The visible hand in economics

Artificial environmental goodness

Posted on: July 27, 2007

Arnold Kling at EconLog isn’t impressed by Planktos who claim to

…restore damaged habitats in the ocean and on land. Through iron-stimulated plankton blooms in the oceans and afforestation projects in Europe, we are able to generate carbon credits. We then sell these offsets to individuals and businesses that are looking to reduce their carbon footprint and lower their impact on climate change.

He claims that this ‘nonsense’ is the product of artificial markets created by the government and should really be the preserve of charitable organisations. I can’t see how leaving the externality damage of markets to be cleaned up by charities is a particularly efficient solution. Surely, the creation of these ‘artificial’ carbon markets internalises the pollution externalities and results in increased market efficiency. It’s a textbook government intervention to correct a market failure. Planktos’ idea seems to be the exact sort of thing that everybody hopes such markets will generate, and excellent evidence that they work to stimulate innovation in environmental protection. The sooner NZ gains a few of these artificial markets, the better, I say.

1 Response to "Artificial environmental goodness"

I agree with you. I think that Arnold Kling is the sort of person that believes the Coase theorem will solve all externalities, and thinks that any market mechanism that can only survive through government intervention is useless.

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