Environmental Economics

For eight years, I have taught environmental economics at California State University, Long Beach and the University of California, Irvine. The majority of the students in this course are taking majors other than economics. About 10% of them are interested in attending law school. The course provides a background in applications of economic theory to public policy issues relating to environmental and land-use law and regulation. In particular, societal goals, as they are revealed through legislation, administrative regulations and court decisions, are given considerable weight throughout the course. Students also gain an understanding of what is likely to result from striving to attain economic efficiency, how attempting to attain economic efficiency can impact the environment, and the principal limitations of the economic efficiency criterion. This paper provides a survey of the principal applications of economic theory to public policy issues relating to environmental and land-use law and regulation. The first section describes the scope of the policy issues treated by environmental economics. The second section provides a discussion of the maximize wealth goal and the concepts of economic efficiency that are derived from that goal. The third section contains a survey of five critiques of the maximize wealth goal as a reasonable basis for rational social policy. One or more of these critiques generally form the basis of attacks by environmentalists upon the relevance of the economic efficiency criterion for evaluating environmental policy options. The fourth section is concerned with the general problem of market failure resulting from the existence of public goods and externalities, and raises the issue of whether attempting to reduce the impacts of market failure will result in an even greater "government failure." The last section deals with the problem of whether technological changes and the depletion of natural resources have made the maximize wealth goal an obsolete standard for measuring economic efficiency.