Regional and local governments are collectively responsible for maintaining the economic health of their communities and managing traffic congestion, air quality, land use, and other related growth-management issues. Yet global climate change and air quality problems result from the consumption of energy in the production of goods and services that help sustain the economy. Public policy solutions to such problems are often difficult to design because of the interrelated nature of the environment, economic activities, and the infrastructure that links them together. A conceptual framework for thinking about the market behavior of consumers and producers as cost minimizers and offering a new way to design public policies using economic and energy efficiency goals is presented for the use of public-policy makers. Production theory can be used to explain how land, vehicles, infrastructure, and energy are combined to produce transportation goods and services. Heat and waste by-products from the production process act as the precursors of air pollution and other global climate-change problems. If public policies are designed to minimize such problems, policy analysis methods need to include those factors that help determine the cost and benefits of prospective policy alternatives, as well as information on how the net benefits of such policies are redistributed in society. A list of criteria to use in selecting analysis methods for this purpose is suggested.
Economic policy making for environmental problems as an interactive learning process
