Social Dilemmas in Environmental Economics and Policy Considerations: A Review

Many crucial environmental issues lead to social dilemmas, in which the personally optimal solution, and the socially optimal solution diverge. Finding a solution to this dilemma is extremely important to allow a good and sustainable management of many exhaustible natural resources. This is especially true when the resource users need to develop collectively a set of rules or practices, and the institutions are unable to provide, or enforce, effective regulations. A few examples are forests, and fisheries, but also carbon emissions. This review presents a selected number of results coming from field observations, laboratory experiments, and theoretical work, which pinpoint some of the more crucial aspects of these decision environments. Knowing which incentives and situational aspects may motivate resource users to adopt a more or less cooperative behavior can potentially be of pivotal importance to develop effective policies and regulations. At the same time, the research we present is also of great interestfor any diagnostic or explorative study that aims to study direct resource users, and their development of cooperative attitudes and practices.

Book Reviews

Shaun McRae of the University of Michigan reviews “The Economics of Electricity Markets: Theory and Policy”, by Pippo Ranci and Guido Cervigni. The Econlit abstract of this book begins: “Six papers address the main issues that arise when competition is introduced into the electricity industry. Papers discuss wholesale electricity markets (Guido Cervigni and Dmitri Perekhodtsev); generation capacity adequacy (Cervigni, Andrea Commisso, and Perekhodtsev); congestion management and transmission rights (Perekhodtsev and Cervigni); competition policy in the electricity industry (Cervigni and Perekhodtsev); retail competition (Anna Creti and Clara Poletti); and climate change and the future of the liberalized electricity markets (Cervigni). Ranci is Professor of Economic Policy at the Catholic University of Milan and Chair of the Board of Appeal of the European Agency for the Cooperation of Energy Regulators. Cervigni is Research Director at the Center for Research on Energy and Environmental Economics and Policy at Bocconi University and Chief Economist at A2A S.p.A. Index.”

Environmental Economics and Policy

Post-Keynesian environmental economics provides a realistic view of the impact of different environmental policy instruments in modern capitalist economies and, in turn, guides the design of policy aimed at improving environmental conditions and reducing energy and material throughput. Post-Keynesian environmental economists criticize the orthodox approach to the environment and the framework of those ecological economists relying on neoclassical principles, since these models neglect fundamental uncertainty, endogenous preferences, path dependence, a foundational role for money, the distribution of income, nonergodic processes, complex system dynamics, and economic power relations. This chapter begins with a brief history of post-Keynesian environmental economics before addressing the reasons for the lack of attention devoted to environmental issues in post-Keynesian economics. It also explores justifications for prioritizing environmental sustainability within post-Keynesian theory and discusses some of the ways the environment can be embedded within post-Keynesian theory. The chapter concludes with a critique of orthodox environmental economic policy and a post-Keynesian alternative.

Book Reviews

Carlisle Ford Runge of University of Minnesota reviews “Climate Change and Agriculture: An Economic Analysis of Global Impacts, Adaptation and Distributional Effects” by Robert Mendelsohn, Ariel Dinar,. The EconLit Abstract of the reviewed work begins “Examines the impact of climate change on agriculture and considers what farmers do to adapt to climate. Discusses the role of climate in agricultural production; a literature review of economic impacts of climate change on agriculture; the Ricardian method; modeling adaptation to climate change; structural Ricardian models; Ricardian analyses of aggregate data; Ricardian models of individual farms; adaptation studies; structural Ricardian studies; a summary of results; and policy implications and future research needs. Mendelsohn is Edwin Weyerhaeuser Davis Professor in the School of Forestry and Environmental Studies at Yale University. Dinar is Professor of Environmental Economics and Policy and Director of the Water Science and Policy Center at the University of California, Riverside. Index.”