Adapting Environmental Economics Courses

Change often happens incrementally and slowly. In the economics textbook market, for example, there is an unwritten rule that new textbooks cannot differ more than roughly 15% from the standard textbook in order to be ‘acceptable’ (Colander, 2003).

While our book clearly breaks this rule and proposes more far-reaching and fundamental changes in most chapters, in this chapter we focus instead on how existing courses could be adjusted incrementally. By doing so, we hope to assist educators in improving and adapting the courses they teach without needing to rip them up and start again, as well as helping students make suggestions for how this could be done.

First, we set out the typical contents of current courses. Second, we provide our suggested additions and changes. It is important to note that we pose all these suggestions as potential sources of inspiration, not a checklist of all the things that necessarily should be included. After all, there is a practical limit to what can be taught within a single course.

Courses:

Courses on environmental economics are generally organized around the neoclassical concept of externalities. In particular, they focus on how negative environmental externalities, whether it relates to local air or water pollution, natural resource depletion or climate change, can be internalized in market prices through taxes, tradable permits, and/or government regulation and control. Often the policy tool of cost-benefit analysis is taught as a way of assessing and comparing possible policy interventions. The history and current state of environmental agreements and policy are also frequently discussed, typically from a rational choice perspective.

Frequently used textbooks:

Like in public economics courses, environmental economics courses could benefit from including various policy tools besides cost-benefit analysis, such as risk-opportunity analysis and participatory evaluation. Furthermore, it can be useful to make students familiar with current environmental policies and institutions, as various courses already do. Here, it can also be informative to explore how policies do, or do not, make it into reality through complex political processes involving politicians, corporate lobbyists, NGOs, activists, scientists, and citizens. 

For more detail, see Building Block 2: Know Your Own Economy and Building Block 9: Problems & Proposals.

Teaching Materials

The concept of externalities is crucial for students to learn, as are the broader insights from neoclassical economics on nature. Environmental economics courses could, however, be enriched by also including different ideas coming from ecological, classical and institutional economics. Ecological economics conceptualizes the economy as being embedded within nature and argues natural capital cannot be replaced by other forms of capital. In this way, it comes to different ideas than neoclassical economics about how the economy should relate to nature and what policies should be pursued. Rent has long been a central concept in economics and it is important that students learn about the different ideas about value creation and extraction that have characterized economic thinking. This can also help them better understand the economics of land and housing of today. Finally, institutional economists, such as Elinor Ostrom, have analysed when and why natural resources are managed successfully as commons. This work gives students more insight in what institutional arrangements are possible and what aspects are most relevant for their success or failure. 

For more detail, see Building Block 7: Research Methods & Philosophy of Science, Building Block 8: Economic Theories and the section Nature in the background material Pragmatic Pluralism. 

Teaching Materials

The core question in environmental economics is what economic structures and policies can best tackle environmental problems. As such, it is crucial that students learn about the different possible structures and policies. Here there is also a strong link with theory as each theoretical approach has its own specific focus. Ecological economics stresses the importance of reducing material consumption and direct regulation. Neoclassical economics, instead, favours market-based policies to ‘get the price right’ in a static framework with a Coasean emission trading scheme or a Pigouvian carbon tax. Complexity economics, in contrast to neoclassical economics, focuses on system dynamics and how targeting tipping points and feedback loops can help solve environmental issues. Evolutionary economists emphasized the importance of innovation and research into clean technologies. Keynesian economists advocate for green industrial policy and government spending to achieve sustainable production processes and consumption. Institutional economists have investigated which institutional structures can prevent tragedies of the commons, thereby providing an alternative to market and state-based solutions to environmental problems. Finally, for more business and individual firm oriented classes, ideas surrounding sustainable and/or circular business models are highly relevant.

For more detail, see Building Block 5: Economic Organizations & Mechanisms and section Nature in the background material Pragmatic Pluralism. 

Teaching Materials

While environmental economics courses should focus on the economics of the environment, it is crucial that students have basic knowledge about environmental issues. Without being familiar with issues, such as resource depletion and biodiversity loss, one could, for example, be unaware of negative side-effects of attempts to tackle climate change by simply replacing all gasoline cars with electric vehicles.

Besides this basic natural scientific knowledge, knowledge about normative perspectives on environmental issues is critical. Here one can teach students both about abstract ethical discussions as well as concrete political struggles related to the environment, preferably connecting the two. 

For more detail, see Building Block 1: Introducing the Economy and Building Block 10: Economics for a Better World.

Teaching Materials

Many scientists have argued we currently live in the Anthropocene, an geological epoch in which human (economic) behavior is a key force shaping Earth’s natural systems. Learning about (economic) environmental history can enable students to put the current situation into historical context and better understand its origins. 

For more detail, see Building Block 3: Economic History.

Teaching Materials

To create space for the above suggested additions, we advise to focus more on the key ideas and intuitions behind the taught models and devote less teaching time to their technicalities and mathematics. As teaching students to reproduce and work through mathematical models often takes up a large part of the teaching time, this would give the teachers the opportunity to devote more time to practical knowledge, the relevance, institutions, and history. Furthermore, a more even balance between neoclassical economics and other economic approaches could be achieved by decreasing the number of neoclassical ideas and models that are taught.