Articles by Robert Stavins
Robert N. Stavins is the Albert Pratt Professor of Business and Government, Director of the Harvard Environmental Economics Program, and Chairman of the Environment and Natural Resources Faculty Group at Harvard University's John F. Kennedy School of Government.
All Articles
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The myth of the universal market … debunked!
Communication among economists, other social scientists, natural scientists, and lawyers is far from perfect. When the topic is the environment, discourse across disciplines is both important and difficult. Economists themselves have likely contributed to some misunderstandings about how they think about the environment, perhaps through enthusiasm for market solutions, perhaps by neglecting to make explicit all of the necessary qualifications, and perhaps simply by the use of technical jargon.
So it shouldn't come as a surprise that there are several prevalent and very striking myths about how economists think about the environment. Because of this, my colleague Don Fullerton, a professor of economics at the University of Illinois, and I posed the following question in an article in Nature: how do economists really think about the environment? In this and several succeeding postings, I'm going to answer this question, by examining several of the most prevalent myths.
One myth is that economists believe that the market solves all problems. Indeed, the "first theorem of welfare economics" states that private markets are perfectly efficient on their own, with no interference from government, so long as certain conditions are met. This theorem, easily proven, is exceptionally powerful, because it means that no one needs to tell producers of goods and services what to sell to which consumers. Instead, self-interested producers and self-interested consumers meet in the marketplace, engage in trade, and thereby achieve the greatest good for the greatest number, as if "guided by an invisible hand," as Adam Smith wrote in 1776 in The Wealth of Nations. This notion of maximum general welfare is what economists mean by the "efficiency" of competitive markets.
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Opportunity for a defining moment
The inauguration of Barack Obama as the 44th President of the United States is a defining moment in American history. For most Americans and countless others around the world, this is an inspiring political transition. The question we must face, however, is whether compelling inspiration will lead to effective action. As I wrote in a Boston Globe op-ed (November 12, 2008) one week after election day, environment and energy issues -- particularly climate change policy -- provide a microcosm of the forces that are shaping and will shape the actions of the new administration and Congress.
About eight years ago, President-elect George W. Bush promised to be President for all the people, not just those who had voted him into office. Bush's ability as Texas governor to bridge differences across the political aisle provided cause for optimism.
But hope for a centrist and sensible presidency dissolved under the influence of White House political operative Karl Rove and Vice President Dick Cheney. The Bush Administration moved not to the center, but toward solidifying its base on the political right. Nowhere was this more apparent than in energy and environmental policy, with Vice President Cheney running energy policy, and EPA Administrator Christie Whitman virtually driven from office.
