My research has addressed many different problems in economics over the five decades that I’ve been working in the field. I began by working on resource allocation in the presence of increasing returns to scale, then worked on growth theory, and then moved to the economics of exhaustible and renewable resources. Increasing returns are interesting because they characterize many aspects of the contemporary economy, and we know that competitive markets don’t work well in their presence. Increasing returns means that large companies have a cost advantage over small ones, and in this context we don’t expect markets to be competitive. You can find some of my ideas on increasing returns here and here: in the growth theory work, the novelty is to assume that how satisfied people are with their current consumption depends on what they have been used to in the past.
For the last thirty years much of my work has focussed on environmental economics, trying to understand how and why the natural world matters from an economic perspective. My latest book, Endangered Economies: How the Neglect of Nature Threatens Our Prosperity, summarizes this work in an accessible form. Here’s a summary of it from the web site of the Union of Concerned Scientists, entitled Our Prosperity Depends on Protecting the Planet, and here’s another summary. And here is a recent review from the Journal of Economic Literature.
Climate change is a major issue for environmental economists like me, and I’ve been thinking about its implications since the 1980s. It poses some interesting challenges to the economists’ standard ways of thinking, such as discounting future benefits and costs, and forces us to admit that uncertainty plays a very central role in our analysis. The way I think about climate change is that a wide range of outcomes is possible, some serious but not devastating, and some quite devastating: we don’t understand the problem well enough to know where in this spectrum we might end up. But we do know that there is a chance – perhaps 5%, perhaps 15% or more – of a really devastating outcome if we don’t take action now. Taking action means moving away from fossil fuels, and when I first looked at the climate issue back in the 1980s and 1990s that would have been a hard thing to do. But fortunately today it’s a realistic option: the cost of renewable energy has fallen so far – and is still falling – that it is realistic to think of a world powered by green energy. And the advent of electric vehicles suggests that the same will happen in the transportation field.
Another issue that has preoccupied me is sustainability. A sustainable civilization is one that can continue in the very long run. It does not contain within it the seeds of its own destruction, as ours currently does via the use of fossil fuels, which ultimately will change the climate in ways that will undermine our way of life. There are additional ways in which we are unsustainable, one example being the extinction of species and the associated loss of genetic resources. Understanding the economic costs of species extinction is another interest of mine – Endangered Economies, mentioned above, goes into this in some details. My research has addressed how to measure sustainability, and you can find some contributions on this topic here and here.