56 primavera - Verano 2010 The overexploitation of a common or global-property resource, such as clean air, is also addressed within the economic sphere. Inherent in market analyses is the distinction between stock and flow variables. A country’s Gross Domestic Product is an example of a flow variable and so is personal income or saving. Wealth, on the other hand, is classified as a stock because its value worth can be assessed at any given moment in time; whereas, changes in income matter over time. Units of goods or resources transacted in markets are measured in units per unit of time. So time is an intrinsic feature in market analyses. Economists usually approach the welfare effect of pollution and environmental degradation by distinguishing between flow pollutants and stock or cumulative pollutants. The latter usually accumulate in air, water, and/or land surface over the very long run. So it is important to note that market-based incentives intended as reparations of societal damages caused by environmental negative externalities are somewhat meaningful when we are dealing with flow pollutants and less meaningful in the presence of stock pollutants. Because many of the pollutants classified under greenhouse gas emissions steadily accumulate over time it is crucial that we approach global goods or resources that are significantly affected by those greenhouse gas emissions in ways other than through market-based incentives. This is one reason why governments across countries have come together, through instances such as the United Nations, to create treaties to ban the production of chemicals or toxics that accumulate over time and across the globe. Under the Montreal Protocol, the banning of the production and use of chlorofluorocarbons and other substances that deplete the ozone layer is one recent example. Yet, international cooperation has also led to treaties attempting to limit or stabilize atmospheric concentrations of greenhouse gas emissions or retreating, at best, to earlier years’ levels of greenhouse gas emissions. Ratified and sanctioned under the United Nations Framework Convention on Climate Change, the Kyoto Protocol is an international attempt to address such stabilization. Overexploitation of a global-property resource is explained because of (a) the benefits of the resource accrue to everyone but since no single individual owns the resource, therefore, no single individual is willing to pay for it or care after it, and (b) an individual’s use of the resource doesn’t exclude other individuals from using it. In essence, the logic behind the overuse of global public goods obeys Hardin’s “The Tragedy of the Commons”.15 Common amongst mainstream economists is the use of game theory as an approach to try to avoid the overuse of global-property resources given the inherent incentive to free ride on such goods.16 The international community 15 Hardin, G. (1968) “The Tragedy of the Commons”, Science 162, pp. 1243-48. 16 Barrett, S. (1999) “The Credibility of Trade Sanctions in International Environmental Agreements”, in Fredriksson, P., ed., Trade, Global Policy and the benefits from limiting or stabilizing greenhouse gas emissions and, thus, diminishing the likelihood of catastrophic effects resulting from unchecked accumulation of greenhouse gas emissions. But, while these benefits are appropriated by all countries, the costs of constraining greenhouse gas emissions are borne by countries that undertake economic actions to limit such emissions.17 The point is that this interdependence of country wellbeing opens the possibility of extending our use of policy instruments, such as strategic trade policies or sanctions, to reach second-best outcomes in the presence of market failures. Another approach in dealing with stock pollutants is known as “tradable permits”. The system of tradable permits is an alternative to a pollution tax. To the extent caps or limits on pollution emissions are credible and enforced, ecological economics is a bit more receptive to a cap-auction-trade arrangement involving tradable pollution permits once limits on emissions have been imposed and permits are dutifully auctioned to the highest bidder. IV. Concluding remarks It is important to note that economics has informed and should continue to inform the debate on global climate change. We’ve argued, however, that not all economics is based on the same premises or paradigms, and that the debate on global climate change has shown, thus far, very little receptiveness to non-deterministic and nonnihilistic ideas. Given that there are alternative views in economics, critical examinations and possible overhauls of some basic premises and ethical approaches from each perspective are long overdue. Finally, it is the author’s view that the debate on global climate change could see major improvements if we questioned seriously whether our current economic aspirations are at odds with our planet’s carrying capacity. Environment, World Bank Discussion Paper No. 402, ibrd. 17 Neoclassical literature has also dubbed this problem as “interdependent utility or profit maximization”.
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