Economic Theory

Abstract

Concepts such as ‘market forces’ or ‘pricing’ occupy a prominent place in present-day thinking about sustainable development. From all quarters we are assailed by the message that we should be making the greatest possible use of the market in order to realize this public objective. In this respect, the spirit of the age is sure to bring a warm glow to the cheeks of many a neoclassical environmental economist. For decades environmental economists have maintained that the state^. manages society in a way that is far from judicious. It employs sanctions and regulations to deter organizations from pursuing activities that are potentially profitable for them and/or forces them to undertake activities which can only work to their disadvantage in economic terms. Economists argue that it would be more astute and even theoretically compelling to adopt a less combative system (Marcus, 1982: 173). The context in which businesses operate should be shaped in such a way that the distance between profitable actions and actions which benefit the public interest is reduced as much as possible. The price mechanism must be harnessed for the good of government. This would allow the economy to be managed both more effectively and more efficiently.

‘The price mechanism — the instrument of the invisible hand — does, it is admitted, have some serious defects. But the remedy is not to abandon that mechanism or to superimpose other instruments with which it is not readily cross-bred. Rather, the thing to do is to use prices themselves, as far as possible, as the most promising means to cure their own shortcomings.

W.J. Baumol and S.A. Batey Blackman (1991: 47)