Some human activities can harm the environment and may result in unwanted impacts on the population in the form of damaged health, lower productivity, depleted natural resources, or reduced enjoyment of nature. Environmental economics seeks to quantify these impacts and determine the most efficient way to reduce them—as well as to compare the cost of environmental damage to the cost of mitigation.
The field of economics traditionally prefers to deal with entities that can be easily demarcated, quantified, and tagged with ownership, but this can become difficult when dealing with shared ecosystems. Economists often deal with this disparity by labeling such items externalities, or costs for which the responsible party does not pay. It then becomes up to the community, and usually the government, to decide how to deal with externalities.
Over the last half-century, RFF has advanced thinking along these lines as environmental awareness has grown as a policy concern. Several distinguished pioneers from RFF’s early years have shaped national policy through rigorous application of environmental economics.
For example, in his 1967 paper "Conservation Reconsidered," John Krutilla identified the economic value of undisturbed natural environments like rivers and forests. Published in the American Economic Review, the paper became a benchmark in the economics of conservation and provided a basis for including preservation benefits in policy analysis.
RFF economist Allen Kneese’s work on water quality management led him to argue that market-based incentives like pollution taxes were more efficient than conventional regulation. Kneese’s ideas, revolutionary in the 1960’s, laid the groundwork for the sulfur dioxide emissions-trading program established by Congress in 1990. Kneese demonstrated that market mechanisms could reduce both pollution and costs to the economy by leaving it up to each polluter to find the cheapest and easiest way to comply.
Hans Landsberg began his work at RFF in 1960, specializing in energy and mineral economics. His contributions included lead authorship in 1963 of Resources in America's Future, a thousand-page volume examining the role of natural resources in the U.S. economy and projecting their long-term availability. Both this and another 1963 RFF publication, Scarcity and Growth, set out the fundamental idea that the impact of growth on environmental quality was a much more significant problem than any threat of natural resource shortages.
RFF also conducted notable research on the electromagnetic spectrum. Harvey J. Levin's 1971 book The Invisible Resource: Use and Regulation of the Radio Spectrum, applied a market-based approach to utilizing the spectrum. Twenty years later the Federal Communications Commission recognized his approach and began licensing and auctioning these airwaves.
In 1979, RFF was instrumental in the founding of the Association of Environmental and Resource Economists (AERE), which was established as a means of exchanging ideas, stimulating research, and promoting graduate training in resource and environmental economics. AERE currently has more than 800 members from more than thirty nations, drawn from academic institutions, the public sector, and private industry. It is the publisher of two academic periodicals, the Journal of Environmental Economics and Management and the Review of Environmental Economics and Policy.