Allocation of Natural Resources

Abstract

(31 Aug., p. 819) argue that, because current pricing practices do not internalize environmental costs, some mechanism other than the market is needed to protect environmental values. They propose a system of environmental credits-natural resource units (NRU's)-to be allocated to individuals and industrial organizations. Although their system is ingenious, I offer the following objections. 1) The system is, first of all, terribly cumbersome. If most families now have difficulty in keeping track of one checking account, think of the problems of maintaining two accounts. 2) How would environmental qualities be evaluated in terms of NRU's? Clearly the process would be extraordinarily cumbersome, arbitrary, and expensive. Maintaining a bureaucracy for establishing and managing NRU's would in itself have a major environmental impact. 3) As I have already pointed out (1), in addition to externalizing environmental costs, industrial activities have failed to internalize human health costs. Because NRU's would not provide equity for those costs, would there not be justice in demanding still a third system of allocating human health costs, or HHC's, to individuals? A monthly electric bill, for example, would then list dollars, NRU's, and HHC's separately, to be paid from three different accounts. 4) Last, and most important, there is a far simpler solution availablethe use of taxes to internalize environmental and health costs so that each consumer pays his fair share. LEONARD A. SAGAN