Castle Rock Institute Blog
Thursday, March 30, 2006
Environmental Consequences
A quick plug for PERC, the Property and Environment Research Center, an environmental organization dedicated to exploring how markets can address environmental issues and improve environmental policy. The March 2006 issue of their magazine, "PERC Reports," includes a striking article by Daniel Benjamin about how companies with poor environmental records are rarely penalized by their customers. For example, very few people avoided buying gasoline from Exxon following the Valdez oil spill in Alaska.
"If we are going to rely on environmental rules and regulations to protect the environment, we must recognize that firms can be expected to respond only to legal penalties, including compliance and cleanup costs. There should be no reasonable expectation that environmentally conscious customers, employees, or suppliers will influence environmental outcomes."

The article reminds us that most consumers do not act contrary to their own economic self interest, even when they might advocate certain environmental principles. Hence, it also demonstrates how market forces alone will be an insufficient means of protecting environmental assets. Public policy requires government supported legal sanctions as well.
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