I came across a good post about why environmentalists need to know economics.

sg16

I agree with the author that government intervention is often less effective than market solutions. I also agree that environmentalists need to know simple supply and demand and incentives.

However, I don’t agree that it is that simple. Well, we know that pollution is bad for us. We know plastic everywhere in the ocean will haunt us for many many years. We know that smog is killing China and many developing nations but nothing seem to stop the smog.

Hmmmm…is the economics broken? I don’t think so. It is just that it takes time for people to coordinate and get things changed. The post has a great point that economics is very efficient but ignores frictions! Markets take time to adjust. Especially, when it comes to big issues that requires lot of cost and coordination, markets may not be so effective. In certain exceptions, I believe that government intervention may be more effective.

For instance, building large networks of roads cannot be easily done by any private enterprises. National defense is best organized by a government. Lot of pollution that affect many and cannot be easily controlled by local authorities, firms, or individuals require government intervention

Hence, indeed, environmentalists need to know economics and realize that market solutions tend to be more effective. However, economists need to also know that in certain exception government intervention may be more effective and environmentalists may be right.

 

 

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