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Global Environmental Change: Understanding the Human Dimensions
tive to policies that take meaningful action but require additional costs. The determinants of concern are likely to vary with the environmental problem, the country, and characteristics of the individual, so the research should be comparative between countries and environmental problems of different kinds.
One of the most likely consequences of global change will be effects on the prices of important commodities and factors of economic production in local and world markets. As a result, uncoordinated human responses will be affected greatly by markets. According to economic theory, producers and consumers respond to changing relative incomes, prices, and external constraints, so that, if the market signals are allowed to reach individuals and market prices include all the social costs and benefits of individual actions, the responses will be relatively rapid and efficient.
Markets allow for many forms of uncoordinated adjustment, as the example of climate change illustrates. People may rapidly alter patterns of consumption (e.g., substitution of water skiing for snow skiing) and production (e.g., relying on snowmaking equipment rather than natural snowfall). Over the longer run, societies may respond, in the case of unfavorable climatic developments, with the migration of capital and labor to areas of more hospitable climates. Structures tend to retreat from the advancing sea, people tend to migrate from unpleasant climates, and agricultural, sylvan, and industrial capital tend to migrate away from lands that lose their comparative advantage. In addition, technology may change, particularly in climate-sensitive sectors such as agriculture and building.
However, the conditions that economic theory specifies for efficient adjustment are not generally met in the case of the global environment (Baumol and Oates, 1988). In three important respects, existing markets do not provide the right signals (in the form of prices and incomes) of social scarcities and values. And in addition, as already noted, the participants in markets do not always behave as strict rules of economic rationality predict.
Environmental externalities of economic activity, that is, effects experienced by those not directly involved in economic transactions, are not priced in markets today. Someone who emits a ton of carbon into the atmosphere may produce great damage to the future climate but does not pay for the damage: effects that