Pearce, David. 1992. "Green Economics." Environmental Values 1(1992): 3-13.

Thesis:

Green economics focuses upon constraining human need, on promoting sustainability, and upon decoupling the rates of change in economic output and environmental assets consumed.

Summary:

Pearce begins by saying that like sustainable development, "'green economics' has come to mean all things to all men" (p.3). In order to clarify the concept, he first identifies what is common to all perspectives within green economics. These issues are (pp.3-4):

a focus on how to urge the economic person (Homo economicus) to be less motivated by selfish concerns and more motivated by non-selfish concerns, to the good of other people and the environment.

a belief that a green economy is one that has the capability of replicating itself on a sustainable basis.

the systemic decoupling of the rates of change in economic output and the environmental assets used up in that process.

Differences in green economics arise in terms of method and scale. For example, to what extent and by what method do we go about constraining human greed? Or, to what extent do we need to control changes in population size or economic growth? While in general green economics is characterized by 'concern for others', those who profess a wider concept of concern for others tend to recommend more extensive intervention in economic activity. At one end of the spectrum, there is a call for varying degrees of 'command and control' measures on human behavior. At the other end are those who believe we need only change the minds and motives of people, a sort of greening of consciousness. Pearce advocates a 'middle ground', which he terms 'constant capital'. (pp.5-6).

Pearce then turns to a brief overview of how the three elements common to green economics are expressed in his middle way as published in Blueprint for a Green Economy (1989). First is the topic of valuation. This is an attempt to "measure human preferences for or against changes in the state of environments" (p.7). That is, economic benefit arises when people feel better off, and economic cost arises when they feel worse off. While it is difficult to place value on the environment because of intrinsic values that cannot be priced and a lack of complete information on the effects of changes, Pearce argues that nevertheless it is important to make an attempt. He reasons that on a daily basis, politicians "are engaged in the activity of trading off environment against economic activity....Defending the environment means presenting the arguments in terms of units that politicians understand" (p.8). Thus, the economic valuation exercise serves as one of many inputs required in the public decision making process.

Regarding the issue of decoupling, Pearce proposes changing the mix of environmental policy instruments. He suggests several measures, that enable the true cost of production to be reflected in market prices (p.9):

pollution taxes

tradeable emission reduction certificates

deposit-refund systems to encourage recycling

financial assistance where external benefits are concerned

the removal of environmentally harmful subsidies

These market based instruments serve to keep compliance costs down, and to 'force' cleaner technology on a continuous basis (p.10).

Pearce concludes by acknowledging a weakness in his approach: we do not know if it will work. However, "[w]hat we do know is that the current path has all the signs of being unsustainable" (p.10). That is because (1) the market place fails to account for the environment, and (2) governments fail to manage the economy with the market in mind. If we can correct these failures, we are more likely to be on a sustainable path. The problem of scale is still an issue, and perhaps the 'middle way' is not enough. However, it may be the only path that can be tried without seriously suppressing human freedoms. (pp.10,12)

Keywords: sustainability, market based instruments, decoupling, command and control