The dramatic improvement in air quality in major Chinese cities in recent years has led to renewed interest in the question of whether economic development allows a country to “grow” out of its environmental problems. We shed new light on this question by identifying a new factor that can drive the long-term relationship between economic development and environmental quality, namely, a spatial effect that arises from a tradeoff between environmental quality and agglomeration economies. We show theoretically that this spatial effect can lead to an inverted U-shaped relationship between income and pollution, i.e., an environmental Kuznets curve. In addition, we decompose changes in US air pollution concentrations from 1990 to 2017 to allow for a possible spatial effect. Results point to the potential importance of a spatial effect in explaining the reductions in carbon monoxide (CO) concentrations. However, little of the change in sulfur dioxide (SO2) concentrations in the US can be attributed to a potential spatial effect.

Since President Donald Trump took office for a second time in January 2025, his administration has initiated a flurry of actions to fundamentally alter environmental policy in the US. These actions include, among other things, climate change policy, renewable and fossil-fuel energy production, public land management, water and air pollution policy, and methods that must be used by federal agencies when performing economic analyses of environmental regulations.The Trump administration has promoted these changes by saying that they will improve the economy and increase government efficiency.In contrast to this rhetoric, these changes are likely to reduce rather than increase economic efficiency, as well as increase costs and reduce welfare for American citizens and people around the world. In this paper, we document and discuss the multiple ways in which the Trump administration’s recent and proposed changes related to the environment violate foundational principles of environmental economics in ways that will likely lead to lower overall social welfare.

There are a variety of contexts in which "pitching in" to address environmental or resource management problems could benefit from individuals or firms working not just on their own but also working together collaboratively as a group. Examples include working together on promoting conservation or habitat protection, the sharing of information, or the development of less polluting products or production processes. However, to date, the literature on environmental policy has considered only the incentives for individual parties (e.g., firms, landowners, or individuals) to take steps (i.e., exert "effort") to reduce pollution or meet resource management goals where those steps impact that party's own environmental footprint or performance. Missing from the literature is any consideration of the ability of one party to undertake activities that instead help another improve the latter's performance. Such help could be either a substitute for or a complement to one's own effort. This paper presents an analysis showing that traditional policy approaches based on individual performance cannot generally efficiently incentivize both effort and help, but a (properly designed) collective approach where rewards or punishments are based on group performance can. This suggests an additional rationale for the use of collective approaches as a potentially important tool for promoting sustainability that has not been recognized in the literature.

Transformational change is possible, but design and implementation must seek to avoid lock-in.

The broken-windows theory of crime is based on the idea that aggressive enforcement of petty crimes, like misdemeanors, will have a deterring effect on would-be perpetrators of more serious crimes. This paper develops a model of this theory that depends on three factors: (1) potential offenders make decisions about committing crimes based on their beliefs about the probability of apprehension; (2) those beliefs depend on prior observations or knowledge about the rate of petty crimes; and (3) there is a linkage across criminal categories (minor vs. serious crimes) as a component of actual enforcement policy. Our results show that even if these factors are all present, increased enforcement of low-harm crimes does not necessarily lead to fewer high-harm crimes.

This paper seeks to better understand the persistent environmental problems in urbanizing economies. We examine the effectiveness of environmental policy in an economy with agglomeration economies and endogenous firm relocation and entry/exit. We show that, although environmental regulation is effective in the short run, in the presence of agglomeration economies, spatial relocation of firms in response to environmental regulation can undermine the effectiveness of regulations, rendering them less effective or even ineffective. In fact, we show that regulation might even be counter-productive, i.e., exacerbate environmental problems, at certain stages of development. We present initial empirical evidence in the context of water pollution in China that demonstrates the importance of agglomeration economies in determining the impacts of environmental regulation.

Financial advisers recommend a diverse portfolio to respond to market fluctuations across sectors. Similarly, nature has evolved a diverse portfolio of species to maintain ecosystem function amid environmental fluctuations. In urban planning, public health, transport and communications, food production, and other domains, however, this feature often seems ignored. As we enter an era of unprecedented turbulence at the planetary level, we argue that ample responses to this new reality — that is, response diversity — can no longer be taken for granted and must be actively designed and managed. We describe here what response diversity is, how it is expressed and how it can be enhanced and lost. A varied repertoire of responses helps manage fluctuations, as in markets. This Perspective argues that society needs to strengthen the diversity of options for responding to disruptions, exploring how this response diversity is expressed, how it can be built and lost, and what we can do to promote it.

Transformation toward a sustainable future requires an earth stewardship approach to shift society from its current goal of increasing material wealth to a vision of sustaining built, natural, human, and social capital-equitably distributed across society, within and among nations. Widespread concern about earth's current trajectory and support for actions that would foster more sustainable pathways suggests potential social tipping points in public demand for an earth stewardship vision. Here, we draw on empirical studies and theory to show that movement toward a stewardship vision can be facilitated by changes in either policy incentives or social norms. Our novel contribution is to point out that both norms and incentives must change and can do so interactively. This can be facilitated through leverage points and complementarities across policy areas, based on values, system design, and agency. Potential catalysts include novel democratic institutions and engagement of non-governmental actors, such as businesses, civic leaders, and social movements as agents for redistribution of power. Because no single intervention will transform the world, a key challenge is to align actions to be synergistic, persistent, and scalable.

This paper discusses contributions that women at the intersection of agricultural economics and environmental and resource economics have made over the past several decades to their profession, through both research and leadership. We highlight research contributions in the following areas: land use and conservation, non-market valuation, environmental policy design, and climate and energy economics. Key examples of leadership within the Agricultural and Applied Economics Association and the Association of Environmental and Resource Economists are also discussed. We conclude with some brief personal reflections regarding our experience working at this interface.

Group incentives can and have been used to address a range of environmental and resource problems. These schemes base individual penalties and/or rewards on the performance of a group of individuals or firms who contribute to the environmental or resource problem. The economics literature on team incentives and public goods, as well as the literature specifically on environmental and natural resource management, provides insights into the design of group incentives. This article reviews the literature on group incentives in the context of environmental protection and natural resource policy. This literature suggests that group incentives can be effective and even efficient as environmental policy tools. However, the outcomes under group incentives will likely depend on a combination of the policy design and the nature of the internal group interactions. Within-group interactions are likely to be particularly important when policies involve thresholds so that coordination is needed to reach a cooperative equilibrium.

This paper examines the role of experience in determining the deterrent effect of criminal punishment. Economic models of crime typically assume potential offenders know the probability of apprehension. Thus, neither the individual's personal experience of being caught and punished nor the observation of someone else's punishment experience affects that individual's future behavior. This paper incorporates a role for experience in determining criminal activity, distinguishing between (1) how individuals form perceptions of the probability of punishment, including how those perceptions are influenced by what they experience or observe, and (2) how those perceptions, once formed, influence their decisions about criminal activity.

Abstract Behavioral economics has highlighted the impact of various biases on economic outcomes. This essay reviews how biases have been incorporated into economic models of the law and the resulting implications for the assessment of different legal rules and policies. It focuses on two contexts. The first concerns biases that affect consumer purchases of risky products. Using a standard accident model that incorporates various forms of consumer bias, we discuss how bias can affect the efficient assignment of liability for product-related accidents. The second context concerns biases that affect the administration of law, particularly regarding the adjudication of guilt, the lawmaking function of trials, and criminal sentencing. We examine procedural rules like precedent and sentencing guidelines, both of which are aimed at curtailing judicial bias.

The increasing frequency of extreme events, exogenous and endogenous, poses challenges for our societies. The current pandemic is a case in point; but "once-in-a-century" weather events are also becoming more common, leading to erosion, wildfire and even volcanic events that change ecosystems and disturbance regimes, threaten the sustainability of our life-support systems, and challenge the robustness and resilience of societies. Dealing with extremes will require new approaches and large-scale collective action. Preemptive measures can increase general resilience, a first line of protection, while more specific reactive responses are developed. Preemptive measures also can minimize the negative effects of events that cannot be avoided. In this paper, we first explore approaches to prevention, mitigation and adaptation, drawing inspiration from how evolutionary challenges have made biological systems robust and resilient, and from the general theory of complex adaptive systems. We argue further that proactive steps that go beyond will be necessary to reduce unacceptable consequences.

This paper extends the literature on products liability by considering the implications of temptation in a context where consumers have different susceptibilities to risk. In response to consumer heterogeneity, producers can offer multiple product varieties that vary according to their riskiness and price. However, when consumers exhibit price-based temptation, the price differential can tempt some consumers to purchase a less safe product variety even when that purchase decision might not be the rational choice given their specific risks. In resisting this temptation, they incur self-control costs. The role of temptation has been studied in other contexts, but its implications for the design of product liability rules have not previously been explored. We show that there is a trade-off between the desirability of sorting due to consumer heterogeneity and the allocative impacts from temptation. No liability leads to excessive risk taking by consumers (due to temptation), while full liability leads to excessive caution by consumers (because of the inability to sort). Thus, full liability is welfare-maximizing if temptation is sufficiently strong, but when temptation is low, increasing liability will have the opposite effect, leading to more purchases of the unsafe product and hence a decrease in overall safety and social welfare.

The Supreme Court's ruling inKelo v. New London(2005) justified the use of eminent domain for redevelopment takings based on the anticipated spillover benefits to the community in the form of increased taxes and new jobs. This paper asks whether this is a coherent economic rationale for allowing expropriation of residential land for private development. We show that, in the absence of a market distortion, the answer is generally no. However, when there is a pre-existing imperfection in the land and/or labor market, it is possible, though not guaranteed, that allowing eminent domain will increase social welfare. The reason, however, is not because of the increased tax revenue or employment per se,but rather because eminent domain increases industrial/commercial land use above the inefficiently low level that arises in the presence of the distortions. Thus, setting aside questions about fairness or holdouts, we show that whether using eminent domain for private takings can be justified on the basis of economic efficiency hinges on the existence of market distortions and the relative values of residential vs. industrial/commercial land in that particular market.

Policies to address environmental and natural resource management are often implemented at the group level.The defining feature of such policies is that penalties or rewards are based on group rather than individual performance, or rights are allocated to a group rather than to individuals.This article discusses how group-level policies have been applied and studied across a variety of contexts in the literature on environmental and natural resource management.The aim is to identify common theoretical and empirical insights and lessons learned about the design and implementation of these instruments.A general finding is that group-level policies are most likely to be effective when rewards and/or penalties are designed to provide strong incentives for groups to meet targets in a cost-effective way.Moreover, to the extent that this requires coordination within the group, the effectiveness of policies will depend on whether the group has or can create its own institutions or mechanisms to facilitate and enforce that coordination.