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Vernon Smith on Free Market Environmentalism

My colleague Vernon Smith — who has one of the most curious and creative minds I’ve ever encountered — is a fan of free-market environmentalism (FME).  Here are some of his recent thoughts on the topic:

Traditional thinking about environmental issues tends to emphasize
incentive problems inherent in markets but ignores them in the context
of political processes. Many economists and policy analysts assume that
an efficient allocation of resources will be reached when government
correctly accounts for the costs and benefits. Free Market
Environmentalism challenged this presumption and provided a more
realistic way of thinking about environmental policy—a way that
emphasized the important role of incentives, transaction costs, and
well-defined property rights to natural resources. These rights, whether
held by individuals or a group, create inherent incentives on resource
users because the wealth of the property owner is at stake if bad
decisions are made.

The interesting essay, published in PERC Reports, from which the above quotation is pulled can be found here.