David Bier

“To maintain our Nation’s competitive edge,” President Obama said this summer, “we must ensure that the United States has fast, reliable ways to move people, goods, energy, and information. In a global economy, where businesses are making investment choices between countries, we will compete for the world’s investments based in part on the quality of our infrastructure.” The president is absolutely right, and yet his environmental zeal stands in the way of American infrastructure growth.

At a news conference with Canadian Prime Minister Stephen Harper yesterday, Obama told reporters that he would reject any Congressional deal that tied a payroll tax cut—something he has pushed for over the past couple months—to an approval for Canada’s Keystone XL, a 1700 mile pipeline that would deliver up to 830,000 barrels of oil a day from the Alberta tar sands to America’s refining hub along the Gulf of Mexico.

“Any effort to try to tie Keystone to the payroll tax cut, I will reject. Everybody should be on notice. The reason is,” he explained, “because the payroll tax cut is something House Republicans and Senate Republicans should want to do regardless of any other issues.” In other words, it’s his way or no way.

The logic behind the payroll tax cuts, as explained by Obama, is that “it will spur spending.  It will spur hiring.” Yet the pipeline will create $7 billion in investment and will create upwards of 13,000 private sector jobs without spending a single public dollar. In tough budgetary times, Congress and the president should be open ways to create jobs without more debt-financed stimulus.

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“Wall Street and corporations have corrupted the political process,” says one Occupy Wall Street sign. It’s a common refrain from progressives, but their criticism is one-directional. The accusation is only leveled when Giant Corporations oppose government intervention. When big business supports the intervention, because it stands to reap windfall profits, industry reports are suddenly valid sources for information about the legislation. During the debate about the incandescent light bulb ban, this attitude was rampant, and still is. Consider this excerpt from a recent piece by Washington Times’ Blogger Catherine Poe. She writes:

[W]hile sitting on the Senate Energy and Natural Resources Committee, [Rand] Paul railed against government plans to transition from the incandescent light bulb to more energy saving light bulbs, citing Rand’s 1937 novel Anthem. The similarity, according to Paul, is that “individual choice is banned and the collective basically runs society.”Just for the record: The companies making light bulbs were all for this change. [Emphasis added]

Her closing comment is remarkable because it demonstrates complete deference to corporate interests on this issue. It’s not just Poe. The Washington Post editorialized in favor of the light bulb ban in July, citing a study by light bulb manufacturer Phillips that said the ban “would save a household $160 in energy costs over its life.” According to the Post, “The law has had an impressive effect: Light bulb manufacturers have invested heavily in developing new bulbs that use much less electricity, turn on immediately, work with dimmers and produce soft white light.” It’s like reading the back of a GE box.

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In Monday’s excerpt, Julian Simon argued that pollution has been in steady decline and living standards have improved over time if you include the ancient pollutants like bacteria and viruses spread by polluted water. In Tuesday’s post, Wilfred Beckerman echoed the point. He argued that economic development improves standards of living, even today. Today’s post from Daniel Yergin’s new book The Quest: Energy, Security, and the Remaking of the Modern World demonstrates how the post-Soviet Russian state rediscovered energy privatization and market forces improved the lives of average Russians.

Natural resources–particularly oil and natural gas–were as critical to the new Russian state as they had been to the former Soviet Union. By the middle 1990s, oil export revenues accounted for as much as two thirds of the Russian government’s hard currency earnings…. Yet the oil sector was swept up in the same anarchy as the rest of the economy. Workers, who were not being paid, went on strike, shutting down the oil fields. Production and supply across the country were disrupted. Oil was being commandeered or stolen and sold for hard currency in the West.

No one even knew who really owned the oil. Individual production organizations in various parts of West Siberia and elsewhere were busily trying to go into business for themselves. The industry was suddenly being run by “nearly 2000 uncoordinated associations, enterprises, and organizations belonging to the former Soviet industry ministry.” Amid such disruption and starved for investment, Russian oil output started to slip, and then collapse. In little more than half a decade, Russian production plummeted by almost 50 percent–an astonishing loss of more than 5 million barrels a day.

One person with clearly thought-through ideas about what to do was Vagit Alekperov… deputy oil minister. On trips to the West, Alekperov visited a number of petroleum companies. He saw a dramatically different way of operating an oil business. “It was a revelation,” he said. “Here was a type of organization that was flexible and capable, a company that was tackling all the issues at the same time–exploration, production, and engineering–and everybody pursuing the common goal, and not each branch operating separately.”

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In yesterday’s excerpt, Julian Simon pointed out that “the worst pollutions of the past were diseases caused by microorganisms, and spread by contaminated drinking water and by airborne germs and insects.” Today’s excerpt from Wilfred Becherman’s Through Green-Colored Glasses: Environmentalism Reconsidered shows how this is still true today in the Third World, and why it should be ignored by so many environmentalists.

In the richer countries of the world, it is at least understandable that important sections of the community should question whether priority should be given to further increases in the output of goods and services. But for the vast majority of the world’s population it does not require much imagination of knowledge of their terrible poverty to rule out the question of whether further economic growth is desirable for them. Nevertheless, it is often argued that the developing countries should not make the same “mistakes” as were made by the now advanced countries. They are advised not to pursue economic growth in spite of its adverse social or environmental effects, and not to fall into the trap of “rising expectations.” Furthermore, we often hear that if the developing countries seek to achieve standards of living comparable with those now enjoyed by the advanced countries there simply will not be enough resources to go around.

One conclusion that might appear to follow from these pessimistic doctrines is that, because the rich countries of the world can hardly be expected to reduce their levels of material prosperity, the poor countries must not be encouraged to believe that they too can aspire to such levels of prosperity. They must therefore accustom themselves to the idea of giving priority to environmental preservation rather than economic growth. Of course, it is bad luck for them that the point at which economic growth has to stop should just have arrived near the end of the 20^th century, when other countries have already achieved a certain affluence but before they have had the opportunity to do likewise themselves.

This view, not surprisingly, has always been rejected by the developing countries. As far back as 1972, the so-called “Founex report,” drawn up by a group of experts convened by the United Nations to prepare a report on Development and the Environment for the 1972 UN World Conference on the Human Environment, pointed out that, although “the developing countries would clearly wish to avoid, as far as is feasible, the mistakes and distortions that have characterized the patterns of developmental problems in the industrialized nations… the major environmental problem of developing countries are essentially of a different kind: they are predominantly problems that reflect the poverty and very lack of development of their societies. They are problems, in other words, of both rural and urban poverty. In both the towns and in the countryside, not merely the ‘quality of life’ but life itself is endangered by poor water, housing, sanitation, and nutrition, by sickness and disease.”

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In this excerpt from The Ultimate Resource 2, brilliant resource economist Julian Simon explains why environmental degradation is not a continuous process. Rather, he demonstrates why prosperity protects the environment.

On April 19, 1970, at the time of the first Earth Day demonstrations, the top-of-page headline story in the Chicago Tribune was “The Pollution of Earth: ‘I’m Scared,’” with the subheadline “Air, Sea and Land–All Being Strangled.”  The story was typical of headlines all across the country: “‘I’m scared,’ said Joseph Sauris, 16, a sophomore at Maine East Township High School, Park Ridge…. ‘I don’t like the idea of leaving a dead world to my children.  That might sound like a cliche, but it may be the truth someday.’”

Today, a quarter-century later, people still believe that the earth is being strangled.  But what are these deadly substances that are supposedly killing the planet?  Almost without exception, the purported pollutions that have most scared the public in the past few decades – Alar, dioxin, acid rain, and a large number of others ranging back to DDT – have turned out to be destructive false alarms.  Yet the alarms have been much louder than the later all-clears; this contributes to the public’s impression that pollution is becoming worse rather than improving.

The worst pollutions of the past were diseases caused by microorganisms, and spread by contaminated drinking water and by airborne germs and insects…. Pollution used to mean such phenomena as human excrement floating in rivers everywhere, as it still does in India and Thailand (and I’m sure many other countries), and as it did in the Hudson River off Manhattan when I was a young man.  When I was in the Navy in the 1950s, there were few harbors in the world that were not completely foul, and it was always disgusting to see native kids diving into that mess to fetch the coins the sailors and tourists would throw near the docks for amusement.

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Yesterday’s and Monday’s excerpts argued that we shouldn’t fear climate change. Steven Pinker argued that even if climate change causes resource scarcity, it won’t lead to violent conflicts over those resources. Matt Ridley argued that a warmer world might actually be good for people. Today’s excerpt from former President of the Czech Republic Vaclav Klaus’s Blue Planet in Green Shackles argues similarly that we shouldn’t fear global warming because people 100 years from now will be far richer and therefore, capable of adapting to new changes.

Blue Planet in Green Shackles was published by CEI in 2008

If we look to the future and any problems that may possibly arise (including environmental ones) through the eyes of an economist, we have to mention the income, or wealth effect, on the one hand, and the effect of technological progress, on the other. We also have to consider the incredible human ability to adapt to new, unexpected events and circumstances.

It is perhaps needless to talk extensively about the fact that people’s income and wealth will radically increase and that—as a result—their behavior and structure of their demand for material and nonmaterial goods will change as well, not to speak about the immense technological progress that will occur. We all intuitively feel this is the case, but not all of us draw the right conclusions from it.

In “Costs and Benefits of Greenhouse Gas Reduction,” Nobel Prize-winning economist Thomas C. Schelling (1996) ponders how the world will look in 75 years. To get an idea of what the future might bring, he thought of looking back 75 years, to 1920. Interestingly enough, he says that in 1920—when paved roads were uncommon in the United States—mud was the biggest climate-related problem. Pure mud. Schelling adds, “It might not have occurred to us in 1920 that by 1995 most of the nation’s roads would have been paved solid.” This conclusion is not in any way trivial. I am convinced that as a conceptual construct it can be applied to the whole environmental problem.

What will the world be like in 100 years, assuming the expected economic growth? We do not know, but surely we will be miles away from where we are today. Many “roads will be paved solid.” It is thus a fatal mistake to base our thinking about the situation 100 years from now on the knowledge of today’s technologies and wealth.

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Monday’s excerpt from Steven Pinker’s The Better Angels of Our Nature argued that we shouldn’t fear global warming because even if it causes resource scarcity, people will not resort to violence over scarce resources. Today’s excerpt from Matt Ridley’s The Rational Optimist gives another reason why we shouldn’t fear global warming—extra warmth will be good for us.

The Rational Optimist was released in 2010

If only hypothetically, it is worth asking whether civilisation could survive climate change at the rate assumed by the consensus of scientists who comprise the Intergovernmental Panel on Climate Change (IPCC)–that is, that the earth will warm during this century by around 3° C…

Sea level is by far the most worrisome issue, because the current sea level is indeed the best of all possible sea levels: any change–up or down–will leave ports unusable. The IPCC forecasts that average sea level will rise by about 2-6 millimetres a year (or about a foot per century). At such rates, although coastal flooding will increase slightly in places (local rising of the land causes sea level to fall in many areas), some countries will continue to gain more land from siltation than they lose to erosion. The Greenland land-based ice cap will melt a bit around the edge–many Greenland glaciers retreated in the last few decades of the twentieth century–but even the highest estimates of Greenland’s melting are that it is currently losing mass at the rate of less than 1 per cent per century. It will be gone by AD 12,000….

As for fresh water, the evidence suggests, remarkably, that, other things being equal, warming will itself reduce the total population at risk from water shortage… On average rainfall will increase in a warmer world because of greater evaporation from the oceans, as it did in many previous warm episodes such as the Holocene (when the Arctic ocean may have been almost ice-free in summer), the Egyptian, Roman and medieval warm periods. The great droughts that changed history in western Asia happened, as theory predicts, in times of cooling: 8,200 years ago and 4,200 years ago especially. If you take the IPCC’s assumptions and count the people living in zones that will have more water versus zones that will have less water, it is clear that the net population at risk of water shortage by 2100 falls under all their scenarios….

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Yesterday’s excerpt from Mark Pennington’s Robust Political Economy showed why it might not be a good idea to trust government with environmental protection. Pennington argued that government has no strong incentive to actually protect the environment, and even if they did, they wouldn’t know the best ways to balance environmental protection with other priorities. Canadian think-tank Environment Probe’s Elizabeth Brubaker’s Property Rights in the Defence of Nature gives many examples of how property rights rather than legislation were used to prevent pollution.

On April 31, 1950, An Act respecting The KVP Company Limitedreceived royal assent. With one stroke of the pen, the Ontario government wiped out an entire community’s property rights, and with them, citizens’ power to protect their river from an upstream polluter. The story of the KVP Act dramatically illustrates the significance of common law rights to clean water and governments’ willingness to override these rights in the name of the “public good.” It is a story about a community’s struggle for a clean river – a struggle against the pulp mill that dumped its wastes into it. The courts tried to protect the river; the government protected the pollution.

…By the 1940s, the abundance of game fish had made the river and its surroundings a popular tourist resort area. The opening of the KVP plant in 1946 changed all that. Repulsive odours, often likened to the stench of rotten cabbage, permeated the river’s 35-mile course to Lake Huron’s north channel; they were even detectable ten miles out into the channel. Farm animals found the water repelling. People living beside the river could no longer draw their drinking water from it. Even boiled water tasted and smelled so bad that it couldn’t be used for cooking or washing.

Sadly, much of KVP’s pollution was unnecessary. Kraft mills elsewhere used alternative methods – settling basins, for example – for effluent disposal. Before the mill had started up, a downstream landowner had urged its manager to pipe the effluent to sand flats nearby. But the manager had refused. “It is,” he had said, “a matter of economics.

Supported by the downstream community and by local wildlife organizations, six men, all of whom owned land along the Spanish River, launched five lawsuits against KVP…High Court Chief Justice McRuer found that the KVP Company had both violated the plaintiffs’ riparian rights and committed a nuisance. He awarded damages totaling $5,600 and issued an injunction prohibiting KVP from altering the character or quality of the water…

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