Earthsky Interviews
Economist explains forest ‘costs and benefits’
09-09-2005 - Human World
We’re speaking with Nobel Prize winning economist Kenneth Arrow of Stanford.
Arrow and other prominent economists recently co-authored a paper called ‘Are We Consuming Too Much?’ in the Journal of Economic Perspectives.
Kenneth Arrow: One of the big problems is that a lot of the exfoliation of the planet takes place, and there’s no economic obstacle, there’s no price. You have the Amazon forests for example, or for that matter, the American forests – although there’s a little more control there, but it’s limited.
Arrow explained that, ordinarily, the market works by balancing benefits and costs. When one person wants something that’s going to impose a cost on other people, then you’ve got to pay that cost. For example, if you want workers, you have to pay for their services. But for forests around the world, the balance between benefits and costs is hard to achieve.
Kenneth Arrow: In the case of, for example, national forests – say mining in the national forests of the United States – there’s no cost to it. You’re allowed to mine there, regardless of the effect on the forest, and there’s virtually no charge for the use of this valuable land. The forests are in general things that are hard to make private property. And the result is, in every country, they are utilized. Either they’re burned and become farms, or they’re logged for timber.
Our thanks to:
Kenneth Arrow
Department of Economics
Stanford University
1972 Nobel Laureate in Economics