ABSTRACT
Economists often think less radically. In the Pigouvian tradition, they argue in favour of balancing the net private benefits of agro-chemicals with their external effects. According to economists, environmental goals are best achieved by economic incentives or instruments of economic policy (Tietenberg, 1985; Baumol and Oates, 1988; Opschoor and Pearce, 1991; Pearce and Turner, 1990). Divergence between social and private costs and benefits in private decision making is the main reason for the existence of environmental problems. Compensating for the difference between private and social costs/benefits with levies/subsidies would solve the problem, because economic agents would make their decisions according to real costs and benefits to society. There are several factors that make it less easy to apply such strict reasoning in practice: a lack of information about private and especially social costs/benefits; a difference between the distribution of income and resources that result from the market process (whether or not levies and subsidies for the environment are included) and the preferred distribution; the existence of several distorting elements within the economy and the difficulty of levying and subsidizing them without distorting the economic process; and non-rational behaviour. Therefore it is questionable whether economic instruments always form the best option in practice.
