Exchange, most broadly, is the act of carrying out our psychology of reciprocity. I give you this, you give me that, or in the case of indirect reciprocity, I give you this so someone else will give me that. Because exchange is a form of cooperation, we can view it as the source of social benefit. Ideally, in the case of direct reciprocity, an exchange produces a win-win outcome between the partners involved, because each partner values what they receive more than what they give up. The potential magic here is that social value is created out of nothing, simply by reallocating resources. This simple, imagined scenario drives a lot of policy discourse and decision-making through phrases like “let the market decide”. What does this mean exactly, and how does exchange of environmental rights promote the public good, or not?

In the previous chapter, we unpacked what it means to use the environment, both directly and indirectly. In this chapter we do the same for exchange: what does it mean to trade in environmental rights? To begin, we continue the discussion of entitlements from the end of the last chapter by discussing the role of exchange entitlements. We do so through the lens of what is referred to as a patron-client relationship, which will have us question a win-win, cooperative framing of exchange.

From here, much of the chapter deals with arguments related to exchange and its relationship to efficiency. Efficiency is the primary theoretical motivation for several market-based environmental policies we will discuss in Chapter 9, so it is worth spending some time grappling with the background. We start by engaging with a dominant discourse that argues that markets promote efficient allocations of resources. To unpack this argument, we explore the relationship between efficiency and equity, which can also be seen as an important allocational principle. After this we explore the relationship between efficiency and stewardship, and explore a hypothesis that efficient markets tend to discount broader social and environmental impacts of exchange. Building on this discussion, we consider the argument that alienation, even if it does not necessarily incentivize stewardship, might incentivize development.