Book Review
Eco-nomics: What Everyone Should Know About Economics and the Environment
By Richard Stroup
Cato 2003
The Journal of the James Madison Institute
Winter 2004
Reviewed by Emily Eineman
Have you ever considered the relationship between the economy and the environment? I certainly hadn’t given it a lot of thought until I read Richard L. Stroup’s book, Eco-nomics: What Everyone Should Know About Economics and the Environment. This book, while thin and unassuming in appearance, is packed with fresh insights. Stroup includes both basic facts and in-depth analyses. He combines solid principles with modern examples and new concepts. Don’t let the heavy subject matter fool you, though. Stroup writes in such a clear and concise way that the reader learns without even trying. (And as a college student, I can appreciate that.) The roles of individuals, economic institutions, and the government are tied together throughout the 86-page volume, with an emphasis on their interconnectedness with the environment.
Eco-nomics is divided into four sections dealing with the basics of economics; how property rights and markets replace conflict with cooperation; how government action purportedly protects the environment; and how economics affects environmental policy choices.
In the chapter entitled "Scarcity: An Economics Primer," Stroup uses a question and- answer format to introduce ten basic economic principles. He also outlines what he wants the reader to derive from his book: "It should quickly become clear that economics is about choice, not necessarily about money, and that economics can help us understand environmental choices, both public and private." Among the questions answered in the chapter are "What do profits achieve for the environment?" and "Even though economists emphasize selfish motives, don’t people have common goals?" Stroup uses common sense that is anything but common to bring to light several compelling points. He explains the danger narrow goals and short-term thinking pose to environmental policy as well as how personal incentives affect the quality and quantity of information gathered by policymakers.
Stroup challenges the widely-held belief that the rich and conspicuous consumers are to blame for the world’s environmental problems when he says, "As people’s incomes increase, their willingness to pay for protecting the environment increases. Once basic demands for food, clothing, and shelter are met, people demand cleaner air, cleaner streams, more outdoor recreation, and the protection of wild lands. With higher incomes, citizens place higher priorities on environmental objectives."
In his second chapter, "Rights: How Property Rights and Markets Replace Conflict with Cooperation," Stroup proposes that "defined, defendable, and divestible" property rights are the key to symbiotic relationships in markets. He also explains the incentives private ownership provides for the conservation of resources. Stroup’s arguments become particularly relevant with his use of real-life examples. He discusses how the National Park Service’s budget battles with the U.S. Treasury often give people less bang for their park-visiting buck and how Ted Turner uses his ranches to help wildlife populations grow. Stroup utilizes East Germany’s "backward, dirty, and inefficient" Trabant car to demonstrate how central planning and the absence of a free market hinder both economic innovation and environmental responsibility.
More principles are introduced in "Coercion: Protecting the Environment with Government Action." Here Stroup discusses the unique position of the U.S. government. The government protects property rights, manages resources such as land and water, and regulates how the rest of us use those resources. These critical roles often cause a blurring of the line between market decisions and political decisions. Stroup makes a number of compelling statements in this chapter such as the fact that since government has no capital market, it lacks the signals and the incentives associated with market decisions. Stroup further argues that decisionmakers in government agencies often fail to see the big picture, so good intentions can lead to bad results.
Stroup next enlightens us on the options we have in "Choosing: Economics and Environmental Policy Choices." He discusses the two different "market-based mechanisms" available to be utilized by the government in an effort to mimic the private sector. First, the government can levy charges against a polluter which could generate revenue and regulate emission controls. The second incentive plan is trading systems, which allow companies that are good at controlling pollution to trade or sell their emissions permits to other companies that are less efficient. Stroup ends with a discussion of the protections against the misuse of government by special interests and leaves us with this final thought: although property rights and markets are imperfect, we have seen evidence that they are greatly underappreciated, and thus greatly underused at this point in the history of environmental policy.
Stroup at times can be repetitive, but his analysis of the relationship between the environment and the economy is fresh, interesting, and thought-provoking. Eco-nomics is a quick and easy read, and provides us with a good, workable knowledge of the interconnectedness of the environment and the economy.
Emily Eineman is a political science/international affairs major at Florida State University, and an intern at The James Madison Institute.