[An updated version of this article can be found at Free-Market
Environmentalism in the 2nd edition.] Free-market
environmentalism emphasizes markets as a solution to
environmental problems. Proponents argue that free markets can
be more successful than government—and have been more successful
historically—in solving many environmental problems. This new
interest in free-market environmentalism is somewhat ironic
because environmental problems have often been seen as a form of
market failure (see Public Goods and Externalities). In the
traditional view many environmental problems are caused by
decision makers who reduce their costs by polluting those who
are downwind or downstream; other environmental problems are
caused by private decision makers' inability to produce "public
goods" (such as preservation of wild species) since no one has
to pay to get the benefits of this preservation. While these
problems can be quite real, growing evidence indicates that
governments often fail to control pollution or to pr