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Regulation Magazine

The Cato Review of Business & Government

Environmental Policy

Richard L. Stroup

Richard L. Stoup is professor of economics at Montana State University and senior
associate of the Polictical Economy Research Center. From 1982-1984 he served
as director of the Office of Policy Analysis at the Department of the Interior.

On February 22, 1983, EPA Administrator Anne Gorsch (later Burford) announced that the Environmental Protection Agency would pay $33 million to buy all the homes and businesses of the small Missouri town of Times Beach. This followed weeks of nationally publicized hysteria about the town's streets, which had been contaminated with dioxin more than 10 years earlier. Although there was no evidence that anyone in Times Beach had ever been harmed by the dioxin, Administrator Gorsuch traveled to Times Beach to announce the buyout personally and to demonstrate to the national media her concern with the risks of hazardous waste. Her demonstration was not enough. Less than two weeks later she was forced to resign-accused of, among other things, a callous disregard for such risks.

This extraordinary episode echoed the Love Canal disaster of the Carter Administration. In 1978 the New York state health commissioner declared an emergency and urged women and young children to move from certain neighborhoods near a chemical waste site. The governor of New York, up for re-election, called for federal aid. The Carter administration quickly answered the call and provided the state federal aid in purchasing hundreds of homes. Massive publicity led to the evacuation of these homes and to the expenditure of millions of dollars-more than $250 million to date for a cleanup that is still unfinished. Yet, while there were allegations about medical effects, no credible evidence has been found that the chemical waste at Love Canal caused any long-term health problems.

Through Republican and Democratic administrations alike, the politicizing of environmental issues is a constant. Increasingly strict regulation, mushrooming tax and spending programs, and mandated private expenditures have been the result. Judging by the virtual absence of demonstrable benefits, these policies are seriously misdirected. Although long-term health problems from industrial waste sites, for example, are almost impossible to substantiate, we spend $8.5 billion on Superfund. This spending is predicted on the assumption that each and every hazardous waste site must be cleaned up to meet the same standard as drinking water. As a recent EPA study reported, "Overall, EPA's priorities appear more closely aligned with public opinion than with our estimated risks."

The good news is that there is enormous room for improvement in the nation's environmental policies. A positive approach involving less political control could substantially reduce the cost of avoiding environmental risks while providing greater environmental benefits. This article seeks to explain the increasing role of politics and crisis in environmental policy, to examine the record of the Reagan years, and to outline a more positive policy agenda for future administrations.

The Common Law

Historically, individuals and their property have been protected against the invasion of chemicals and other pollutants primarily by nuisance and tort actions. Our system of individual responsibility under the common law has successfully screened us from the worst possible risks.

The key to the common law approach is accountability. Individuals who make decisions must be accountable for the results; that is, they must face penalties and rewards in line with what they do to society and for it. When people are accountable, they find ways to avoid errors and to react quickly and constructively when errors occur. People who are accountable have the incentive to act as if others matter, whether or not they truly care about the welfare of others.

One strength of the common law approach is that the rules of evidence and of standing in court have developed over the decades to prevent frivolous actions and to balance the interests of plaintiffs and defendents. To decide when and how much a polluter should pay in damages, or whether an alleged danger is sever and imminent enough to warrant prior restraint, a judge must be able to estimate the damages being imposed. Absent such estimates, rational control or compensation measures under any regime of protection are impossible. The primary job of courts is to make individuals accountable for what they do, not for what someone thinks or alleges they do. This is what rules of evidence are for, and they operate far more systematically in the courts than in the political process.

Another advantage of the common law is that it evolves in a process that cannot be controlled by lobbyists for industry, the environment, or any other particular interest. When judges impose prior restraint (injunctive relief) to prevent irreversible harm, they must follow rules developed over centuries to balance considerations of freedom, efficiency, and safety within the community.

Despite these advantages, the common law approach has been under siege form environmental activists for the better part of 25 years.

American's "Green"ing

Environmental activism exploded onto the American scene in the 1960s as politically active groups shifted their attention form atmospheric nuclear testing to chemical pollutants. The movement was fueled by the publication of Rachel Carson's Silent Spring in 1962. As in much environmental literature since that time, the rhetoric in Silent Spring was eloquent and full of strong emotions, but the supporting evidence was considered by many scientists to be one-sided and misleading. The book elicited fear and indignation and moved people to demand political action. " Those who would pollute and plunder the planet must be stopped!" was the message increasingly heard.

Silent Spring inaugurated the view that a whole new regime of governmental controls was required to protect he earth and its inhabitants form technological disasters. This view is still common and, when an environmental crisis stirs public concern, it is the driving force behind public policy.

For people moved by stirring prose of the sort in Silent Spring and fearful of new and developing technologies, the traditional common law system fails to provide adequate safeguards against environmental risks. In their view convincing evidence of environmental damage is unnecessary, and an economical means of preventing it is irrelevant. Any plausible threat of damage must be eliminated. Of course this is easy to say as long as large corporations are perceived to be the main culprits in pollution and they, rather than individuals, are presumed to pay the tab for prevention and cleanup.

Unfortunately the laws that result for this viewpoint are notorious for being expensive and environmentally ineffective. The reasons for this are clear. Politicizing environmental control does nothing to produce the information needed for effectively protecting us for pollution. When an agency tells polluters exactly what technology to use or what their emissions should be to protect society best, it is usually acting with neither essential data on pollution effects, nor important data on the cost of alternative control measures.

We are increasingly operating under a new regulatory regime, one partly based on common law principles but modified in important ways by statute. Among the important changes is the heavy burden of proof on anything new. New activities often are allowed only if shown to be almost "risk free"-as exemplified by the Delaney clause of the Food, Drug, and Cosmetic Act. Faced with the potential risk of new chemicals, drugs or genetically altered microorganisms, politicians and bureaucrats are inclined to ban use until safety can be proven. As AIDS sufferers and the families of those who have died waiting for federal approval of new drugs can attest, "zero risk" is actually a very dangerous strategy. The unintended side effects of "uncompromisingly tough" environmental standards can be similarly dangerous. When DDT was banned because its misuse harmed some wildlife, more dangerous pesticides replaced it. (In less wealthy Sri Lanka the situation was worse: Sri Lanka withdrew form the World Health Organization's large-scale DDT spraying program, and the number of cases of malaria rebounded for a low of 110 cases in 1961 to 2.5 million cases in 1968-1969.) We cannot know just how many farm workers have died from DDT substitutes, but since the replacement pesticides are much more harmful to people and must be more frequently applied, the "risk avoidance" banning of DDT introduced far more human risk.

In general, overly conservative risk-avoidance policies are dangerous to society because they stifle technical and economic progress. Most research and development efforts in biotechnology have shown no clear and present dangers and, indeed, offer the promise of more effective waste cleanups and "softer" (less environmentally threatening) means of controlling agricultural pests and weeds. But again, the atmosphere of fear and even of crisis has meant that research, testing, and use of these techniques has been hampered needlessly by the web of regulations created by the EPA and the U.S. Department of Agriculture.

Furthermore, abandoning common law to seek shelter from risk in congressional statutes bestows power on organized special interests. Members of Congress, after all, do not have national constituencies, and helping important constituent groups is the name of the game. It is not surprising that many of the costly policies of the Clean Air Act have been used to fight regional economic battles and to protect the powerful eastern coal industry and its unions. Both the Clean Water Act and the Superfund Program have funded massive local spending. Some good has surely come from these efforts. We spend an estimated $80 billion annually to control pollution, and some cities certainly have clearer air, and stretches of river immediately downstream of big new sewage treatment plants are noticeably cleaner. But the price is very high, and evidence of serious health harms prevented (that is, benefits achieved) is typically rare and tenuous.

The Last Eight Years

If anyone seemed likely to take a calmer view and restore the traditional common law system, at least in part, it was Ronald Reagan. Reagan rode into the White House on a wave of disenchantment with intrusive regulation and big government. He championed individual responsibility and less direct control by government.

Unfortunately this view did not influence the administration's environmental policy. The administration's policy pronouncements revealed little understanding of the role and purpose of private property rights protected by common law: holding decision makers accountable for environmental effects, while giving them freedom to innovate.

A positive, pro-environment program could have been built on ideas floated internally by some Reagan appointees. For instance, the 1984 annual report of the Presidnet's Council on Environmental Quality included a discussion of the role of private property rights and devoted a chapter to case histories of important private conservation efforts. These histories showed that decades before environmentalism was a political movement, individuals, and groups in the private sector were helping preserve species, habitat, and natural settings, sometimes in direct opposition to public policy. Such efforts would have been doomed to failure if public lands or public-sector approval had been needed. The report made no apparent inroads, however, in defining the administration's agenda.

Similarly, William A. Niskanen, a member of the President's Council of Economic Advisers for most of the Reagan years and author of Reaganomics, reports that he proposed turning over more decisions and responsibilities for environmental protection to state and local governments. The benefits of controlling most pollutants are mainly local and, had these proposals been accepted, a diversity of approaches at the state level presumably would have been tried. Permitted emissions could be tailored to local needs, which vary dramatically with geography, population density, and climate. Both the Clean Air Act and the Clean Water Act, which were due for renewal during the Reagan years, offered opportunities to translate these ideas into policy.

An emphasis on federalism could have been coupled with national technical monitoring-to see that one state's pollution was not seriously harming another state's residents-and a national clearing house for technical information on pollution control. The constitution provides for interstate compacts to help solve truly interstate problems. These steps would have been positive measures in keeping with both Reagan's philosophy and good environmental management.

Proposals of this sort were offered within the administration, but little was done to follow through. The EPA had little or no impact on the renewal of the Clean Water Act in 1987 or on Superfund.

The simple move toward transferable pollution permits, given to those already allowed to emit specific pollutants, would have been a giant step forward. Suggested by EPA staff economists among others, this approach was rejected by Gorsuch. Yet its advantages would be numerous. Valid information on the true costs of pollution control would quickly surface in the form of market-clearing prices for the permits. Any given level of control could be achieved much more cheaply. And the constant pressure for polluters to profit by reducing their use of permits would make them eager customers for new and better control technologies. Such technologies would further lower the cost of pollution reductions. Governments could purchase and retire permits in order to lower emissions, rather than engage in the destructive political battles that now accompany regulatory adjustments. Or conservation groups could purchase and retire them, just as they buy (and retire) development rights in land to preserve habitat or natural features.

These constructive proposals had little impact because members of the Reagan administration, like most politicians, seemed to view environmental policy as a zero-sum game: if environmentalists gain, then other goals suffer. The administration showed neither an appreciation of the political importance of environmentalism nor a vision of how to formulate an environmental policy that reflected the president's philosophy. Simply streamlining regulations and procedures seemed to become the goal. In its eight years in office the Reagan administration presented no alternative to Superfund and even support amendments designed to strengthen the program. Command-and-control programs, criticized by liberal and conservative analysts alike, escaped serious reform.

In the two terms of the Reagan administration, however, there were some limited successes in environmental policy:

The Reagan administration's achievements were modest because they never addressed the heart of the problem. Instead of being aimed at reducing damage, current statutes make criminal many practices-the careful application of DDT for example-which normally are both productive and safe. The government is still trying to provide environmental quality the way the Russians grow wheat-with central, political control- and trying to preserve land and wildlife with straight socialism, namely ownership of the means of production.

In all fairness, the Reagan administration faced an enormous political problem, just as future administrations will. The holy-war rhetoric of some environmental activists, perfected over the years, had fanned the flames of public outrage over "environmental atrocities" perpetrated by "greedy and uncaring corporations." A lot of waste and pollution is in fact generated each year, and much of it can be dangerous if not properly handled. The dangers currently faced are grossly overstated, however, and the cost of cleanup and prevention is scarcely borne by corporations alone.

Toward a More Fruitful Environmental Policy

The next administration would do a great deal of good for the nation if it reduced the enormous inefficiencies now plaguing U.S. environmental policy. The environment can be cleaner and safer, and we can expend far fewer resources in achieving this goal.

To strengthen the nation's protection against environmental threats, the next
administration should take steps to expand local control and strengthen the liability approach. It could do this in several ways. First, the new administration should allow more leeway for the states and localities to make their own decisions about pollution control. Citizens are certainly in no mood to allow overly lax pollution control, yet jurisdictions choosing more rigorous control would quickly find the price their citizens were willing to pay. This time-honored variety of approaches among the states is an important part of American life, and is part of the genius of the federal system. In this system experiments are small rather than national in scope; more of them are tried; errors are much less costly; and the information produced is useful for the whole country.

Second, the new administration should focus federal resources on technical forensic assistance in tracing, or even finding ways to brand, pollutants as they are emitted, so that accountability could be enhanced. Polluters would more often be made to pay when harm is done, and innocent parties would less often be forced to pay in error. A careful firm storing chemical wastes, for example, would want to be able to show that its stored wastes did not show up where damage occurred, and it could if the wastes were branded.

Third, the next administration should assist states in reaching agreement on interstate compacts when important pollution damages are shown to be interstate matters.

For their part, states should seek to strengthen the common law through statute. Restoring the right of contract in the voluntary transfer of risk, for example, would help to revitalize the insurance industry, which historically has helped to "regulate" risks in cost-effective ways. Requirements for the posting of bonds would also strengthen the liability approach, for example, by insuring the solvency of a firm producing, processing, or storing hazardous wastes. Greatly lengthening the statute of limitations period for the recovery of damages in pollution cases might be another important measure. Branding chemicals that might escape into the water or air could be a real help. Many other innovations can also be tried at the state level without the need for national consensus or a national commitment.

The challenge in environmental policy is to develop better institutions-ones that will preserve environmental quality where it is most important, and minimize the constraints that would keep us from increasing wealth and prosperity. Only with more of the latter can our society better serve all our needs, including demands for safety and environmental quality.

Property rights should be expanded in ways which may seem novel in the United States today. If, for example, whales and commercially valuable fisheries in the oceans were owned, it is likely that ocean dumpers would avoid harming them. If that idea seems far-fetched, consider England and Scotland, where sports and commercial fishing rights are privately owned and transferable. Access is often rented daily or leased for longer terms, and prices vary from a few dollars per month for bait fishing to very high fees for the rarest and finest fly fishing. Long before the environmental movement took hold, owners of fishing rights successfully sued polluters of streams for damages and obtained injunctions against polluting activities. It worked: now they seldom have to go to court. Polluters generally leave those waters (and thus the fish) alone. When resources are owned, political wars are no longer necessary to protect them.

A great deal of education and some strong political leadership will be necessary it environmental policy is to be turned in a constructive direction. Unpopular things need to be said. The public must be persuaded of two fundamental facts. First, there is no widespread environmental crisis requiring action so urgent that scientific investigation should be bypassed. There is no evidence that we are in a national environmental crisis justifying emergency measures. Second, despite colorful rhetoric to the contrary, the risks of rapid technological change have been far outweighed by the benefits received. Cancer, for example, (apart from lung cancer attributable to smoking) is declining while life spans continue to rise. We are a far wealthier and thus far healthier and more resilient society than we would have been had technological change not been allowed, or indeed encouraged.

To reform environmental policy, the next administration will have to defeat the kind of sensationalist populism that arouses and sustains groundless fears about chemicals and other pollutants. The same sort of deliberate efforts being made by the press and the government to clam fears about AIDS (while at the same time providing information about the genuine risks posed) are needed to reduce the outrage that shapes environmental policies today. We can afford to buy much more environmental quality with a much smaller sacrifice of economic prosperity.

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