Thursday, December 16, 2004


The economics of environmental durability

A fellow Ph.D. Candidate at my department tried to make the argument that the Kyoto protocol was an implementation of basic free market-based solutions to the environmental problems of our time. My standard reply, as always, is to refer to (the Hoosier) Elinor Ostrom's excellent defense of free-market solutions. I really admire her work and some of her papers are as important for the environment as they are for the market for information. (Do a J-Stor search on the following title: "Covenants With and Without a Sword - Self-Governance is Possible" together with James Walker and Roy Gardner APSR, 1992, 86 (2): 404-417 , and an Amazon search for "Governing the Commons: The Evolution of Institutions for Collective Action" Cambridge Press 1990.)

Now, for all of you who would like a quicker read on the issue, I suggest you read this article where Björn Lomberg writes about the Kyoto protocol in The Telegraph. (Thanks to Henrik for the link.)
A market solution can of course include locked-in rates of interests. But in the Kyoto case, the rate of return under that regime is clearly questionable if you compare it to the pretty low alternative costs for other, bi-lateral agreements.

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