F.J. Dietz

Rethinking Environmental Economics: Missing Links between Economic Theory and Environmental Policy

This article deals with the discrepancy between environmental economics and environmental policy regarding the abatement of environmental deterioration. In short, in mainstream economic textbooks environmental problems are seen as a market failure that, in the tradition of A.C. Pigou, can be corrected by imposing charges on polluting and natural resources-depleting activities. In environmental policy, however, this recommendation is almost fully neglected, as in almost all OECD-countries only physical regulations are used to decrease pollution and depletion of natural resources. Section 1 describes this discrepancy more extensively. In general, economic theory provides the basis for policy measures. Without any idea about the causes of, for example, unemployment or