Externalities, Freeloaders, and Cooperation: Economics Aspects of the Environmentalism Challenge

Abstract

This paper focuses on some economic aspects of environmentalism, both challenges and possible solutions that the study of economics may provide. These issues include externality and free-loader challenges, exacerbated by difficulties in achieving global cooperation. The Stern Review on the Economics of Climate Change makes some of the same points and is thus discussed. The paper will also list some criticisms and weaknesses of Stern’s approach, but will focus on the bottom-line issues that are raised therein. Numerous charts, graphs and game-theoretical models are used throughout the paper to illustrate such phenomena as the free-loader situation and negative externalities. As is explained, while policy decisions are capable of solving the environmental challenge on a national level, achieving international cooperation is likely the greatest difficulty. With this knowledge, environmentalists and interest groups can devise the most efficient strategy for ensuring that environmental threats are given the appropriate weight and cost.