Saturday, July 27, 2013

Full-cost Pricing: an Impractical Solution

Over the past several years, we have seen a number of proposals put forward by environmentally active academics and think tanks calling for the implementation of concepts such as environmental policymaking with full-cost pricing, which includes policies and legislation that adjust market prices to reflect the direct costs of goods and services and their impact on so-called "natural capital" and "ecosystem services."
The concept of eliminating all externalities (be they positive or negative) within economic systems is desirable. However, it is not presently practical, and any intermediate system will be subject to substantial errors. The question of how to value the costs of so-called pollution and the benefits from ecosystem services has challenged researchers for some time, and the more work that is conducted, the more questions and uncertainties arise. We are farther from the answers we need than ever, and such is the paradox of science: the more you learn, the more you realize you do not know.

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