Comments due Oct. 7, 2018
The notion that a zero pollution objective is not necessarily ideal policy is one of the more difficult concepts for environmental economists to convey. After all, if pollution is bad shouldn’t we design policy to completely eliminate it? Many of us are drawn to the field based on a genuine concern for the environment and the belief that economics provides a powerful tool for helping solve environmental problems. Yet we are often in the position of recommending policies that appear on the surface to be anti-environmental. How can these observations be reconciled? The answer lies in understanding scarcity: we have unlimited wants, but live in a world with limited means. Economists in general study how people make decisions when faced with scarcity. Scarcity implies that resources devoted to one end are not available to meet another; hence there is an opportunity cost of any action. This includes environmental policy. For example, funds used by a municipality to retrofit its water treatment plant to remove trace amounts of arsenic (a carcinogen) cannot also be used to improve local primary education. Environmental economists are tasked with recommending policies that reflect scarcity of this type at the society level. For both individuals and societies scarcity necessitates tradeoffs, and the reality of tradeoffs can make the complete elimination of pollution undesirable. Once this is acknowledged the pertinent question becomes how much pollution should be eliminated. How should we decide? Who gets to decide? To help provide answers economists use an analytical tool called cost-benefit analysis.
Cost-benefit analysis provides an organizational framework for identifying, quantifying, and comparing the costs and benefits (measured in dollars) of a proposed policy action. The final decision is informed (though not necessarily determined) by a comparison of the total costs and benefits. While this sounds logical enough, cost-benefit analysis has been cause for substantial debate when used in the environmental arena (see the online debate between Lisa Heinzerling, Frank Ackerman, and Kerry Smith). The benefits of environmental regulations can include, for example, reduced human and wildlife mortality, improved water quality, species preservation, and better recreation opportunities. The costs are usually reflected in higher prices for consumer goods and/or higher taxes. The latter are market effects readily measured in dollars, while the former are nonmarket effects for which dollar values are not available. In addition to complicating the practice of cost-benefit analysis (dollar values for the nonmarket effects must be inferred rather than directly observed) this raises ethical issues. Should we assign dollar values to undisturbed natural places? To human lives saved? To the existence of blue whales and grey wolves? If we decide such things are too ‘priceless’ to assign dollar values we lose the ability to use cost-benefit analysis to inform the decision. What then is the alternative? How do we decide? Who gets to decide?
Environmental economists tend to favor cost-benefit analysis in the policy arena because of the discipline and transparency it provides in evaluating policy options. It is easy to evaluate absolutes. Most would agree that reducing nitrogen contamination of groundwater wells, limiting the occurrence of code red ozone alerts, and preserving habitat for grizzly bears are worthy goals. Determining the relative merits of any one of these compared to the others, or compared to non-environmental goals such as improving public education, is much more daunting. Because policy making is ultimately about evaluating the relative merits of different actions some mechanism is needed to rank the alternatives. Without the discipline of cost-benefit analysis it is not clear how the interests, claims, and opinions of parties affected by a proposed regulation can be examined and compared. Criterion such as ‘moral’ or ‘fair’ do not lend themselves well to comparison and are subject to wide ranging interpretation. Who gets to decide what is moral or fair? Cost-benefit analysis is far from perfect, but it demands a level of objectivity and specificity that are necessary components of good decision making.
To begin this post I described an apparent contradiction: environmental economists who consider themselves ‘environmentalists’ will on occasion recommend environmental regulations that do not seek to completely eliminate pollution. Hopefully it is now clear that this is really not a contradiction. Environmentalists come in many forms, including activists, lobbyists, spokesmen, natural scientists, and even economists. Economics provides a structured framework for evaluating outcomes absent hype and advocacy. Cost-benefit analysis is a part of this. By using the tools of their field environmental economists can contribute unbiased information that can lead to better policy decisions, and ultimately better environmental outcomes. (The Cromulent)
It will be nearly impossible to completely eliminate pollution in the near future or focus solely on zero pollution policies. We have to ask ourselves what is more important when we focus on new plans or policies related to the economy. Our economy has a limited amount of power, money, and ability to devote its resources to all problems it faces. Therefore, it must trade off one factor for another. Many people believe that environmental issues are not equivalent to the opportunity cost of other issues a society faces- such as education, safety, army, and other. This is why we will never reach a completely pollution free world - not every person will agree on the trade offs required to reach this point, such as higher prices and higher taxes.
ReplyDeletePersonally, I believe that working on the environment is no longer a choice that we have- these are mandatory regulations we must start working on. I believe that cost benefit analysis is very important- although most of environmental issues question morals. Therefore the scale will be shifted for many people.
We have to ask the government and those who make these decisions what is our goal? To what extent is it absolutely necessary to dedicate economic practices to protecting our environment? If we can’t expect to eliminate all pollution, how far do we go to eliminate what we can?
-Almira Ardolic
Hi Almira,
DeleteI agree with your response to this blog. Environmental stabilization should no longer be a choice, but a goverment regulated policy. Since enviromental change reflects social and political decisions, how would be it possible to get everyone on board.
I think that new policies would cause a high fiscal detriment at first, but be beneficial in the stability of the world in the long run. However, due to this opportunity cost, enviromental policies remain difficult to pass.
-Christine Lin
This topic about cost benefit analysis and other methods to value environmental assets is clearly controversial. However, I do not think it is controversial in the sense that people are against it because we should not value environmental resources, but because people have a hard time agreeing how each and every resource should be valued. After all, it is 2018, and the only people that does not believe in the environmental crisis is the ones that are selfish and just does not want to believe in it because it will not benefit themselves, or just very uneducated people.
ReplyDeleteMoreover, continuing along my solution-oriented path, we should think about how we can focus on the finding a compromise in the different valuation methods, instead of focusing on the controversies. Money is the ultimate valuation tool as it is a means of payment, unit of account, and a store of wealth, and conclusively, a tool to compare benefits and costs.
One solution-oriented example of choosing the most beneficial project, only including money as a valuation, avoiding environmental resource valuation, would be to compare projects, for example as; renewable energy and non-renewable energy production plants which will have the same kind of benefit: production of energy. They will have costs, whether they are economical or environmental, and they will have benefits. However, the controversies come from which other environmental costs we should value, and how we would value them. Instead of focusing on how to value these costs, an environmental-considering government could implement subsidies and taxes on building certain projects. A very simple example would be a solar power plant, and a coal power plant. The solar one would have $1 million dollars in net benefits, and the coal plant would have $1.5 million dollars in net benefits. However, the solar plant would receive $0.5 million dollars in subsidies for constructing the plant, and the coal plant project would need to pay $0.5 million dollars in taxes. The final net benefit of the solar power plant would end up exceeding the benefits of the coal plant with $0.5 million dollars. Just a thought I came up with now on the spot, and this would obviously not apply to all kinds of project, but is a solution-oriented example for some projects that would maybe work.
Most importantly professor, you forgot that environmentalists come as entrepreneurs as well, whom will probably have an increasingly important role in environmental preservation and project decisions. :)
// Nils Erik Molin
The topic of pollution has been discussed countless of times and never really dealt with. Environmentalists all apply their input of ways to get rid of pollution by adapting new policies into the world to make it cleaner and safer to live in. There are numerous amount of methods that can measure what is the cause of pollution and how we can get rid of it. There is the cost benefit analysis that is relied on for identifying, quantifying, and comparing the costs and benefits (measured in dollars) of a proposed policy action. This tool helps identify how a policy can benefit the country or world. The problem with creating these policies is that we don't know how beneficial it will really be until it's acutally placed.
ReplyDeleteI agree that certain regulations will benefit our environment in a way but there's so much that can be done. Our earth is already sufferring from things we never thought would happen. Can global warming be really stopped? How can we stop pollution and plus work on the causes of pollution? Pollution can be caused through big vechiles like buses. People need trasnportation and so the other sollution would be making the buses eco-friendly but to do that , it causes an abudance of money. There are so many things that need to be considered when you try to place a policy to help our environment. Would it be afforadble? Certain people have started applying to helping the environment by recycling , driving electronic cars, taking a bike to work, installing solar pannels, and so much more. Also, once we have a scarcity on certain products somehow there are methods to recreat those products but obviously not through a healthy or safer source for our body. There is so much to consider and it should be looked at more carefully and I think that would take years of studies. We should apply to ways of helping our environment one step at a time so people can adapt to it and realize that this is the right choice for Earth and their lives.
-Nicole Katsnelson
As long as humans are on the earth and we live in an industrial society, pollution is always going to exist- and there is no way for pollution to be entirely eliminated. Scarcity is the limited resources we have to allocate out in the world, and economics is the study of how we as a people use those limited resources to satisfy our needs and wants. In order for society to get the balance of necessities and resources they need- they enforce tradeoffs. When tradeoffs are established, a question that is asked is whether or not we should eliminate pollution completely?
ReplyDeleteAs I said before, I believe that as long as humans are on the planet- and we continue to be an industrial and technological society, that pollution cannot be completely and utterly eliminated. However, I believe that it is extremely important to regulate pollution as best as possible. I believe that mandatory regulations must be set for every society and group.
Because our society has impacted and damaged the environment so much already, it is very important to control and reconstruct our global environment by enforcing rules, whatever they may be as long as they have a positive effect. Some examples of practices already implemented by the government in hopes to decrease pollution are: recycling regulations, the urge for citizens to use public transportation, sustainability trends in the corporate world- giving benefits to companies who “go green”., etc.
The article makes many interesting points, but what mostly stood out to me was the political and policy side of environmentalists as a whole. In recent years we have seen the environment become more and more of a hot button debate topic in local, state, and up to our federal government. With many being extremely polarized over the issues present we see many ends of the spectrum that seek to conserve and other that seek profit. In my opinion I believe that as soon as we are a consumer driven society we will always incur the biproducts of our production. Where these outputs of pollutants can be regulated further has yet to be seen but when look at it through the lens of economics it becomes more appealing to the “business type” that we see peppered throughout Washington DC. There are many ways to identify the inherent risks of pumping in a lack but speaking about it from an activist’s perspective does not appeal to leaders who have interests in all sorts of companies. Leaders would rather devote time, effort, and especially money to areas that supply them votes. However, I believe that regulations are possible if spun into even more economical concepts that when presented can pose threats to leader’s bottom lines. These regulations can include programs that are run on a state to state bases that limit the pollution of air and based on if these states me the criteria educational funds will be accolated more heavily to those states. With this approach there is an automatic cost benefit analysis that takes places and to whether ignoring for sort term profits is a better option or conserving for long term funding for a leader’s state. Regulations like these will also make it known that our environment directly correlates to our quality of life. Because this plan also does not call to eliminate pollution which is in fact impossible for a nation like ours it presents itself as more appealing.
ReplyDeleteRegulations like these would also implore citizens to find better approaches to dealing with the environment. They would be more apt to finding solutions to benefit themselves and their neighbors. And it would foster entrepreneurial growth to find methods of sustainability while still producing and building up communities. Essentially valuing the environment in a way that if regulations are broken taxes are incurred in the most efficient way to weight cost benefits when looking at proposals through a political and economic lens.
The reason why I like this article is because it brings positive perspective into how we can incorporate business with environmentalism. One important point you mentioned in another article was that of paradigm shift and changing perspective as a whole bringing a different light. Therefore with the CBA this can account for long term benefits in the environment. It is obvious that pollution cannot be eliminated all together but it is also obvious that its better to eliminate some over than none. By bringing in the cost benefit analysis we are shedding light on how to outweigh the benefits of what consumers and the people can do.
ReplyDeleteWhen bringing up business and environment many people believe that there is a strong pull against each other but the cost benefit analysis may even be the winner in this case as it will create values for the environment that environmentalists did not look at before.
To add on - the important thing that we were always forgetting is the morality behind all our actions and so the cost benefit analysis sheds light on believing what steps can be taken to be more moral, to be more fair in the topic of sustainability so that other business can leave less of a negative impact.
Marta Krawczynski
The article is about cost benefit analysis which is one of the tools economist use when deciding on new policy. Cost benefit analysis is the framework for identifying, quantifying, and comparing the cost and benefits of a proposed policy action.
ReplyDeleteThe article starts off by stating a zero pollution objective is not necessarily good policy for environmental economist.It seems quite contradictory but if you taken account what the article says about cost benefit analysis you understand that some pollution will be necessary to have a high output.
This article bring up the great point of how do we assign a dollar amount to things without non-market affects such as undisturbed natural places, human lives, and the existence of species such as blue whales and grey wolves. Can we really have a cost benefit analysis on things that provide no market value? As of now we cannot because there is no way to decide what is moral or fair when discussing such things. Though we are still able to use the cost benefit analysis in other environmental situations such a preserving wildlife and protecting the ozone. Performing a cost benefit analysis provides a powerful tool for all economists
-Declan Tougias
This article gives a very interesting explanation for why environmental pollution cannot be completely eliminated. I think that it is actually an opportunity cost . The money and energy cost in eliminating environmental pollution can be spent on other businesses. And the same pay can be more profitable in other things, which leads to no more environmental protection cost when the input for environmental protection is equal to the income. The benefit-cost analysis method is naturally applied to environmental treatment methods and policy recommendations.
ReplyDeleteHowever, I think there is another point. Environment is a public good,The benefits of environmental protection are difficult to quantify,too. The benefits of environmental protection are not quantifiable wealth, but some better experiences of sight, smell and hearing.These reasons also lead to little incentive for people to consciously carry out environmental protection.
Ma.Xue
Scarcity and opportunity cost are often used in conjunction. Scarcity is the notion that there is unlimited wants for a limited resource. Opportunity cost thus is the loss of potential gain form an alternative when someone makes a choice.
ReplyDeleteThis blog brings interesting concepts of the political and social attributes of environmental cleanliness. Since there are scarcity at societal levels, environmental economics must look at the opportunity cost of certain policies and conduct a cost-benefit analysis. While I never thought about this, environmental policies are proposed when comparing costs and benefits. Due to the high cost in environmental policies, there are less pull for these policies. This brings on the ethical issues of quantifying health in human and wildlife, water quality, species preservation, and clean air with a price. Although cost-benefit analysis shows the merit of environmental policies, there is a great deal of room of interpretation as to the “fair” amount necessary to achieve such goals. Cost-benefit analysis should remain a tool used to advocate for environmental regulations and policies but since this brings political and social issues in play, there will alway be a trade-off to eliminating pollution.
-Christine Lin
I think that if there was a reallocation of subsidies from fossil fuels to climate finance.
Delete-Christine Lin
If I were an economist/environmentalist, I would also favor the cost benefit analysis. Since it was mentioned that Environmentalists will on occasion recommend environmental regulations that do not seek to completely eliminate pollution; cost benefit analysis gives them that benefit of the doubt. Research shows a “cost benefit analysis includes identification of the project to be evaluated, determination of favorable and unfavorable impacts, determination of the values of those impacts, and calculation of the net benefit.” I feel that things are not always black and white, there are gray areas for everything as well as pollution. The purpose of cost benefit analysis is to provide the best approach to achieve the best outcome. It is impossible to do everything perfect then have a perfect outcome. There will never be zero pollution without zero production. If we produce any manufactured goods, pollution will always follow. I agree that as a country and world as a whole, we all just have to figure out how much pollution we are willing to take and it will weigh on our economy as a whole. Lessening the pollution would be cutting a great deal of our goods and services. I do enjoy the fact that environmental economists are tasked with recommending policies. This is their craft and they know the most about it, and can help us aim to regulate our resources in order to reduce pollution and help us protect our environment.
ReplyDelete- Alexis Burton
Cost-benefit analysis (CBA) is an analytical way for society to make decisions about complicated issues such as education, health care, transportation, or the environment. It involves a comparison of the costs of an action compared with considerations of the benefits of that action. Cost-benefit analysis of environmental policies are difficult and controversial. Often, the results will produce unclear results because of factors that are omitted or sensitivity analysis. “When this happens, different methods may be needed. One alternative is to rely on a different process for setting policy objectives and having economics play a more limited role” (Harris & Roach, p. 167). Cost-effective analysis is an economic analysis that finds a way to determine the least-cost way of attaining a given policy goal.
ReplyDeleteThe textbook provides an example of this that deals with the issue of pollution. It proposes a goal of cutting sulfur dioxide pollution (which is a major cause of acid rain) by 50%. One way this goal might be accomplished is by requiring highly polluting coal power plants to install scrubbers. A second way to achieve this goal is to impose taxes or fines based on emission levels. A third way is to issue “tradable permits for a certain level of emissions, with the total number of permits not exceeding 50 percent of current levels” (Harris & Roach, p. 167). Cost-effective analysis can help us to determine which option is the most economically efficient way to attain our policy goal. This approach does not tell us how much we should reduce pollution, but rather it tells us how to choose the most efficient policies to achieve a desired result (Harris & Roach, p. 167).
Another alternative to CBA is positional analysis, which is an approach that combines economic valuation with other considerations such as equity, individual rights, and social priorities. It doesn’t aim to reduce all impacts to monetary terms.
I think the most important issue is the valuation of human lives. We need to evaluate tradeoffs between environmental protection expenditures and mortality risks. The value of a statistical life (VSL) method seeks to estimate society’s willingness to pay to avoid a death due to environmental contaminants in terms of economic value.
- Jennifer Torsiello
Source: Environmental and Natural Resource Economics, Harris & Roach, pp. 167-168
ReplyDelete- Jennifer Torsiello
DeleteI believe that using a cost/benefit analysis in Economics and Environmentalism is important. Even though cost/benefit analysis has worsened our environment over time, acknowledging that we can never fully assign a dollar amount to human life or the environment will help us understand and advocate for environmentalism. Attempting to assign dollar amounts is one way we can show how much our environment means to the world we live in. Though the environment has been (in my opinion) undervalued, assessing current policies and frameworks helps us understand how accurately or inaccurately we have evaluated the environment. In other words, if we did not even try to evaluate the environment, we would have nothing to compare it to and we wouldn’t be able to value the environment. Furthermore, we know that our current evaluation methods (like GDP) do not fully describe the state of our beings. But if we didn’t know that, we wouldn’t know how we could improve the field of economics. Also, environmental regulations that do not fully seek to eliminate pollution are not always bad. These policies have the capacities to help the environment through getting us closer to the ideal of eliminating pollution. When this is the case, even getting closer to that idea is valuable because as we have discussed in this class several times, we must undergo a complete paradigm shift to really undertake reaching that ideal. Until then, not everyone in this world is going to be comfortable with the idea of eliminating pollution, and not everyone will be comfortable with the idea of not eliminating pollution. This is something we must accept and work with in our dominant paradigm because we are often too polarized and stubborn in our thinking to consider our relevant counterparts. Environmentalism is as much about collaboration as it is about the physical environment.
ReplyDelete