Public policy and private-sector decision making in industrialized countries aims at facilitating and sustaining high rates of economic growth. The negative side of this is the potential damage to the environment resulting from poor methods of underground resource extraction, the loss of high-quality agricultural land to urban sprawl, over-harvesting of resources, and pollution. This environmental degradation is not accounted for in either corporate or national balance sheets.
In most jurisdictions, the most frequent government response has been to increase the number and strength of regulations – both macro and micro – designed to better protect the environment. Without denying the importance of enlightened environmental regulation, there is an even more powerful instrument which can and must be harnessed to the task of environmental conservation: the market itself.
It is the market, producing and delivering goods and services in response to consumer demand, which invariably generates pollutants and environmental stress as a byproduct of its operations. It can therefore be argued that there is no substantive long-term solution to the problem of environmental degradation without finding new and better ways to bring market principles and mechanisms to the task of environmental conservation.
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