If the goal is to guide human action, environmental markets work better than indecipherable regulations


One of the greatest strengths of free market environmentalism approaches to environmental problems is that they facilitate the development of new information about the environment and provide an effective means for people to act on that information. Where there’s a market for some environmental benefit, the people who value it have a strong incentive to discover more information about it and, thanks to the price signal, others can act on that new knowledge without having to know it themselves.

For instance, suppose a plucky environmentalist discovers that a farmer’s practices reduce water quality to a distant stream through a complex hydrological process. If there’s a cost effective substitute or a means of mitigating its effects on the stream, the environmentalist can pay the farmer to change his behavior. If the price is right, the farmer will change his behavior without having to understand the complex process by which his…

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