Nov 14, 2018

The Economics of Environmentalism

I’m a big believer in the free market. I also care a lot about the environment. I never thought of those two things as opposed: in my mind, it makes sense that the free market would reward “green” companies, because informed consumers want the earth to be healthy. But here on campus, I’ve faced more than my fair share of dorm-room debates with people who think my position makes no sense!


I know that your column doesn’t get political, but I was hoping you could provide some insight into the relationship between our corporations and our planet. Aren’t corporations doing a lot to help the environment?


Like it or not, environmentalism has a lot to do with economics. We should each do as much as we can to limit our individual impacts on the planet, but there is a power in scale: the evidence shows that the environmental impact of corporations (and other large organizations, like governments and even nonprofits) massively outweighs the impact that we, as individuals, can have.


The good news is that many corporations are doing a lot to help our planet. Engineers at M.W. Watermark LLC, a company that produces industrial filtration equipment, point out that practices like recycling the water used in industrial processes have effects that, at scale, do a lot to help the environment in a way that individual habits can’t.


But does the profit motive–the primary driver of any corporate strategy–really encourage companies to do what’s best for the environment? It’s hard so say for sure. There’s clearly money to be made with alternative fuels and highly efficient vehicles, for instance, say the automotive and diesel technicians at NYADI. But the benefits of producing such vehicles can fluctuate with other factors, such as the price of gas, say experts.


Then there is the role of government regulation–something that free market advocates say is unnecessary, while others claim makes a large difference. Where a profit motive doesn’t exist, governments can create one with subsidies, or, of course, they can simply issue mandates. Government mandates in some regions–such as populous states like California–can force manufacturers to tailor their products to suit government standards.


Ultimately, it’s clear the corporations have a major role to play in protecting the environment. How much they will do so on their own is an open question–so debate on!


“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” — Margaret Mead

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