Monday, October 4, 2010

The Case for Environmental Economics Theory

This is actually the introduction to a long research paper I wrote about what I thought were important areas of research. A shorter version of the research paper is here.

Environmental Economics Theory To Do

It is clear that we have environmental problems, and they need to be addressed in the context of improving the economic well-being of Americans. Two mechanisms have been identified, which are to provide green jobs and build green industry. One is aimed at addressing economic concerns of the labor class, and the other is to address the concerns of businesses and investors. Even so, it is unclear how to incorporate the environmental agenda with the rest of economic and social policy. For example, the bank bailouts, healthcare reform, and financial regulatory legislation had no framework for determining whether or not they were in line with the environmental agenda. As a result, the environmental agenda has been marginalized even though it is indisputably important to the economic well-being of Americans in the long run.

To build a stronger case for comprehensive policymaking and put environmental policy on the map permanently, we need to develop a strong theoretical foundation. We should build upon the endogenous growth function to examine the dynamics of labor, material resource use, technology development, and the money supply. This foundation needs to be able to answer three key questions. The first is how do we create jobs by rebuilding the manufacturing sector while reducing emissions? The second is how can we make green businesses more profitable while creating enough well-paying jobs to keep unemployment low? The third is how do we foster a stable while robust monetary system and financial industry while reducing emissions and material throughput? These answers are not just needed in the United States. While others such as China and Europe may have made more headway in clean technology than the US has so far, they will soon need more direction to complete the transition to environmentally sustainable economies.

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