What do defenders of the market approach to environmental responsibilities state about the ability of economic markets to achieve a sound environmental policy? Discuss if their responses are environmentally adequate.

Question

What will be an ideal response?

Answer 1

Defenders of a narrow economic view of corporate social responsibility have responses to the challenges associated with market failures. Internalizing external costs and assigning property rights to unowned goods such as wild species are two responses to market failures. But there are good reasons for thinking that such ad hoc attempts to repair market failures are environmentally inadequate. One important reason is what has been called the first-generation problem. Markets can work to prevent harm only through information supplied by the existence of market failures. Only when fish populations in the North Atlantic collapsed, for example, did we learn that free and open competition among the world's fishing industry for unowned public goods failed to prevent the decimation of cod, swordfish, Atlantic salmon, and lobster populations. That is, we learn about market failures and thereby prevent harms in the future only by sacrificing the "first generation" as a means of gaining this information. When public policy involves irreplaceable public goods such as endangered species, rare wilderness areas, and public health and safety, such a reactionary strategy is ill advised.