ENVIRONMENTAL MANAGEMENT PROBLEMS, FUTURE GENERATIONS AND SOCIAL DECISIONS

Joan Pasqual (joan.pasqual.rocabert@uab.es) and Emilio Padilla Rosa

The IUP Journal of Public Finance, 2006, vol. IV, issue 3, 15-59

Abstract: The decisions of many individuals and social groups, taken according to well-defined objectives, causes serious social and environmental problems in spite of following the dictates of economic rationality. There are many examples of serious problems for which there are no appropriate solutions yet, such as management of scarce natural resources, including aquifer water or the distribution of space among incompatible uses. In order to solve these problems, the paper first characterizes the resources and goods involved, from an economic perspective. Then, for each case, this paper notes that there is a serious divergence between individual and collective interests, and where possible, it designs the procedure for solving the conflict of interests. With this procedure, this paper shows the real opportunities for the application of economic theory, and especially, the theory on collective goods and externalities. This paper shows the limitations of conventional economic analysis and examines the opportunity to correct the shortfalls. Many environmental problems, such as climate change, have an impact on different generations that do not participate in the present decisions. This paper shows that for these cases, the solutions suggested by economic theory are not valid. Furthermore, conventional methods of economic valuation (which usually help decision-makers) are unable to account for the existence of different generations and tend to obviate long-term impacts. This paper analyzes how economic valuation methods could account for the costs and benefits enjoyed by the present and future generations. This paper studies an appropriate consideration of preferences for future consumption and the incorporation of sustainability as a requirement in social decisions, which implies not only more efficiency but also a fairer distribution between generations than the one implied by conventional economic analysis.

Date: 2006
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