Oscar Wilde in his play Lady Windermere's
Fan poked fun at economists when he described them as people who know the price of everything and the value of nothing (Wilde,
1892). But perhaps the ability to distinguish value and price is what makes an economist a good one, and recently some economists
have taken new fields, like environmental economics and apply the same principles (Bateman, Julii, 2003). Environmental economics
is a topic in economics that undertakes theoretical or empirical studies of the economics effects of national or local of
environmental policies around the world (Kneese, Russell, 1987). This should not be confused with green or ecological economics,
and the main issues in environmental economics may include, the cost/benefit approach of alternative environmental policies
to deal with all manner of pollution. Economics has a unique take on how environment resources should be utilized and managed.
This is based on the assumption in environmental economics that resources on earth are exhaustible giving rise to a abstract
upper limit for resource exploitation and waste management (Hussein, 2004)
Like any other branch of economics,
environmental economics is concerned with scarcity, the need to produce goods and a seemingly mutually exclusive need to preserve
the environment. The fundamental assumptions of environmental economics may be termed as hereunder.
• Natural and hence in environmental economics the term
environmental resources are used in production process
• Environmental resources are exhaustible and thus satisfying
an element of an economic resource of Scarcity.
• The environmental economic values of environmental
resources are determined by the consumers' choice which is determined in a laissez faire economy.
• Environmental resources market price is capable of
being measured to indicate relative scarcity of the resource.
• It is entirely possible to use an alternative resource
instead of a natural resource with another natural resource or a man made resource.75
• That advances in technology may help stem over-exploitation
of the natural resources in environmental economics’ point of view.
It is evident that the same old economic
principles that are applied in other branch of economics hold true in the field of environmental economics. Among the few
home-truths that is coming out of the discussion is that market can be an indicator of the scarcity of a resource, that there
is a possibility of resource substitution, and that scarcity may help to further technological progress.
Crucially, environmental economics
has the concept of externalities as a pillar concept (Wikipedia 2007 [online]).
The concept of externality simply means that some effects of some activity may not be taken into account when pricing
that activity. For instance, in environmental economics, excessive pollution may occur beyond the socially acceptable levels
if the polluter is not compelled to pay for the impact he has caused in the production process. Again, this example of market
failure goes on to demonstrate the economic aspect of the environment economics for those who still have doubts.
One way of correcting the externalities
include environmental regulations, where the economic impact is measured by a government appointed regulator on a cost/benefit
analysis. Other popular methods include quotas on pollution, taxes on pollution, for instance the so-called carbon tax, and
a better protection of intellectual property rights, based on an assumption that this will lead to an optimal use of resources,
and further enhance the standing of environmental economics among other branches of economics.
1. Hussein, AM, (2004). Principles
of Environmental Economics. Routledge, Oxford.
2. Batterman, I, Julii SB, (2003).
Applied Environmental Economics. Cambridge University
AK, Rusell, CS. (1987). Environmental Economics. The New Palgrave, A Dictionary
4. Wilde, Oscar (1892). Lady Windermere's Fan
5. URL. http://en.wikipedia.org/wiki/
Environmental_economics. Last accessed
28 October 2007.