Environmental Protection And Economic Growth

Economists question the once-conventional wisdom "that environmental regulations impose significant costs, slow productivity growth, and thereby hinder the ability of U.S. firms to compete in international markets."15 Many economists have observed that the economy has grown nicely during periods, particularly starting with Earth Day 1970, when efforts to protect the natural environment have been greatest. The idea that policies protecting the environment hinder economic growth -that they reduce the number of "gd jbs w hi pa" - came under attack particularly in the 1990s, when prominent economists saw environmental regulations as "not only benign in their impacts on international competitiveness, but actually as a net positive force driving private firms and the economy as a whole to become more competitive in international markets."16 Michael Porter and Claas van der Linde wrote, "By stimulating innovation, strict environmental regulations can actually enhance competitiveness____Efforts to reduce pollution and [efforts to]

maximize profits share the same basic principles, including the efficient use of inputs, substitution of less expensive materials and the minimization of unneeded activities."17

I cannot review here the vast literature that considers the extent to which the preservation of natural areas (such as old-growth forests) and the reduction of pollution help or hamper economic growth, and vice versa.18 It is fair, however, to draw four general conclusions from this literature. First, the stringency of environmental regulation, particularly with respect to pollution, often has little effect on competitiveness as long as the regulated industries are given "the ability to use new, innovative, and low-cost ways to meet discharge standards."19 Second, the effects of environmental regulation on the economy are generally so small - while some jobs are lost, others are created - that they seem to be too inconsiderable either way to matter in terms of standard measures of economic growth. As Robert Repetto has written, "Economists who have reviewed research on the subject... find scant evidence that environmental regulation has had adverse effects by any of these measures."20 Third, wealthier countries can afford - and thus generally possess - cleaner environments than impoverished ones. A huge literature surrounds the idea of an "environmental Kuznets Curve," which supposes that environmental concern and therefore environmental quality increase after a point as a society becomes more affluent.21

Fourth, air and water quality have improved remarkably during the past three decades even as the economy has grown. Rivers no longer stink or catch fire; one can drink the water in most parts of the Great Lakes. Gross domestic product (GDP) increased in the United States by 187 percent between 1970 and 2004; vehicle miles traveled increased by 171 percent; energy consumption went up by 47 percent; and population grew by 40 percent. During the same period, according to an Environmental Protection Agency (EPA) report, "total emissions of the six principal air pollutants dropped by 54 percent." These emissions include nitrogen and sulfur dioxide, ozone, particulates, carbon monoxide, and lead. Between 1990 and 1999, emissions of eighty-nine other toxic substances declined on average by 30 percent.22 On these measures, air pollution has fallen to the lowest level ever recorded in the United States.23 Environmentalists came into power with the Clinton administration; coincidentally technological advances fueled the economy. Productivity increased and pollution per dollar of GDP fell by every measure.

I hardly mean to suggest that environmental protection coincides with economic growth; these goals may often conflict. John Muir and Gifford Pinchot battled over a plan to dam the magnificent Hetch Hetchy Valley in California to provide water for San Francisco - essential for its economic growth. Eventually society "halved the difference" by damming Hetch Hetchy but preserving the Yosemite Valley. Today the same kind of political battle rages over a desolate tract of tundra in the Arctic National Wildlife Refuge (ANWR). According to my colleague Robert Nelson, what makes the "1002 area" at ANWR valuable to environmentalists is not the few herds of caribou that frequent it - many ecologically superior places could be identified and preserved instead - but the sacrifice that is required to protect it. Ancient tribes sacrificed their best goats and sheep to their gods. In Medieval times, societies made enormous sacrifices to build cathedrals, such as Notre Dame in Paris. To protect ANWR at the cost of hundreds of billions of gallons of oil "would show the willingness of society to commit vast resources in order to construct a multi-billion dollar cathedral, a religious edifice requiring such a large sacrifice that it would stand as one of the greatest (certainly most expensive) testimonies ever made to the glory of the faith."24

The environmental faithful believe that ANWR should be protected against exploitation as a way to cleanse our souls from earthly pursuits.

The economic faithful favor drilling because economic growth is the way to bring Heaven to Earth. A path to "halve the difference" might be to drill the oil surgically and use much of the money to invest in energy efficiency or to preserve ecologically more significant and sensitive areas elsewhere - such as rainforests. Such a compromise would indicate we are intelligent enough to function while keeping two opposed ideas in mind.

POLLUTION - TRANSGRESSION OR TRANSACTION?

The regulation of pollution draws simultaneously on two opposed philosophical beliefs. Many environmentalists among others believe that pollution represents a form of coercion - an assault upon persons and a trespass upon property. As philosopher Tibor Machan points out, the morally appropriate approach to controlling pollution "requires that pollution be punished as a legal offense that violates individual rights."25

For centuries, common law courts have followed this principle by protecting individuals as a matter of right from injuries of the sorts associated with pollution. As an English court found in 1705, if the wastes from a person's privy percolate through his wall and into his neighbor's cellar, for example, common law will require the polluter to cease and repair the nuisance, because he is "bound of common right to keep his wall so as his filth might not damnify his neighbor."26 Similarly, one might suppose that factories are likewise bound by common right to maintain their walls, scrubbers, filters, liners, drums, or stacks so that their emissions and effluents do not damnify their neighbors. Their neighbors can sue not just for compensating damage awards but also for injunctive relief. The plaintiff should be able to compel the defendant to cease the nuisance, not simply to pay whatever costs or damages a court may assess.27

On the other hand, many environmental economists regard pollution not as an invasion or trespass but as a diseconomy, that is, a social or external cost of production which may be offset by benefits. As Larry Ruff, then an economist at EPA, argued, pollution is "an economic problem, which must be understood in economic terms."28 From this economic perspective, pollution is to be managed as a misallocation of resources - a failure of the market to allocate them to those who are willing to pay the most for them and thus (tautologically) a failure to maximize welfare. There is "a very simple way," Ruff explained, to bring private costs in line with social costs. "Put a price on pollution."29 A Pollution Control Board (PCB) should place a tax on emissions. "Under such a system, anyone could emit any amount of pollution so long as he pays the price the PCB sets to approximate the marginal social cost of pollution."30

Law professors often use the case of Boomer vs. Atlantic Cement Company (1970) to illustrate the conflict that arises between the belief that pollution represents (1) an invasion of person and property that should be enjoined as a matter of common right or (2) a social or external cost of production acceptable if it creates compensating benefits.31 The named plaintiff, a small-scale farmer, enjoyed the tranquillity of his rural estate near Albany, New York. When an immense cement plant located nearby, he and some neighbors sued to enjoin it "from emitting dust and raw materials" that reached their land.32 To the extent that the cement plant, by covering the surrounding farms with fumes and dust, made them uninhabitable, this case is structurally similar to the one involving the percolating privy in England. In England, the court required the polluter to stop the nuisance. In New York, the court called for damages instead. Why should comity between neighbors be treated any differently in America than in England?

The New York Court of Appeals noted "the large disparity in economic consequences of the nuisance and of the injunction." The nuisance consisted in the inability of a few small landowners to enjoy the peace and tranquillity of their rural estates. An injunction would require the closure of Atlantic Cement Company, which represented a $450 million investment, employed 300 people, and was the most important contributor to the tax base of the county, supporting its schools, social services, and so on. The judge found, moreover, that no technological fix would relieve the conflict between the property rights of the plaintiffs and the economic needs of the community. He wrote that "techniques to eliminate dust and other annoying by-products of cement making are unlikely to be developed by any research the defendant can undertake." The case confronted two squarely opposed social principles or goals: first, the enforcement of property rights against invasion and, second, the economic well-being of the community.

These two ideas are logically opposed; one cannot claim fully to honor one in principle except by breaching the other. If the courts always granted injunctive relief against pollution, then few industries could operate. Nearly every industrial activity produces some emission or effluent; therefore society could not prohibit all pollution without bringing the economy to a screeching halt. On the other hand, if an industrial polluter had only to pay damages in nuisance cases, it could take possession of any property it wanted simply by making it uninhabitable and compensating the property owner at whatever pittance a court-appointed appraiser says it is worth. As a dissenting judge complained, "It is the same as saying to the cement company, you may continue to do harm to your neighbors so long as you pay a fee for it."33

To give injunctive relief in nuisance cases may be to forfeit wealth for the sake of principle. To deny injunctive relief, however, is to give private entities the power of eminent domain. The trick is to keep both goals (protecting rights and promoting prosperity) in mind without collapsing them or reducing one to the other. Society can function - it can be intelligent - if it is able to act case by case in ways that acknowledge the separate legitimacy of each of these opposing ideas.

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