Volume 3, ISSUE1/2012 - Review of Applied Socio-Economic ...

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________________________________________________________________________________________________ ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 3, Issue 1/ 2012 ), pp. 201 URL: http://www.reaser.eu e-mail: editors@reaser.eu From the perspective of the analysed topic, the literature associates the “limitations” of the standard economic theory with the existence of market failure phenomena. The latter manifests when the market fails to assign present and potential economic value to the environment or in the case when environmental goods have no well defined property rights, resulting thus an inefficient allocation of resources. The existence of transaction costs, the absence of adequate property rights and the presence of negative externalities as a result of the combination of the two outlined causes, are just some of the many factors that contribute to the formation of the noted phenomenon. Briefly, the Institutional Ecological Economics builds its methodology on the same foundation, of the well known Institutional paradigm, assuming that the vast majority of the environmental problems, caused by the human factor, can be seen as an effect of an incomplete delimitation of institutions interpreted here as social values and formal and informal norms. Regarding society’s attitude towards the environment, the institutionalism offers through culture the opportunity to establish those social rules and values necessary to improve the economy-environment relationship, both at micro and macro level. The second direction, of the free-market approach, inspired by the Austrian School of thinking, emphasizes that the individual initiative, free market and a proper defined system of property rights are the necessary and sufficient conditions to achieve economic efficiency together with the environmental protection. In other words, if one wants to improve environmental quality, should make use of those mentioned instruments to develop proper markets for environmental services. However, the necessary condition stays in an effective allocation of property rights to environmental goods in a manner that right must be well defined, strictly applied last but not least, easily transferable 15 . We can notice that an important part of the theoretical movement in the field of environmental debate evolves and develops in the same pattern with the main theoretical and ideological corpus. We hope that we have brought sufficient arguments in order to state that, regardless of the ideological nature, we cannot speak of efficient markets in the absence of private property and freedom of individual action. Moreover, in order to ensure that markets operate at its potential parameters other formal and informal institutions are invited. We conclude that, if a well defined market of environmental goods and services as what we need, then clearly it must be created. The best way to achieve this aim is by establishing property rights in a coherent manner, together with the creation of those social institutions to ensure their compliance. The State is invited to play its role of “night watchman”, with strict responsibilities with regard to property rights and to ensure a proper operation of the market. 3. Conclusions The identified issues discussed in this paper are intimately linked to a transcendence of the idea of “perfect” in a imperfect world, suggesting that the neoclassical models, describing the world and the environment in a general equilibrium, once they transcend in reality, prove their “imperfections”. The empty space left by the neoclassical authors is filled with Austrian philosophy on individual, community, society and so on. Starting from common ground, the Austrian School of Thinking reaches some contrasting conclusions with the general view of “marginal” economics, and these conclusions are firmly fixed in reality. For this reason, we support the idea that the twentieth century remains in the history of economic development under the influence of some of the brightest minds that wrote in the line with Austrian philosophy. Therefore, we argue that through originality, novelty and pure logic, the Austrian School of Economics contributed in a fundamental way to the development of economic science. Rules, spontaneous order, property rights, human cooperation are just some of the elements which define the Austrian analytical framework, one that is fertile and consonant with economic realities. 15 Slavikova L, et. al., Bridging theories on environmental governence. Insights form free-market approaches and institutional ecological economics perspectives, in Ecological Economies 69, 2010, p 1369;
________________________________________________________________________________________________ ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 3, Issue 1/ 2012 ), pp. 202 URL: http://www.reaser.eu e-mail: editors@reaser.eu 4. Acknowledgements "This work was supported by the project "Post-Doctoral Studies in Economics: Training program for elite researchers - SPODE" co-funded from the European Social Fund through the Development of Human Resources Operational Program 2007-2013, contract no. POSDRU/89/1.5/S/61755.)". "This work was supported by the the European Social Fund in Romania, under the responsibility of the Managing Authority for the Sectoral Operational Programme for Human Resources Development 2007-2013 [grant POSDRU/CPP 107/DMI 1.5/S/78342]". 5. References [1] Benham A., Benham, L.. Property Rights in Transition Economies: A Commentary on What Economists Know. In: J. M. Nelson (ed.), Transforming Post-Communist Political Economies, 1998, online: http://www.nap.edu/openbook.php?record_id=5852&page=35 [2] Smith A.. Lectures on Jurisprudence , Clarendon Press, Oxford, 1978, p. 5 apud Bethell Tom, The Noblest Triumph: Property and Prosperity through the Ages, St. Martin’s Press, New York, 1998 [3] Vatn A., Bromely D. W.. Externalities – A Market Model Failure, in Environmental and Resource Economics, 9, 1997, online: http://oldweb.econ.tu.ac.th/archan/chalotorn/on%20mkt%20failure/vatn%20et%20al.pdf. [4] Demsetz H.. Toward a Theory of Property Rights, in The American Economic Review, vol. 57, no. 2, 1967, online: http://www.econ.ucsb.edu/~tedb/Courses/Ec100C/Readings/Demsetz_Property_Rights.pdf [5] O'Driscoll J., M. Rizzo. The Economics of Time and Ignorance, Basil Blackwell, London, 1996 [6] Lachmann L.. The legacy of Max Weber, The Glendessary Pres, Berkeley, 1971 [7] Slavikova L., Kluvankova T., Jilkova J.. Bridging theories on environmental governance. Insights form freemarket approaches and institutional ecological economics perspectives, in Ecological Economies 69, 2010 [8] von Mises Ludwig L.. Acţiunea umană. Un tratat de teorie economic, original title: Human Action, Henry Regnery, 3rd rev. ed., Chicago, 1966, translated and published online with the permission of Mrs. Bettina Bien Greaves on behalf of the Estate of Mrs. Ludwig (Margit) von Mises, online http://mises.ro/43/ [9] von Mises L.. Profituri şi pierderi, English version: Profit and Loss, Planning for Freedom, 4th ed., Libertarian Press, South Holland, IL, 1980, translated and published online with the permission of Mrs. Bettina Bien Greaves on behalf of the Estate of Mrs. Ludwig (Margit) von Mises, 2001, online http://mises.ro/269/ [10] Musole M.. Property rights, transaction costs and institutional change: Conceptual framework and literature review, in Progress in Planning, vol. 71, 2009 [11] Boettke P., Horwitz S., Prychitko D.. Beyond equilibrium economics: reflections on the uniqueness of the Austrian tradition. In: P. Boettke, D. Prychitko (eds.), The Market Process, Essays in Contemporary Austrian Economics, Edward Elgar, 1994 [12] Coase R.. The Problem of Social Cost. In: Journal of Law and Economics, 1960, online: http://www.sfu.ca/~allen/CoaseJLE1960.pdf [13] Eggertsson T.. Economia neoinstituţională (comportament şi instituţii), Editura Cartier, Bucureşti, 1999
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