Environmental law & the limits of markets

A number of writers have drawn on Hayek’s epistemic defence of market institutions to argue that free-markets and tort law are best placed to overcome the knowledge problems associated with the environmental sphere. This paper argues to the contrary, that this Austrian School approach itself suffers from significant knowledge problems. The first of these relates to the ability of Austrian economics to assign victim compensation and the second to the difficulty of establishing causation in complex environmental problems. The paper will also show how alternative approaches may not suffer from these epistemic challenges and are better placed to overcome them.