ABSTRACT
This chapter shows that economics as an analytical system can contribute to conceptual clarification and more effective public action in the important area where the concerns of ecology and economics meet. In identifying the economic objectives and criteria of environmental policy, one encounters the problem of unity of science—in this case the unity of economics as an analytical system. In formulating policy criteria, welfare economics takes explicit account of differences in individual preferences and incomes and of the resulting problems in aggregating individual utilities. The contribution of welfare economics has been a clarification of the theoretical difficulties in arriving at a social-welfare function and social indifference curves and of the operational difficulties in applying the Pareto criterion in actuality. The maximization principle is applied in normative economics, first as efficiency criterion for limited operations under restrictive assumptions and second as the assumed overall objective of public policy.
