Sustainability: Collective Action Problems and a Potential Market-like Solution


By almost every account, global temperatures are on the rise. Most of us are ignorant of the matter, given that weather changes so rapidly and the increase in average global temperatures is so gradual (roughly 1.5℃ during the last century) as to be almost imperceptible. Our general lack of appreciation for this threat creates a classic economic problem, that of collective action. The enduring formulation of the problem goes back to the 19th century with Thomas Malthus’ (flawed) prophecy on population control.

In order to ensure that we avoid catastrophe, everyone must be bound by the same rules. Those who continue to pollute are seen as free-riders. Those who flout the rules that limit our consumption of natural resources impose a burden or externality by polluting but reap the benefit from the remainder of humanity conforming to a more sustainable set of policies. Cap-and-trade is a recent formulation that attempts to impose conformity. However, there are challenges to be confronted when considering its enforcement. Poorer individuals and countries are likely to be more adversely affected than most with adhering to elite opinion on reducing our collective carbon footprint.

Students are invited to evaluate the economic and moral trade-offs of various proposals. Only after realizing the limitations of common approaches to the problem can an innovative solution begin to be drafted.

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