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Environmental ethics & economic incentives

In his book, What Price Incentives?, Steven Kelman suggests that from an ethical point of view, the use of economic incentives (such as emission charges or emissions trading) in environmental policy is undesirable. He argues that transforming our mental image of the environment from a sanctified preserve to a marketable commodity has detrimental effects not only on our use of the environment, but also on our attitude toward it. His point is that applying economic incentives to environmental policy weakens and cheapens our traditional values toward the environment.

a. Consider the effects of economic incentive systems on prices paid by the poor, on employment, and on the speed of compliance with pollution control laws as well as the Kelman arguments. Are economic incentive systems more or less ethically justifiable than the traditional regulatory approach?

b. Kelman seems to feel that because emission allowances automatically prevent environmental degradation, they are more ethically desirable than emission charges. Do you agree? Why or why not?

c. If we were to allow the private market to bring about an efficient outcome that society would deem desirable, do you think they would be able to effectively reflect the true market benefit and cost?

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Solution Preview

a. Kelman is comparing the impacts of regulation vs. incentives. In effect, regulatory policy says, "Pollute too much and we'll shut down your business." Economic incentives say, "Pollute all you want, but be prepared to pay for it." Kelman argues that the first strategy is more ethically desirable because it sends a clear message that polluting is wrong. You can choose whether to agree or ...

Solution Summary

Steven Kelman, author of What Price Incentives?, argues that the use of economic incentives in environmental policy is undesirable because it cheapens our traditional values toward the environment. This solution presents a contrasting view.