tigated is reviewed in this chapter. Three bodies of literature are reviewed, as follows: (1) valuing environmental damage; (2) corporate social responsibility; and (3) activity-based accounting and management.
The most typical approach to the protection of the environment is through the application of non-market activities by government. Several economists, however, suggest that market approaches would be more effective. Within the context of this suggestion, environmental damage is viewed as an externality. The typical approach to economic externalities is based upon two assumptions. First, the assumption is that externalities are harmful, and second, it is assumed that they are unidirectional. Based upon these assumptions, solutions to the problems thus created have tended to be one of the following three types: (1) require the entity creating the externality to pay damage to those injured by its existence; (2) tax the entity creating the externality by an amount equivalent to the damage caused; or (3) prohibit those activities in areas where harmful externalities would be created.
According to the Anderson and Leal (1991), government regulation directed at environmental protection is doomed to failure for two reasons. First, such regulation evolves from a political agenda, as opposed to being developed on the basis of sound economic realities. Second, governmental regulation for environmental protection is based upon a concept of penalty, as opposed to an incentive basis. The general tenor of this argument is that society should reward those of its members who would despoil the environment to the extent required to assure that such individuals and institutions will not act prejudicially to the environment.
Applying this reasoning to the protection of the environment has led to market approaches to solving the problem that exact charges against polluting activities, but that do not prohibit such activities (Braden,...