Building on the seminal contributions by Pigou (1920), Coase (1960) and Baumol and Oates (1971), economists have extensively explored the role that economic incentives might play in bringing a more efficient allocation of natural resources. The theory of environmental economics suggests that pricing instruments are an adequate means to internalize external costs. More specifically, there is widespread agreement within the scientific community that from a theoretical point of view pricing instruments are preferable to alternative measures, owing to their efficiency advantages (Frey et al., 1985). However, though economists see pricing instruments as an attractive policy tool, most attempts to introduce economic incentives in environmental policy have failed, and the acceptance of these mechanisms in the political debate is still rather limited (Hahn, 1989; Schneider and Weck-Hannemann, 2005).
There are many possible reasons why incentive instruments as a means to internalize external costs have been rarely applied in the past. It certainly would be too simple just to refer to imperfect information on the part of decision-makers about the advantages of incentive-based instruments. On the contrary, there seem to be good reasons why politicians, voters, bureaucrats, and/or representatives of interest groups are rather reluctant to favor price instruments on a large scale in environmental politics.
KeywordsPublic Choice Environmental Policy Environmental Politics External Cost Environmental Taxis
Unable to display preview. Download preview PDF.
- Bommer, R. (1998). Economic Integration and the Environment. A Political-Economic Perspective. Cheltenham: Edward Elgar Publishing.Google Scholar
- Bovenberg, A.L. and DeMooij, R.A. (1994). ‘‘Environmental levies and distortionary taxation.’’ American Economic Review, 84, 1085-1089.Google Scholar
- Brennan, G. and Buchanan, J.M. (1980). The Power to Tax: Analytical Foundations of a Fiscal Constitution. Cambridge: Cambridge University Press.Google Scholar
- Buchanan, J.M. and Tullock, G. (1975). ‘‘Polluters’ profits and political response: direct controls versus taxes.’’ American Economic Review, 65, 139-147.Google Scholar
- Congleton, R.D. (ed.) (1996). The Political Economy of Environmental Protection: Analysis and Evidence. Ann Arbor: University of Michigan Press.Google Scholar
- Dijkstra, B.R. (1999). The Political Economy of Environmental Policy. Cheltenham: Edward Elgar Publishing.Google Scholar
- Downs, A. (1957). An Economic Theory of Democracy. New York: Harper & Row.Google Scholar
- Frey, B.S. (1997). Not Just for the Money. An Economic Theory of Personal Motivation. Cheltenham: Edward Elgar Publishing.Google Scholar
- Hahn, R.W. (1989). ‘‘Economic prescriptions for environmental problems: how the patient followed the doctor’s orders.’’ Journal of Economic Perspectives, 3(2), 95-114.Google Scholar
- Kahneman, D., Knetsch, J., and Thaler, R. (1986). ‘‘Fairness as a constraint on profit seeking: Entitlements in the market.’’ American Economic Review, 76, 728-741.Google Scholar
- Kirchgässner, G. (1999). ‘‘International environmental policy: Problems and possible solutions.’’ Aussenwirtschaft, 54(2), 269-290.Google Scholar
- Lepper, M. and Greene, D. (eds.) (1978). The Hidden Costs of Reward: New Perspectives on the Psychology of Human Motivation. New York: Erlbaum.Google Scholar
- Olson, M. (1965). The Logic of Collective Action. Cambridge: Harvard University Press.Google Scholar
- Pearson, M. (1995). ‘‘The political economy of implementing environmental taxes,’’ in L. Bovenberg and S. Cnossen (eds.) Public Economics and the Environment in an Imperfect World. Boston; Kluwer, pp. 37-57.Google Scholar
- Pigou, A.C. (1920). The Economics of Welfare. London: MacMillan.Google Scholar
- Schneider, F. and Weck-Hannemann, H. (2005). ‘‘Why is Economic Theory Ignored in Environmental Policy Practice?’’ in C. Bohringer and A. Lange (eds.) Applied Research in Environmental Economics. Heidelberg: Physika, pp. 257-275.Google Scholar
- Schulze, G.G. and Ursprung, H.W. (eds.) (2001). International Environmental Economics — A Survey of the Issues. Oxford: Oxford University Press.Google Scholar
- Tullock, G. (1983). Economics of Income Redistribution. Boston: Kluwer.Google Scholar
- Weck-Hannemann, H. (2006). ‘‘Efficiency of Protection Measures,’’ in W.J. Ammann et al. (eds.) Risk 21 - Coping with Risks Due to Natural Hazards in the 21st Century. London: Taylor & Francis, pp. 147-154.Google Scholar