Thursday, February 02, 2006

Make 'Em Pay

Just finished reading Collapse by Jared Diamond. Definitely a good read; in discussing the effects of societal choices it serves as a good companion to Guns, Germs, and Steel, which seemed to me to lean heavily towards environmental determinism1. However, I have some quibbles with his summation, specifically in terms of his proposed mechanism for environmental reform. Mr. Diamond places ultimate responsibility on the consumer; he spends the last section of the book demonstrating how consumer preferences for ecologically sound goods can, through market forces, force companies to clean up their act (literally in some cases). I've no beef with this; the examples he gives are sound and the mechanism he proposes undoubtedly works (but slowly, and perhaps not in all cases). But he ignores a much more fundamental type of change which could be made, namely forcing companies to pay for their real environmental costs up front. The problem with environmental costs is that, for a long time, nobody even recognized them as legitimate; the environment isn't tangible, and the effects of poor environmental practices are diffuse and hard to calculate. Its only recently that we've come to understand that a company's actions can have an impact on the environment and that a dollar amount of economic damages (or, in rare cases, benefits) can be associated with that impact. Mr. Diamond gives two prime examples of this sort of activity, notes that the law has failed in these cases, and then moves on, never to take up the subject again. The first example provided by Mr. Diamond has to do with the salinization of farmland due to over-watering. Briefly, over-watering2 of a field can cause the mobilization of salt in the soil, making the ground unsuitable for growing most types of plants. This wouldn't be such an issue except for the fact that the salt can flow downhill; in this case the salt from a farm on higher ground can contaminate the fields of a farm on lower ground. Mr. Diamond pauses briefly during this discussion to note that there is now way for the owner's of the lower field to be compensated for the loss of productive farmland. A more egregious example which is discussed at length is environmental damage due to hardrock mines. In some cases mines are required to post a bond for cleanup once the mine is decommissioned (in some states they just have to promise that they'll clean things up), but the required value of these bonds is usually not large enough to cover the required cleanup. More importantly, its often the case that, once a mine is played out, the mining company will transfer all of its remaining valuable assets to another company and then declare bankruptcy, thus avoiding the need to pay for cleanup. Again, Mr. Diamond laments this failure of law but lets the matter drop. In both of these cases, wouldn't it make more sense to force the people involved to pay for the cost of the environmental damage they've inflicted? For example, in the case of the farm that lost some fields its ridicuously easy to determine economic damages, and I would imagine its pretty easy to determine fault3, so there don't seem to be any technical hurdles that need to be cleared. All that would be necessary is for the powers that be to summon the will to enact the requisite laws. In a similar fashion, if the property-transfer ploy that mines engage in is as transparent as Mr. Diamond claims then how come there isn't any way to stop it from happening, or at least compel the beneficiaries of the property transfer to pick up the bill? I'll concede that that situation is more complicated, but I find it hard to believe that that particular loophole can't be closed. And there are many other examples as well. Water pollution killing the fish? Well, figure out what the fish are worth and then charge the culprits with their cost. Air pollution making people sick? Figure out what their lost productivity is worth and then charge the polluters. I'll grant that these things are difficult to quantify, and that its even more difficult to prove that a particular company caused a particular instance of pollution. And yet economists are still able to say that "X impact from industry Y causes Z dollars in economic damages every year". Its not rocket science to levy an appropriate emissions fee on all members of that industry in proportion to the amount of pollutants they emit. And, lest I be accused of unfairly targeting industry, let me say that this approach needs to be extended to the general public as well. Cars causing air pollution? Tack a whopping great tax onto gasoline. Let me tell you something, I was fucking ecstatic when gas reached $3 a gallon, its the best thing that's happened to US energy policy in a long time. The only problem is that the price came back down and people are going to forget it ever happened and go back to their usual routine. Gas need to go to $5 a gallon and stay there4. Now let me explain why I favor this approach over the approach advocated by Mr. Diamond. As he notes, its very difficult for consumers to have an effect on companies which are distant from them on the supply chain. Consumers have to influence them indirectly by influencing end distributors like Tiffany's and McDonald's and letting the effect propagate back through the supply chain. As Mr. Diamond so elegantly lays out, this approach doesn't always work and is slow to take hold. However, if you force the companies at the beginning of the supply chain to build the cost of their environmental impacts into their overall cost of doing business you end up with much more predictable results. They're not altruistic; they'll pass on the increased cost to their customers, causing a ripple effect that propagates forward through the supply chain much more reliably and quickly. And, even better, my little ol' libertarian self has no problem justifying this from a theoretical standpoint. A legitimate function of government is to protect property and enforce tort. Here we have a case of real, quantifiable damages against life and property inflicted by individuals or industries; compelling them pay compensation isn't overreaching on the government's part. Hell, the stronger argument is that not forcing them to pay represents an abdication of responsibility on the part of the government. Remember that the next time this comes up and some wanker starts going off about how this sort of thing is communism and wealth redistribution promulgated by tree-huggers and puppy-lovers. So, Mr. Diamond, listen carefully and take notes. In you next revision of Collapse I want you to take up the theme I've outlined above. Your current proposal is certainly part of the solution, but you also need to encourage people to work towards enforcing these types of direct costs to parties which produce environmental damage.
1 I suspect that Mr. Diamond might have written this book specifically with this intent. In the summarizing chapters he explicitly states that, contrary to the claims of some of his critics, he doesn't believe in environmental determinism. 2 Over-watering is another issue which can be dealt with in a similar fashion. As Mr. Diamond notes, over-watering is often caused by the prevalence of cheap water. In the case of Australia, for instance, water is subsidized by the government. The easiest way to prevent over-watering is to make all industries pay a fair market rate for water rather than providing it to certain segments (read "farms") at a discount. 3 IANAL, please forgive me my ignorance if that is an incorrect assumption. 4 I know that there are problems with this approach as well since it disproportionately affects low-income individuals, but in the balance the positive, long-term change that would be effected by increased gas prices would benefit everybody. Especially low-income people, since we also know that they are disproportionately affected by pollution as well.

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