The Austrian school of economics has experienced a renaissance in recent decades. Its adherents have put their distinctive paradigm to work in nearly every field within their discipline. This post is the first of two that will examine the Austrian approach to environmental economics, with special emphasis on the problem of air pollution. (Follow this link for Part 2.)
Pollution as a Coordination Problem
A distinctive feature of the Austrian approach is the idea that environmental issues are problems of coordination. As Roy Cordato puts it, they are “not about harming the environment, but about human conflict over the use of physical resources.” The Austrian paradigm differs in that regard from that of the neoclassical school, which looks at environmental problems in terms of efficiency and maximization of social welfare, and from that of ecological economics, which frames the issues as conflicts between humans and nature.
Just whose actions require coordination in the Austrian view? Consider a typical scenario, one in which emissions of SO2 and NOx from power plants in the American Midwest mix in the atmosphere to form acid rain, which harms people and property downwind, along the Eastern seaboard. Four groups of actors play central roles in this scenario:
The power plants themselves
The downwind victims of the pollution they emit
The suppliers of fuels and technology for the plants
Customers who buy the electricity the plants generate
- See more at: http://www.economonitor.com/dolanecon/2014/03/31/austrian-environmental-economics-air-pollution-as-a-coordination-problem/#sthash.7slwQPc9.dpuf
The Austrian school of economics has experienced a renaissance in recent decades. Its adherents have put their distinctive paradigm to work in nearly every field within their discipline. This post is the first of two that will examine the Austrian approach to environmental economics, with special emphasis on the problem of air pollution. (Follow this link for Part 2.)
Pollution as a Coordination Problem
A distinctive feature of the Austrian approach is the idea that environmental issues are problems of coordination. As Roy Cordato puts it, they are “not about harming the environment, but about human conflict over the use of physical resources.” The Austrian paradigm differs in that regard from that of the neoclassical school, which looks at environmental problems in terms of efficiency and maximization of social welfare, and from that of ecological economics, which frames the issues as conflicts between humans and nature.
Just whose actions require coordination in the Austrian view? Consider a typical scenario, one in which emissions of SO2 and NOx from power plants in the American Midwest mix in the atmosphere to form acid rain, which harms people and property downwind, along the Eastern seaboard. Four groups of actors play central roles in this scenario:
The power plants themselves
The downwind victims of the pollution they emit
The suppliers of fuels and technology for the plants
Customers who buy the electricity the plants generate
- See more at: http://www.economonitor.com/dolanecon/2014/03/31/austrian-environmental-economics-air-pollution-as-a-coordination-problem/#sthash.7slwQPc9.dpuf
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