Tuesday, March 27, 2007
Chapter 8 from: J.J. Ray (Ed.) "Conservatism as Heresy". Sydney: A.N.Z. Book Co., 1974
Pollution: The Cost of Clean Living
By: PETER SAMUEL
Economics used to be called the dismal science, but compared with the newly modish science of ecology it is almost utopian. The ecologists --or more strictly the collection of people jumping on the bandwagon of conservation and anti-pollution --are the new prophets of doom. There is now a very real danger that by misstating and grossly exaggerating the very important case for a greater concern with the environment, conservationists may be dismissed as cranks. If the case for conservation is stated only by biologists and natural scientists ignorant of politics and economics, then it is not going to get far. In fact, a reaction will set in against it.
Nevertheless, scientists do recognise the relevance of economics to the environment, even if they make fools of themselves when they enter an area they know so little about.
The first economic point that needs to be made to the conservationists is that some current economic trends are working very much in their direction. The growth areas of all advanced economies are information (computing, control systems, telecommunications), education, health, tourism, leisuretime activities and the like, and these are 'non-polluting'. Most manufacturing is growing much slower than these activities. And the economic sector which has had the most devastating effect on the environment --agriculture --is hardly growing at all.
Another point is that a great deal of the growth in productivity which conservationists tend to despise is actually on their side. Many of the great economic advances are associated with more efficient utilisation of natural resources. A ton of steel can now be manufactured using considerably less iron ore and coal and limestone than it could twenty years ago. A ton of steel now means less digging and messing around with the earth. Most of the increases in agricultural production have been achieved without using more land. Very often technological advance reduces pollution; for example, the switches to natural gas and electricity for heating, away from the use of coal, wood, and oil.
If scientific research is directed specifically toward the problems of pollution it should be possible to make considerable progress. But scientists seem to have lost faith in the possibility of progress. They talk all the time about the impossibility of finding a technological solution to every pollution problem. That no doubt is true. But surely it is also true --though the scientists in their pessimistic mood tend to overlook it --that technological advance can solve many pollution problems and reduce others to satisfactory dimensions.
The supporters of anti-pollution measures should also recognise that much of the concern about the environment and the demand for conservationist measures is elitist and inegalitarian. Cleaner air must be regarded as a luxury item in most conditions in Australia, for example. It is one thing for the professor of biology with his income of $16,000 a year to be keen on conservation. He probably is very well set up with housing and associated gadgetry, and he can take trips to conferences and elsewhere. His wife does not have to count housekeeping money. For him, the prettiness of the countryside and the freshness of the air are relatively very important, since his other needs are relatively satisfied.
But this man is part of a very small minority. The average man is on an income of about $5,000 a year and he is often battling to keep up the payments on his house, and he values his modest collection of household gadgets and his car quite highly for the freedom from drudgery, the entertainment and the mobility they give him. He will not be prepared to sacrifice much of these for cleaner air. And similarly he will value the preservation of the countryside less highly than the richer man.
For the higher-income man it is nothing that he, together with everyone else in Australia, has to pay an extra $50 for his car because of the cost of incorporating anti-pollution devices. But for the man who can only just afford a car, and who is paying hire-purchase interest rates, the anti-pollution regulations will be an unwelcome burden when he is already struggling to maintain a vehicle which will take him and his family into the countryside at weekends or during holidays. At present levels of income and under existing pollution conditions, the majority of Australians are probably not prepared to pay very much for cleaner air and other aspects of a better environment.
The fact that conservation is often an inegalitarian measure does not mean it is wrong. All sorts of things governments do are inegalitarian --like subsidising the arts. The country would be culturally very impoverished if egalitarianism were the only criterion by which policies of governments were judged.
And while the mass of present-day Australians might not be prepared to pay a great deal for a better environment and the conservation of the natural wildlife and vegetation, it is a safe bet that future generations of Australians will value these things much more highly. In a generation --twenty-five years' time --Australian per capita incomes should be more than twice what they are now and by then the average householder will have far less difficulty in financing his gadgetry and will be prepared to pay much more to have a good environment. So, to satisfy the needs of the next generation --not to speak of future generations --there is a case for conservation policies now which will preserve a satisfactory environment for them. An environment is not something, like a washing-machine or a house, which can be manufactured to meet immediate needs. It can only be moulded over a long period by positive conservation measures on the one hand and negative 'development' measures on the other. A balance between development and conservation which suits present-day Australians is probably stressing conservation inadequately (and over-emphasising development) for the needs of future generations.
But the first target of conservationists should be those so-called 'development projects' which are not really development at all, because they are likely to require subsidies to make them go. They should be concentrating their anger on schemes which make neither conservation sense nor economic sense. The elimination of these will both improve the environment and increase people's incomes. There are plenty of uneconomic developments which the conservationists could attack. They did this with great success in the Little Desert affair in Victoria recently. But almost every new rural water-storage project in Australia is uneconomic --because of the paucity of market for the produce of irrigated land. Each of these dams is impoverishing the country by consuming resources in the building which could be used productively elsewhere and by putting into business another collection of farmers who will have to be subsidised steadily over the years ahead. Each dam also impoverishes the environment by submerging vast bush valleys and disrupting the whole ecology of the river downstream. Many of Australia's water birds as well as smaller species of river life are threatened by the changes in river behaviour caused by dams.
Though it is hard to believe, there are governments in Australia still encouraging farmers to grow more. The worst offender is Victoria, which is still clearing bush for new dairy farms, though Western Australia must rank next in silliness with its continuation of land clearance for new wheat farms. The Commonwealth Government is an offender in a less direct manner. By giving extraordinarily generous tax deductions for capital expenditures, it encourages 'development' beyond the limit which is economically sound. And by subsidising fertilisers so heavily it encourages their excessive application. The deleterious effect of fertilisers outside the farm, once they are washed into creeks and rivers and then into the sea, probably means that even what makes economic sense for the individual farmer is an excessive use of fertiliser from the viewpoint of the nation as a whole. Fertilisers, insecticides and other chemicals which pollute the environment should be heavily taxed, not subsidised. (The farmers could get the money gained by the Government back in the form of a straight tax deduction.)
The current crisis in Australian agriculture gives conservationists a heaven-sent opportunity. Because of the world surplus of grains which has developed in the past three years, and seems likely to persist because countries like India are now self-sufficient, the Australian wheat industry must take half its twenty-five million acres out of use. That is equivalent to over half the area of Victoria. Wool prices are going down not because of any conspiracy of Japanese buyers -- if only it were as simple a problem as that! -- but because the market for wool is steadily weakening. Synthetics are being used more, heating in houses, workplaces and cars is making people all over the world dress more lightly. (Like many Canberra people, I do not own an overcoat.) Butter and tobacco are being used less because more people believe they are health hazards. For many items of Australia's agricultural production protective tariffs and import quotas in other countries make the future look grim. And possible British entry into the EEC makes the future of many rural industries look disastrous.
In this context, there is no economic logic in further land clearance for farming or for any more rural dams. There is a positive economic case for progressively taking marginal farms out of agricultural production. 'Let the bush grow back' is a sound slogan for Australia in the 1970s. And it opens new horizons for conservationists. Conservationists can demand an end to policies of agricultural expansion and the beginning of reconstruction, and they should be able to get every taxpayer on side. Every acre of land given back to bush will not only improve the national environment but it will save the nation the costs of surplus agricultural production.
But perhaps the most important advice the economist will give the conservationist is that he should harness the price system to his cause. In other words he should try to extend the economic system based on price incentives into the area of 'the environment' and use it to combat pollution. Use of the price system will generally be more effective and practical than use of direct controls or regulations. Take the example of exhaust emission from cars. Being advised by bureaucrats, governments are in the process of introducing a complicated series of bureaucratic controls. All new cars will have to be fitted, for example, with devices suppressing emission of pollutants below one per cent. This regulation may help somewhat in reducing car-exhaust pollution, but it is an extremely crude device. It means that old cars can go on polluting as before. There is no incentive to the car operator, once he has got his car out of the showroom, to maintain his car so that its pollutant emission is kept down. And there is no incentive to the car manufacturer or fuel supplier to get pollution further below the mandatory ceiling emission set in the regulation. Finally, it is an unfair and wasteful imposition on the country man, who lives in an area of low motor-vehicle density.
Most of the shortcomings of the bureaucratic regulation can be overcome with a 'pollution charge'. Each car owner should be charged an amount proportional to the estimated emission of pollutants from his car. This would be an easily implemented measure as most States now have the requirement that for safety reasons each car is inspected annually when re-registration comes up. Exhaust emission could be measured and related to the miles driven as indicated on the speedometer. The charge could be set at a level which equalled the estimated nuisance value of extra exhaust in the particular registration centre. In country areas there should be no pollution charge, and probably it would not be considered necessary in most smaller towns and cities. In the bigger metropolitan areas it might be substantial and raised steeply should the general problem be judged to be getting more acute.
The pollution charges would give manufacturers an incentive to spend money on research and development into cheaper and better emission-suppression devices, since 'save on emission charges' could become a selling point. In the same way, fuel makers would have an incentive to get the lead and sulphur and other pollutants out of their fuels. And motorists would have an incentive to maintain their cars after purchase in a condition in which their exhaust emission was controlled.
Such pollution charges could also be applied to other processes which vent private garbage into the public domain of the atmosphere: domestic heating systems, industrial plants, airliners.
And why not noise charges in cities, where this is practical? Life in suburbia would be much more pleasant if motor-mowers were taxed proportionately with the noise they make. Again there would be an incentive for the makers to progressively reduce noise levels by introducing new silencing systems and eventually produce new motors and power sources. The regulation that a mower shall not emit more than forty decibels is an inferior rule, because it is set at a level which is 'practical' with existing technology and therefore gives manufacturers no incentive to find improved technology, because it gives the purchaser no incentive to buy the marginally quieter model.
On the other side of the ledger there are private activities in cities which improve the environment of the city community generally as well as benefiting the individual. Tree planting is an example. Surveys in Sydney by the Urban Research Institute recently have shown just how highly suburbanites value the tree-ness of their environment, but each individual cannot do much. The institute thinks there is a clear case for subsidised trees for the suburbs.
The motor car is generally recognised as one of the main damagers and not only because of exhausts. The 'road toll' makes it a major health problem and it requires seemingly endless expenditures on roadways and parking facilities. One approach to the safety problem might be to try to adopt some set of 'danger charges' based on a safety rating of the vehicle. Some car safety features are so valuable that there could be severe fines for not using them. An American estimate puts the average cost of not wearing a seatbelt in terms of extra death, hospitalisation and time lost at about $2000 per $5 seatbelt. There should obviously be a very heavy fine for not wearing a seatbelt. But more general 'danger charges' would give car makers a reason for getting busy designing and introducing other safety features. We have heard for a long time about rapidly inflating air cushions for protecting the occupants of cars in case of collision, but very little real work is being done on this important innovation. Danger charges related to danger ratings (based, say, on survival probability in given collisions) would have the motor industry working like beavers to design and introduce new safety measures.
The non-economists' answer to the obvious overuse of cars in cities is to say let them congest: do not build the new roads and parking stations which seem justified by the existing traffic flows and congestion. The better answer is to start pricing the use of roadspace according to the cost that the motorist imposes by occupying that space. If he puts sufficient value on the mobility he gets out of using the roadspace at a particular time to pay the costs to the community of providing that roadspace, then equity and efficiency dictate that he should be able to get that roadspace to use. If motorists were charged the costs of the use of their roadspace, and if parking charges were everywhere related to the rentable value of the space taken up by parking, then the car would be brought under control. There would be an indicator of the social value of new roads, and a better use of existing roads, since charges in peak hours would encourage a de-peaking of traffic flows. Public transport would be able to compete on a more equal basis with the car.
These are only a few examples of an economic approach to pollution control and an improved environment. A whole range of other measures is obviously needed. Governments spend pitifully small amounts. The Commonwealth could well take more initiatives. Why not a program for the Commonwealth acquiring and running a number of large national parks? And running field-study centres in various places to study and report on changes in the environment as the Weather Bureau reports on the weather? There is obviously a great deal to be done in education, and the idea of 'biological centres' (higher-level zoos which display whole systems of plants and animals together in an ecological setting rather than just the animals in isolation) is most interesting. Finally, the Commonwealth's contribution of $50,000 to the Australian Conservation Foundation is pathetically small in a Federal Budget of $7,000,000,000.
Since the above was written, farming has become a better business than it once was and the overpopulation prophets have created the fear that chronic food shortage may be around the corner. A little history, however, will show that the present tight supply of rural commodities is at least in part merely one temporary phase of an often repeated cycle of boom and slump in agriculture. There is little doubt that the long-term situation in Western agriculture is one of oversupply. The 'dynamic cobweb' cycle in agriculture often described by economists has in recent times been distorted and extended in period by government 'propping up' operations but cyclic effects must still be expected. The present good market for agricultural products is also partly due to the once-in-a-lifetime coincidence of bad harvests throughout the world. Such coincidences cannot be relied on for long term planning. ( J.J.R. )
This chapter originally appeared in "The Bulletin", 30 May 1970, p. 39-41.