The Impact of Economics on Environmental Policy

37 Pages Posted: 27 Jul 1999

See all articles by Robert W. Hahn

Robert W. Hahn

University of Oxford, Smith School; Georgetown University

Date Written: May 1999


Environmental economists have seen their ideas translated into the rough-and-tumble policy world for over two decades. They have witnessed the application of economic instruments to several environmental issues, including preserving wetlands, lowering lead levels, and curbing acid rain. This essay examines the impact of the rise of economics in the policy world on the making of environmental policy. I focus on two related, but distinct phenomena-the increasing interest in the use of incentive-based mechanisms, such as tradable permits, to achieve environmental goals; and the increasing interest in the use of analytical tools in regulatory decision making, such as benefit-cost analysis.

I argue that economists and economic instruments have had a modest impact on shaping environmental, health and safety regulation, but that economists will play an increasingly important role in the future. Although the role of economics is becoming more prominent, it does not follow that environmental policy will become more efficient. This apparent inconsistency can be explained by the political economy of environmental policy.

JEL Classification: K2, L5, N5

Suggested Citation

Hahn, Robert W., The Impact of Economics on Environmental Policy (May 1999). AEI-Brookings Joint Center Working Paper No. 99-04. Available at SSRN: or

Robert W. Hahn (Contact Author)

University of Oxford, Smith School ( email )

United Kingdom

Georgetown University

Georgetown Center for Business and Public Policy
Washington, DC 20057
United States

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