Economics, Environment, Latest, Social issues

340. COVID-19 and environmental economics

The flood of writings on COVID-19 across all academic disciplines is quite overwhelming. I’m partly to blame; apart from the Policy Forum article we published in Science in May, I’m involved in two special issues of research journals on the subject. There is also a follow up to the Policy Forum article soon to be submitted. 

The first of the special issues to be published is in Applied Economic Perspectives and Policy. I have a paper in there with Vic Adamowicz from the University of Alberta, on the topic “What Can Environmental Economists Learn from the COVID‐19 Experience?”

Here’s the abstract:

The responses of policy makers, individuals, and businesses to COVID‐19 contrast with typical responses to environmental issues. In most countries, governments have been willing to act decisively to implement costly restrictions on work and personal life, to a degree that has never been observed for an environmental issue. A number of possible lessons for environmental economists are identified. In addition to valuing natural environments, people also place a high value on social interactions. These two values may interact. Adaptation can substantially reduce the cost of restrictive policies and should be considered when policy proposals are being evaluated. Preparation for an emergency can substantially reduce its costs by allowing a more rapid response. The development of new technologies can play a key role in reducing externalities. As well, the effectiveness of policies that deliver public goods can be enhanced by credible leaders who provide clear, compelling, and consistent information, emphasizing both the private and public benefits of compliance.

And here’s part of the conclusion:

COVID-19 as a policy issue shares a number of features with the environmental issues that are commonly addressed by environmental economists. In both cases, costs of various types are created by policy responses, and policy makers have needed to make judgements about whether those costs are too large to be worth bearing. Public compliance with policies is needed to generate both public goods and private benefits. Communication and leadership matter in fostering that compliance. Scientific advice and evidence is critically important in making decisions about the design of effective policies. Technology development can be a key element in the policy response. Decisions have to be made in the face of uncertainty about the severity of the issue being addressed and about the performance of alternative management responses. Difficult trade-offs are needed between the disease or environmental issue, on the one hand, and economic or social issues on the other. And spread of a disease or pest or environmental problem provides a potential market-failure rationale and justification for coordinated policy response that places restrictions or costs on individuals and businesses to avert other larger costs.

Despite these close parallels, some clear differences in policy decisions and outcomes are apparent. Governments have been willing to adopt stronger, more costly and more rapid policy actions for COVID-19 than are typically seen for environmental issues. In most countries, public support for these policies has been stronger and more united than for any environmental issue, resulting in high levels of compliance despite high private costs. Uncertainty has been acknowledged and addressed more explicitly, both through adaptive management and through approaches to disease modelling. Science has played a central and trusted role, with scientific advice being actively sought and acted on by politicians.

The whole paper is open access:

Further reading

Pannell, D.J. and Adamowicz, W.L. (2020). What Can Environmental Economists Learn from the COVID-19 Experience? Applied Economic Perspectives and Policy (forthcoming). Journal web page

Shea, K., Runge, M.C., Pannell, D., Probert, W., Shou-Li, L., Tildesley, M. and Ferrari, M. (2020). Harnessing the power of multiple models for outbreak management, Science 368(6491), 577-579. Journal web page