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Why the economics of pollution favor the left

By Ian Boudreau
Friday, April 27, 2012 22:39 EDT
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Air pollution
 
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If you look at any study of asthma hospitalization rates for children, you’ll find they are markedly increased in areas near major highways and heavy industry – places where air pollution is most concentrated. Several components of air pollution – particulate matter, ground-level ozone, nitrogen oxide and sulfur dioxide – greatly exacerbate asthma symptoms, particularly in children, leading to emergency room visits and missed days of school. It happens, incidentally to the topic at hand, that areas high in air pollution concentration, and the high rates of asthma that go along with them, map rather neatly onto areas where the household median income is below average.

Exacerbation and onset of childhood asthma is a cost generated by industries that rely on combustion in their production processes, and these costs are shouldered by people who have no stake in the profits generated by those processes.

The byproducts of any industrial process should be considered costs inherent to that process, and are the responsibility of whoever is profiting from the enterprise, because the costs of mitigating, containing, and cleaning up pollution are endogenous to the process that creates them. That industry has had free reign to push these costs onto the general population for many decades should be of no consequence.

Yet without fail, whenever any new environmental policy or regulation that could limit the amount of toxic chemicals released into the atmosphere, groundwater, or soil is put forward, the response is that “saddling” industry with “unnecessary” regulations is a luxury we simply cannot afford in these tough economic times. This framing of the issue has come to dominate discussion of environmental policy to such an extent that the only way forward for environmental advocates is to craft policy that creates “synergies” between industry and green policy – in other words, we can have green policies, so long as they don’t hamper anything done by industry.

It’s staggering that this line of reasoning has gained the traction it has. There are tradeoffs between economic growth and green policy, indeed – but the reality is that we are “trading” in order to shift business costs back to businesses themselves, where they belong, and away from the people who don’t share in their profits. As a byproduct of industrial processes, pollution should be included on the left hand side of the ledger, along with the costs of raw materials and labor. Instead, it isn’t treated as an accounting issue at all – industry has successfully lobbied to have these costs essentially written off. But costs do not go away – people outside the firm absorb them. They pay for them in the form of increased health care costs, degraded property values, lower quality of life, and increased morbidity and mortality.

There is a school of thought that simply accepts this as a fact of free enterprise – how can you expect industry to do anything else, since the ability to lower production costs is a trait that marks successful companies? But this is the same as to say that stealing is a good way to supplement your income. As pollution is, in a very real sense, a grand form of theft, there is no reason it shouldn’t be handled the same way we handle individual theft – it should be against the law, and that should be the starting point of any discussion about policy that would outlaw any form of it.

This is the same concept that underpins organic food. Yes, it’s usually somewhat healthier to eat organic produce and meat, but the more important aspect of the movement is its attempt to capture the costs of production. Modern agriculture is an industry and in general does the same kind of cost-shifting you see in heavy industry – pesticides and animal waste from farms run into watersheds, where they make their way into rivers. They flow downstream, becoming more concentrated as the river widens and passes by more farms, eventually creating algal blooms that eventually choke out all the oxygen in the water, killing fish and other marine life, and creating vast dead zones of hypoxia, such as the one currently occupying the Chesapeake Bay. Because organic farmers account for any costs their processes incur downstream, their products seem to cost more to produce. In fact, they cost less – Since cost-shifting isn’t an option for organic farmers, they reduce production costs the other way: they increase their efficiency and decrease their environmental impact.

They have a good reason to do this. We place a high premium on organic goods and are willing to pay more for them. While I was a reporter in rural New York, the recession was just hitting the dairy industry there. Combined with high input costs – for fuel (thanks to high oil prices) and feed (high corn prices created by increased corn demand from the emergent ethanol industry) – conventional dairy farmers there were making about 12 dollars per hundredweight of whole milk, which cost them 16 dollars per hundredweight to produce. Several small, family-owned dairy farms that I wrote about just four years no longer exist.

But there was also an organic family-owned dairy farm there. Their milk was more expensive to produce, but they made 26 dollars per hundredweight for their efforts – making them one of the only profitable dairies in the county that year.

I spoke with the owner of the dairy while doing a story about his then 20-year-old son, who instead of leaving the area after college planned to return home and eventually take over his family farm. His father told me they’d decided to make their conventional farm organic after some serious thought about the impact they were having on the Chesapeake Watershed.

“We realized that what we do here doesn’t just affect tens of thousands, it affects hundreds of thousands of people downstream,” he told me.

But this small farm in Preble, New York, was able to retool to an organic model because of the premium placed on their products by the market. Whether it’s true or not, people believe that buying organic produce is healthier, and are willing to pay more for it.

While this works on the micro scale, it does not on the macro – at least not at the moment. The cheap goods we rely on – food and clothing, most essentially – are affordable to us because of cost shifting. And industry is in no mood to shrink profit margins by increasing their production costs voluntarily.

That leaves one option: regulation of pollution. Make no mistake – regulations make industrial processes more expensive. But it’s also more expensive to buy jewelry from a jeweler than it is from a thief. Properly-regulated industry – whether it’s manufacturing or energy production – will have prices that more accurately reflect the costs of production.

The crucial point, though, is to remember that this does not mean “adding” costs to these processes. Those costs are already there, and we feel them every day – every time a parent has to miss work to take her wheezing child to the emergency room, every time someone has to take go on disability thanks to exposure-related lymphoma or other cancer, and every dollar shaved off the value of a home due to soil and water contamination in the area. These are sunk costs, and the only question is whether it will be the people generating them who pay the bill, or someone else.

Conservatives who trumpet free market economics should embrace this framework, since it reflects true capitalism of the kind Adam Smith wrote about in The Wealth of Nations. What we have now is a distribution of costs – a “socialism” of costs, to momentarily use their incorrect definition of the word – and a privatization of profit. Discussion of the national debt as theft from future generations cannot be taken seriously unless it is acknowledged that real theft – from us and from future generations – is being perpetrated on a massive scale by industry that insists on selling us stolen goods.

It’s as simple as this: Regulation of environmental pollutants keeps the costs associated with production on the left hand side of the ledger, where they belong. If not the polluters themselves, who will pay for pollution? We can’t afford to foot their bills any more.

 

Image: National Parks Service file photo. Public domain.

 

Works cited:

Delfino, Ralph J . “Epidemiologic evidence for asthma and exposure to air toxics: linkages between occupational, indoor, and community air pollution research.” Environmental Health Perspectives, August 2002. 110(Suppl 4), pp. 573–589.

“Hypoxia: Dead Zone.” Partnership for Interdisciplinary Studies of Coastal Oceans (Produced by Green Fire Productions). Accessed April 27, 2012.

Neidell, Matthew J. “Air pollution, health, and socio-economic status: the effect of outdoor air quality on childhood asthma.” Journal of Health Economics, November 2004. 23:6, pp. 1209–1236

Ridker Ronald G. and John A. Henning. “The Determinants of Residential Property Values with Special Reference to Air Pollution.” The Review of Economics and Statistics, May 1967. 49:2, pp. 246-257

Samet, Jonathan M.; Scott L Zeger, Francesca Dominici, Frank Curriero, Ivan Coursac, Douglas W Dockery, Joel Schwartz, Antonella Zanobetti. “The National Morbidity, Mortality, and Air Pollution Study, Part II: Morbidity and Mortality from
Air Pollution in the United States.” June 2000. 94(II).

Ian Boudreau
Ian Boudreau
Ian Boudreau is a science writer in Raleigh, North Carolina. He has covered crime, politics, and the military over the course of his career, and was the 2006 winner of the Army's Keith L. Ware Journalism Award for commentary. You can follow him on Twitter @iboudreau.
 
 
 
 
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