An Unnecessary Book on Environmental Economics?

In the internet age, a collection of fine articles may not make a worthwhile book.

Edward Elgar Publishing have recently published a seventh edition of Economics of the Environment: Selected Readings (1), a collection of 34 articles on a wide range of topics in environmental and natural resource economics, edited by Robert Stavins.  According to the publisher, it “serves as a valuable supplement to environmental economics textbooks and as a stand-alone reference book of key, up-to-date readings from the field”. 

A virtue of the book is that, while the articles are all republished from academic journals, most of them are towards the more readable and less mathematical end of the spectrum of academic writing on economics.  I will comment briefly on a few.

Article 2 – Coase’s The Problem of Social Cost (1960) – is a seminal work in which he challenges the view that the appropriate policy response to a negative externality is either a Pigovian tax or regulation. Instead, he lays emphasis on a comparison of the overall economic effects of alternative social arrangements defining the respective rights of the parties, and on the transaction costs which arise if a party attempts to negotiate agreement with another party to infringe their rights in return for payment.  His numerous detailed examples illustrate the range of circumstances to which his arguments apply – but many readers will probably prefer to skip some sections in order to focus on the main points.

Articles 5 to 7 by, respectively, Carson, Kling et al and Hausman (2012), set out alternative positions on the contentious issue of the role of the contingent valuation method for valuing non-market environmental goods.  They focus especially on the conditions under which contingent valuation studies may be subject to hypothetical bias, where individuals overstate their willingness to pay for an environmental good.  I discussed these articles in this post.

Article 12 by Schmalensee & Stavins (2017) is a useful and fairly concise analysis of the performance of and lessons from seven cap and trade (marketable permit) systems intended to reduce emissions at a lower cost than would a command-and-control approach.  It considers six US systems differing in type of emission addressed and regional scope – notably the national Sulphur Dioxide Allowance Trading Program that began in 1995 –, as well as the EU Emissions Trading System, a multi-country system focused on CO2 emissions which started in 2005.  Among the lessons identified are a) not to require prior approval by a central authority of trades in emissions allowances; b) to establish rules and obtain accurate data well before the start of the first compliance period; c) to limit price volatility by price collars and by permitting allowances to be carried forward to the following period (allowance banking).

Article 16 by Covert, Greenstone & Knittel (2016) asks whether natural supply and demand forces (that is, without policy intervention) can be expected to significantly reduce fossil fuel consumption and so help to mitigate climate change.  They consider two kinds of such forces: increases in the costs of extracting fossil fuels; and technological advances improving the energy efficiency of existing technologies and developing new carbon-free technologies.  Their conclusion that fossil fuels will remain the primary energy source without policy intervention may not be a surprise, but it is useful to have the evidence for this set out in detail.

Article 24 by Tol (2018) considers the overall economic effects of future climate change, drawing on the conclusions of many previous studies of general and specific effects of climate change, and also considers recent estimates of the social cost of carbon (which should inform the welfare-maximising rate of a carbon tax).  As might be expected, he concludes that the overall effects of climate change in the long run are negative.  On the crucial issue of quantifying the negative effect, he suggests that the welfare effect of a century of climate change is unlikely to exceed that of losing a decade of economic growth.  But this conclusion is importantly qualified by recognition both that the effect on poor tropical countries is likely to be especially large and that the range of uncertainty is very wide.

Article 30 by Shogren & Taylor (2008) assesses the relevance of behavioural economics to environmental and natural resource economics, referring to much previous literature on this topic.  One of various arguments considered is that markets tend to encourage rational behaviour, in aggregate if not at the level of individual participants, and that the insights of behavioural economics are therefore especially relevant to behaviour in respect of non-market environmental goods. The conclusions reached are in my view balanced: neither dismissing the behavioural approach, nor over-stating the extent to which it requires modification of conventional analysis and policy recommendation based on an assumption of consistently rational behaviour. 

Although the book certainly contains some fine and mostly recent articles, I find it difficult to see who would want to buy it at a (current online) price of £130.50 (hardback) or £35.96 (paperback).  The world of publishing has changed since the first edition (1972).  Those affiliated to an academic institution will probably have free access to most if not all the articles via institutional arrangements with the original journals.  Moreover, nine articles are from the Journal of Economic Perspectives, an open access journal.  Another four (articles 3, 12, 24 & 27) I found to be freely accessible on the websites of the Review of Environmental Economics and Policy and the American Economic Review, subscription journals which however make the full text of selected articles freely available.  The Coase article is available within the open-access part of JSTOR.  So even without an institutional affiliation, it is possible to obtain free (and legal) access to at least 14 of the articles. 

Notes & References

  1. R N Stavins (ed) (2019)  Economics of the Environment: Selected Readings, 7th edition,  Edward Elgar Publishing   https://www.e-elgar.com/shop/economics-of-the-environment
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