1 / 17

Markets: Key Concepts for Environmental Policy

Markets: Key Concepts for Environmental Policy. Errol Meidinger www.law.buffalo.edu/eemeid. What is a Market?. Trading (of goods, services, information, opportunities, etc.) Repeated or regularized One trade is not a market Organized system for trading Routinized Expectations

bailey
Download Presentation

Markets: Key Concepts for Environmental Policy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Markets: Key Concepts for Environmental Policy Errol Meidinger www.law.buffalo.edu/eemeid

  2. What is a Market? • Trading (of goods, services, information, opportunities, etc.) • Repeated or regularized • One trade is not a market • Organized system for trading • Routinized Expectations • Rules and Property Rights (entitlements) • Historical role of ‘the market place’ • Often regulated • Different rights to participate • Limits on what can be traded • Fees for participation • Information requirements • Enforcement mechanisms

  3. Origins • “Spontaneous”: people just started trading and set the rules (Hayekian model) • Intentionally Created • Often by an authority, sometimes the state • E.g.: medieval markets • State advantages: • Contract rules • Property rights • Adjudication (courts) • Enforcement • Legal and illegal markets

  4. Abstraction • Supply • Demand • Markets facilitate the setting of prices whereby as much of a good, service or information is produced as can be done within the price buyers are willing to pay • Price = MC

  5. Political Economy • Minimal State • Property rights • Contract law • Money supply • Regulatory (or ‘welfare’) State: all of the above, plus • Taxation, public works, environmental and social regulation • Coordinated market economies (Germany, France) versus Anglo-American liberal economies

  6. Sociological Dimensions • Embedded versus Dis-embedded (Polyani) • Mechanisms of Accountability • State legal system • Private legal systems (e.g., diamond merchants) • Inequality: perpetuation of unequal resources (terms of trade, bargaining power, etc.) • Commodification of people and nature (people as means rather than ends) • Markets as measure of social value: value of a person or thing is what the market will pay

  7. Normative Justifications • Utility: each party to a transaction is better off • Liberty: individuals free to make and get what they want • Democracy? “Consumer sovereignty”; markets produce what people want • Short leap to think of markets as a good way of making whole societies better off • Public interest in promoting markets

  8. Core Analytical Ideas • Efficiency: Benefits > Costs • Transactions Costs: costs of gathering information, negotiating, enforcing • Externalities: benefits or costs not considered in deciding to execute the transaction • Tragedy of the Commons • Moral Hazard: taking extra risks when the costs will be borne by others • Private versus Public Goods

  9. Private Goods • Rivalrous: one person’s use is inconsistent with another person’s use • Excludeable: access can readily be limited • Classic type of goods or services traded in markets • Question: to what degree is the nature of a ‘good’ inherent, and to what degree is it socially defined and enforced?

  10. Public Goods • Non-rivalrous: use by one person not inconsistent with use by another • Non-excludable: access is very hard to limit • Archetypical example: national defense • Not readily provided by markets: no one will want to pay if others can easily free ride • Very difficult to organize people to figure out how to provide collectively • States traditionally seen as best provider (Keynes)

  11. Public and Private Goods

  12. Public and Private Goods

  13. Commons • Tragedy of the Commons: insufficiently controlled access leads to overexploitation • Tragedy of the Anti-Commons: excessively controlled access leads to under-exploitation

  14. Environmental Goods and Services

  15. Policy-Created Markets (often by innovating excludability) • Emissions Trading: most pollution reduction at lowest costs (e.g., SO2 market in U.S) • Tradeable Fishing Quotas: each fisher can keep or trade; often leads to consolidation • Tradeable Development Rights (accumulate rights to develop some property by preserving other property) • Wetlands Mitigation Banking: developing some wetlands requires locking in preservation (or even creation) of others • Habitat Conservation Plans: (same thing for endangered species)

  16. Common Problems • Leakage: does development prevented in one place simply occur in another? • Additivity: is anything really gained? • What is the baseline? • No new wetlands created • No new habitat preserved • Equivalency: how know one wetland is equivalent or better than another

  17. Non-Governmental Environmental Market Mechanisms • Forest Certification • Voluntary Carbon Offsets Markets • Laying foundations for crediting avoided development

More Related