Enlightened Economics

Economics for an Enlightened Age

• Stronger Environmental Policies Do Not Hurt Economic Growth

Posted by Ron Robins on January 16, 2015

“Studies of individual environmental laws, such as the Clean Air Act, have found that they have little impact on employment and productivity… Now, there is hard data showing that more, and more stringent environmental policies do not harm economic growth.

That’s the finding of researchers at the Organisation for Economic Co-operation and Development who have compiled the first comprehensive set of data on environmental strictness and its effect on productivity. The figures cover 24 OECD countries from 1990 to 2012, and draw on the ORBIS database of information on 44 million companies. The report’s conclusion contradicts what governments and companies often believe: that green regulations may be justified in the long run, but that they come with immediate, substantial economic costs. One interesting point: stricter environmental policies may encourage businesses to invest more in efficiencies and innovations than they would have otherwise.”
— John Howell for 3BL Media.

Commentary: Ron Robins
That such a respected economic body like the OECD finds that environmental laws do not hurt economic growth should be become a major plank in the platform of political parties everywhere. That way the idea can be embedded in public consciousness and spur governments and businesses to not be afraid of environmental regulations.

However, I believe a superior way to accomplish this goal would be based on market-based pricing mechanisms that allow for full product costing that includes societal health and environmental costs. I would propose a scaling up over time of the inclusion of such costs and that all trade agreements be amended to account for them. Presently, this is probably impractical, but from a free market perspective might be preferable to government imposed regulations and laws. Such a market-based mechanism might also be less expensive to administer. Just a hunch though…

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