People or prairie chickens: The uncertain search for optimal biodiversity

A quarter century ago, Professor William F. Baxter authored a widely read a nd influential book on the law and economics of pollution control. In Peopl e or Penguins: The Case for Optimal Pollution, Professor Baxter argued that environmental policy must take account of both the benefits and costs of p ollution abatement in order to avoid wasting scarce societal resources. In this article, Professor Barton H. Thompson, Jr. criticizes the Endangered S pecies Act for failing to incorporate the lessons of People or Penguins. Re cognizing the difficulties that the government would face in measuring and balancing the costs and benefits of regulatory actions under the Act, Profe ssor Thompson suggests an alternative hierarchy of governmental policies. F irst, the government should eliminate public subsidies that encourage the e conomically inefficient destruction of valuable habitat and should promote markets in the "natural services" of species and ecosystems. Second, the go vernment should establish a system of taxes and subsidies that incorporates the values of species and ecosystems not reflected in the markets for thei r natural services. Although quantifying such values would be difficult, th e task would be simpler than a full cost-benefit comparison. Finally, and o nly where these steps are inadequate, the government should consider using the Endangered Species Act to directly regulate activities harmful to biodi versity. Use of the Act should reflect a balancing of both the benefits and costs of biodiversity protection (taking full account of uncertainties, ir reversibilities, and intergenerational tradeoffs).