ABSTRACT
Most of the recent work on mainstream environmental economics has centred on the use of cost-benefit analysis in environmental policy formulation, either as an object of defence (Pearce et al., 1989) or of criticism (Jacobs, 1991; O’Neill, 1993a; Sagoff, 1988). Cost-benefit analysis is taken to represent the standard attempt to bring the environment into orthodox market-based approaches to policy-making. It is defended on the grounds that it resolves the problems of ‘market failures’ that arise when real markets depart from ‘ideal markets’ which, according to the fundamental theorem of neo-classical economics, yield Pareto-optimal outcomes.
