In introductory econ classes I often start out with the simple question: What is economics? Invariably the answer comes back "It's about money." So I ask what is money? This usually takes a little longer to answer (because everyone knows what money is) but we usually end up talking about 'mediums of exchange' and 'lubricants for economic engines'. Finally we end up dispelling the myth that economics is the study of money in favor of the more general (but no more clear) definition; economics is the study of trade-offs. Students readily accept the idea that money is not needed to study simple economic trade-offs, it just provides an easy way to compare trade-offs. It's easy to compare $10 worth of candy to $10 worth of pizza, but it's much more difficult to compare 200 pieces of candy to one pizza. It can be done, just more difficult.
What does this have to do with the environment? Well, for some reason when we combine money and the environment, the discussion always turns ugly. Indignation (how dare you try to place a monetary value on the environment) turns into name calling (silly neo-cons) which turns into an inability to maintain a dialogue.
What does money have to do with the environment? It simply a way to measure trade-offs. The same way you decide whether you are willing to give up $1 worth of bubblegum to get that new Wilco song for your I-pod (that one's for John W.) you can decide whether you are willing to give up that same $1 worth of bubblegum for less sulfur dioxide. Money gives us a common metric to maintain that discussion.
So then, what is environmental economics? It is very simple the study of environmental trade-offs. From the economic viewpoint, most environmental problems stem from the inability to make these trade-offs. Markets facilitate trade-offs, but property rights are required for trade-offs to occur. If property rights don't exist, trade-offs can't be made.
Why do firms pollute? Because they're run by greedy, uncaring bastards, right?! NO! It's because the environment is free and lacks ownership. Ideally, all of the costs of polluting (environmental, health, insult,...) would be measurable and enforceable. Since these costs are not enforceable (no property rights), firms perceive the costs of polluting to be lower than they are to society. Are firms evil, greedy and socially irresponsible for polluting or are they just taking what is given to them; inexpensive waste disposal? Ask yourself the same question the next time you start your car, or better yet, the next time you flush your toilet.
Most environmental economists are working in some way to solve the problem of environmental property rights. As for measuring the full costs and benefits of pollution, we'll leave that for columns in the near future...
