Issue 111: How Useful Is Environmental Economics?

In 1992, the Quality of the Environment Division at Resources for the Future (RFF), with the help of the Alfred P. Sloan Foundation, began a research program to renew and enlarge economists' and others' investigations of the application of welfare economics theory to environmental and natural resource policy. Such investigations seem timely, as some economists and noneconomists have recognized that traditional assessments of the benefits and costs of exploiting natural environments are somewhat deficient. Philosophers and environmental advocates, for example, have pointed out that such assessments focus on use values, ignoring the ethical values individuals hold with regard to natural environments. While some economists contend that ethical values lie beyond the purview of economic analysis, others assert that they can be brought to bear in quantitative analyses of proposed environmental programs and policies.

Although the notion of self-interested utility is not about to be abandoned in such analyses, researchers at RFF suggest that welfare economics would become a more useful tool for decision making if the utilitarian model of human behavior is broadened to include behavioral motivations of an ethical character. By integrating insights concerning human behavior from other disciplines—philosophy, sociology, and psychology—into the welfare economics paradigm, they seek to provide research that will better guide public policy.

In recognition of the potential contributions of other disciplines to its research, RFF invited Dr. Mark Sagoff, director of the Institute for Philosophy and Public Policy at the University of Maryland, to articulate his views on environmental economics, the discipline that applies the theory of welfare economics to environmental and natural resource policy. In a lecture at RFF on June 3, 1992, Sagoff argued that the concepts that define the approach of environmental economics have outlived their usefulness as ways to evaluate such policy. In doing so, he presented a libertarian critique of the discipline—one that many economists find unconvincing.

Given that environmental economics is increasingly used in policy analysis, the debate between philosophers and economists over the discipline should not be restricted to the halls of academia. Because the debate involves issues of ethical values and freedom of choice, and therefore is of importance to many, RFF asked Sagoff to summarize his critique of environmental economics in this issue of Resources and invited Dr. Raymond Kopp of RFF to respond to it.

— Melissa Edeburn