish breakthroughs in protecting the environment through an evaluation of the costs and benefits of different strategies, and the establishment of environmental protection systems based on economic incentives and disincentives. In many cases, resources or species are being depleted as a result of a situation in which they have market value, and actions that deplete them are rewarded, but actions that preserve them are not. This is a situation in which the principles of economics can be the basis for many useful suggestions aimed at environmental protection.

The purposes of this special section are (1) to introduce social studies teachers to a new perspective on environmental protection that is based on economic principles, and (2) to suggest instructional activities aimed at helping young people learn how to use economic reasoning to analyze environmental policies.

The new environmental economics seeks to bridge a gulf that has emerged in recent decades between environmentalists and economists. It has not been unusual for environmentalists to argue that market forces threaten the environment. It has been common for proponents of economic growth, on the other hand, to argue that environmental concerns interfere needlessly with efforts to improve everybody's standard of living. It is time for both groups to appreciate that market-driven economic growth and environmental quality are not incompatible. In fact, market forces can be used in unexpected ways to improve environmental quality.

When economists explain economic growth, they emphasize the importance of private initiative, entrepreneurship, respect for property rights and capital investment. These positive forces for economic growth can also be enlisted in the protection of the environment. As the limitations of reliance on the command-and-control levers of a central government become clearer, there will be increasing interest in methods of channeling private initiative and obtaining voluntary agreement among the users of resources in the cause of environmental preservation.

The advocates of this approach do not denigrate achievements that are the result of government activities to date. Yet in the protection of the environment, as in the economy in general, an overreliance on government action is unwise. Government priorities frequently differ from those of protectors of the environment. In the United States, dams along major rivers restrict fish populations. Logging on public lands has, at times, led to bringing some fragile lands into production. Agricultural subsidy programs have also encouraged the waste of scarce water resources and the bringing of land into production that should not have been used.

The preservation of fisheries, safeguards for wetlands and the protection of endangered species are complex issues requiring the active involvement of all who use those fisheries and wetlands or who hunt the species. Preservation is most likely to take place when there is a voluntary agreement by those involved to engage in the kind of actions that can preserve the environment. These voluntary agreements are most likely to be obtained when the parties involved are offered incentives. Some environmental programs provide for stakes to be offered or quasi-property rights to be assigned to reward acts of environmental protection. Villages in Africa have been allowed to benefit from the hunting of local elephants on the assumption that they will have a stake in preserving elephants for the hunt and preventing the extermination of elephants by poachers. License programs have been established to preserve the fisheries of New Zealand. Incentives from private organizations have also rewarded U.S. landowners who protect endangered species and preserve wetlands.

This special section suggests new policies based on economic principles that foster and reward voluntary efforts to improve environmental quality.

Donald R. Wentworth, Mark C. Schug, and John S. Morton point out the importance of environmental solutions that stress incentives and voluntary choice. Policies that recognize the commercial value of resources, and offer rewards for actions that preserve rather than deplete them, offer the best chance of environmental protection.

Mark C. Schug and Jane S. Shaw explain how well-intentioned government policies, such as the Endangered Species Act, can actually cause harm to endangered species by creating disincentives to preserving the habitat for endangered species. They explain how the use of incentives can lead to voluntary species protection, and offer an activity for the classroom.

Terry Anderson and Donald R. Wentworth observe that the blue planet has serious water problems. They trace the problem of water overuse to the fact that many farmers are allowed to use water at a fraction of its real cost. As a result, water is overused much in the same way that children drinking soda through straws from the same glass will race each other to the bottom in order to get the last drop. Anderson and Wentworth suggest several ways in which their analysis can be used in classrooms.

Finally, John S. Morton, Jane S. Shaw, and Richard Stroup revisit the issue of overpopulation as broached by Thomas Malthus. They describe the debate between the apocalyptic theorists and the cornucopians, and they suggest that the cornucopians seem to have the edge. In a research activity, students investigate why parents in poorer nations have more children than parents in wealthier nations.

Mark C. Schug is Professor of Curriculum and Instruction at the University of Wisconsin-
Milwaukee. Richard D. Western is Associate Professor of Curriculum and Instruction at the same university.