Wednesday, May 14, 2014

Early environmental economics

Agnar Sandmo has posted "The Early History of Environmental Economics", an article surveying the thought of eighteenth- and nineteenth-century economists on environmental issues, long before Arthur Pigou's famous work on taxing externalities and the late twentieth century blossoming of the field. Thomas Malthus is here, but so are many others whose writing on environmental issues is less well known, including the Marquis de Condorcet, John Stuart Mill, and Alfred Marshall, along with Edwin Chadwick, whom I had not thought of as an economist.

Some examples. Mill, the classical liberal, is quoted as writing the following regarding the proper role of government:
File:John Stuart Mill by London Stereoscopic Company, c1870.jpg
John Stuart Mill
Is there not the earth itself, its forests and waters, and all other natural riches, above and below the surface? These are the inheritance of the human race, and there must be regulations for the common enjoyment of it. What rights, and under what conditions, a person shall be allowed to exercise over any portion of this common inheritance cannot be left undecided. No function of government is less optional than the regulation of these things, or more completely involved in the idea of civilized society.
Marshall anticipated later fascination with the "fisherman's problem" in the late nineteenth century:
An individual firm in the fishing industry may experience constant returns to scale; two vessels will be able to catch twice as much fish as one. However, when many firms increase their number of vessels, the stock of fish declines and vessels may have to travel further in order to catch the same amount as before. Thus, the unit cost of fishing goes up, and the private marginal cost of fishing is less than the social cost, leading the individual firms to push aggregate resource use to a point beyond the social optimum (Marshall 1890; 1920, p. 166). We may note that Marshall’s conclusion regarding this issue is formulated with a degree of caution that was characteristic of his style of writing; the possibility of overfishing was a controversial issue in public debate at the time, and he clearly did not wish his illustration of a theoretical point to be understood as taking a position on a current controversy. The example was nevertheless a pioneering effort to study the economics of a common property resource, and his conclusion about the tendency to overexploitation was of significant importance for the more general approaches to this question that were to follow.
The article abstract:
This paper considers economists’ treatment of problems related to the environment prior to the establishment of environmental economics as a separate field in the 1960s. In discussing the literature from the late 18th century onwards, it looks on the one hand for awareness in the work of the early economists of the effects of economic activity on the natural and social environment and of the feedback from the environment to the economy. On the other hand, it describes how economic theory developed in a way which made it increasingly relevant for the study of environmental issues and the design of economic policy. 

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