ABSTRACT
The movies typically portray government, like romance, as being either idyllic or disastrous. In life, both tend to be a blend of the essential and the absurd. Government’s role in the efficient allocation of environmental resources, and its taxonomy as essential or absurd, rest on the effectiveness of the “free market” alternative. When successful, free-market mechanisms can allocate resources to those who value them the most, invite the production of goods until the marginal benefit equals the marginal cost, and price goods to reflect a combination of value and scarcity. As a particular resource becomes relatively scarce, its price will rise, inducing greater efforts to supply the product or find viable replacements. This pricing mechanism goes on display every time rising gas prices motivate research into alternative energy, energy conservation, and new discoveries of oil. As discussed in Chapter 3, free markets have a harder time allocating resources efficiently in the presence of imperfect information, imperfect competition, externalities, or free riders. Further, some goods, like air and river water, have no formal markets to address their allocation. When markets are inefficient or non-existent, government can provide needed remedies. If mismanaged, government can also bring excessive bureaucracy, ineptitude, misguidance, and corruption.
