2.2 Externalities
Costs &
Benefits External to Market Price
Until now we have assumed that market price includes or
'internalizes' all relevant costs and benefits. This means the
consumer captures all benefits and the producer pays all the costs.
An externality refers to costs and benefits that are not captured
by market price for whatever reasons, i.e., they are external
to market price.
In effect, the market demand curve reflects only
marginal private
benefits (MPB) of consumers but not the external benefits accruing
to society. When such external benefits are added, vertically, we
derive the
marginal social benefit curve (MSB) inclusive of
both private and public benefits.
Similarly, the market supply curve reflects only
marginal private
costs (MPC) but not costs external to the firm’s accounting,
e.g., pollution that society must pay. When social costs are
added, vertically, to the supply curve we derive the
marginal
social cost (MSC) curve inclusive of both private and public
costs.
The standard model of market economics is thus based on the
assumption that all relevant costs and benefits are internalized in
market price, i.e., there are no externalities. If this
assumption holds then ‘X’ marks the spot. If, however, there are
externalities then market equilibrium must be adjusted. External
or social costs and benefits must be added to private costs and
benefits reflected in the market supply and/or demand curves. The
point is that such external costs must be paid and external benefits
accounted for if the appropriate price/quantity equilibrium is to be
established. The agency to do so is not the market but rather
government. Put another way, the market 'X' solution is superseded
by a social ‘X” marking the spot and it is up to government to
correct the miscalculation of private agents to generate
a new socially optimal equilibrium.
This is a controversial view. It is expressed in the
tradition of both welfare economics (a sub-discipline) and the
Keynesian view.
On the other
side are those arguably including the Austrian school of economics -
von Hayek and von Mises being leading protagonists - who argue: Let
the market do it! If consumers are willing to pay then
providers will be willing to supply. If a sufficient number
are not willing to pay, for example, because of the 'free rider'
problem associated with public goods, to make it profitable to
suppliers then there will be no provision, no market and people will
get what they paid for.
Public & Private
Goods & Bads
We have seen that excludability and rivalrousness distinguish
private from public goods. If I buy a car I can exclude others from
using it by lock and key. I alone extract its utility. Similarly,
if I am driving no one else can, i.e., driving is rivalrous. Public
goods, on the other hand, are non-rivalrous in consumption, i.e.
my consumption does not reduce the amount available to you. If I
watch a fireworks display it does not reduce the amount available to
you. Similarly, public goods are non-excludable, i.e. a user
cannot be easily prevented from consuming a public good. This
creates the ‘free-rider’ problem. Extending the fireworks example,
while not willing to pay to enter the stadium I can still
watch the display from the balcony of my apartment at no charge.
Allowing for externalities (discussed above) there is in fact a
spectrum of goods ranging from pure private to pure public in
nature. The more public a good the less likely it is that private
producers will be willing to supply a socially optimal output and
the more likely that only government will be willing to do so,
e.g., national defense, the Census or inoculation against
infectious diseases.
The response of the government to problems presented by public goods
varies according to the nature of the good. Non-market benefits and
costs may be considered sufficiently important to justify public
action. In the case of benefits, such goods are called “merit
goods”. In the case of costs, they are called “demerit” goods.
There are thus times and situations in which a democratic
government decides that the free market is not producing socially or
politically acceptable outcomes and chooses to override the
marketplace.
Pollution
Pollution is a demerit good the social costs of which
private firms do not account for in their books, i.e., it is
external to their bottom line. This means they
will tend to over produce both product and pollution.
Government can intervene to adjust
market demand or supply curves using a range of public policy
instruments and hence achieve equilibrium at a
socially optimum level of both production and pollution.
From
my perspective pollution is a biological, ecological question
concerning a common planetary biosphere.
Figure 2.1, page 16 of the required text, in this view, fails to
display the feedback loop from waste - excreta - produced in the
economic process back into the economic process as polluted air,
earth and water -
Fig. 2.1 Feedback Loop. When there was a frontier to which we could
move there was always fresh supplies of each. With the planet
now the house requiring management, we are, as a species, simply
fouling our own nest.
The world is relatively speaking a closed biosphere, a closed
system. And there is only one universal poison to all
forms of life as we know it: its own excreta.
The
following taxonomy summarizes pollution by type, geography,
absorptive capacity of the environment and policy instruments
available to adjust market demand and/or supply. I will
briefly discuss each, some below, some in class.
POLLUTION TAXONOMY
Type |
Geography |
Absorptive Capacity |
Policy Instruments |
Elementals |
|
|
|
Air |
Local |
Fund |
Auction |
Earth |
Regional |
Stock |
Cap & Trade |
Water |
National |
|
Fees |
Other |
Global |
|
Product Charges |
Electromagnetic |
Near Earth |
|
Property Rights |
Heat |
|
|
Relocation |
Light |
|
|
Standards |
Sound |
|
|
Taxation |
(a) By Type
Elementals: Air, Earth & Water -
Trends in Air Pollution
Other
Electromagnetic, the ether, since the early 1900s
increasing use of the EM spectrum a national asset
Heat: urbanization and thermals
Light:
Melbin, M., "Night
as Frontier", American Sociological Review, Vol. 43,
February 1978, 3-22.
Sound: Don Hill, Murray Schaffer, noise
(b) By Geography
Local
Regional
National
Global
Near Earth
(c) By Absorptive Capacity
Fund
Stock
(d) By Policy Instrument
in many cases, market creation by fiat
Auction
Cap & Trade
Fees
Product Charges
Property Rights
Relocation
Standards
Taxation:
Pollution Tax,
Carbon Tax & Solar Subsidy
2.3 Property Right
As noted in 1.0 Introduction, the French Physiocrats before the
French Revolution constituted the first modern school of economics.
It is from them we have received the terms economist, laissez
faire and laissez passer. They were also the first to
identify the economic importance of the Law and property rights.
For the Physiocrats the first step was to establish a legal order
that fostered the social good, specifically economic growth and
development, by channeling the self-interest of economic agents –
consumers and producers. Once the law of property was appropriately
established then and only then would laissez faire and
laissez passer come into play. In the words of economic
historian Warren J. Samuels their's was: "a
theory of malleable property rights premised upon an utilitarian
understanding of the social function of private property and
necessarily involving the state in the continuing reconstitution of
property rights".
Law, in all Nation-States, is made at four levels: international,
statutory, regulatory and case. International law is made by
Nation-States and International Organizations through the
treaty-making process. For our purposes what is important is that
to ratify a multilateral instrument often requires changing domestic
law.
Statutory law is made by domestic legislators in parliaments,
legislatures, congresses, etc. Regulatory is made by bureaucrats –
domestic and international - interpreting and implementing a statute
or treaty. Case law is made by judges – domestic and international
- interpreting and enforcing international, statutory and/or
regulatory law.
Complicating matters, however, is that when judges make Law it is by
setting precedent. In the Anglosphere this body of precedent is
called the Common Law. If a similar case was resolved in the past,
a current court is bound to follow the reasoning of that prior
decision under the principle of stare decisis. The process
is called casuistry or case-based reasoning.
If, however, a current case is different then a judge may set a
precedent binding future courts in similar cases. Often such
precedents compel legislators and bureaucrats to change statutory
and regulatory law. Furthermore, precedent established in one
jurisdiction may spill-over into others.
In the Anglosphere – the English-speaking world – the Common Law of
precedent rules especially in the United States. Thus while on
the one hand, the first Republican Revolution of 1776 overthrew an
ancient regime of subordination by birth, on the other, the U.S.A.
adopted British Common Law with all its precedents and prejudices.
The second Republican Revolution of 1789 in France, however, not
only overthrew the ancient regime it also overturned the Common Law.
This was replaced by the Civil Code rooted in principle rather than
precedent, specifically in so-called Natural Rights. We will now
briefly review the nature of property rights under these two global
legal systems.
Anglosphere Common Law
Property title
is the right to the possession, use, or disposal of a
thing. This implies ownership or ‘proprietorship’. In feudal times
it referred to a piece of land under one owner, i.e., a
landed estate. Such estates were initially associated with a Title
such as the Duchy of Cornwall. With Title came Property. Title was
granted by the Sovereign and consisted of a bundle of rights &
obligations (e.g., fealty) which were often qualified by the
Sovereign. Some could be inherited; some could not; some rights
were included, some were not. All Property and Persons, however,
were ultimately subject to the Sovereign.
Under Common Law, all Property (and, in constitutional monarchies,
all Persons) remains ultimately subject to the Sovereign whether
Crown or State, a.k.a., the ‘People’. Sovereignty is supreme
controlling power ultimately exercised through overwhelming coercive
force. The territory over which Sovereignty is asserted is
established by continuing occupancy and/or by conquest.
Today, Title to Property usually takes the form of a document, deed
or certificate establishing the legal right to possession. The
coercive power of the State may be invoked to protect and defend
it. There are three contemporary forms. There is immovable or
‘real’ Property such as land, buildings and fixtures which together
with moveable Property or ‘chattel’ (derived from the Anglo-Saxon
for cattle) constitute tangible Property. Then there is
intangible Property such as business ‘good will’ and
intellectual property such as copyrights, patents, registered
industrial designs and trademarks. Each of these rights &
obligations are granted by and subject to the pleasure of the
Sovereign whether Crown or State. In Law each consists of different
bundles of rights & obligations, e.g., the term of a patent
vs. copyright.
John R. Commons (1924) observed in his classic Legal Foundations
of Capitalism that Property, in the economic sense of what can
be bought and sold, is the history of its ever increasing
intangibility. In this sense, Property has become not so much the
thing in-and-of-itself but rather an evolving set of rights &
obligations associated with it, e.g., a warranty. Thus
Property today includes intangibles like artistic & literary works,
inventions, futures options, equity shares, software and investment
certificates in land and buildings, e.g., ‘CDOs’ or
Collateralized Debt Obligations including an unknown number of
sub-prime mortgages. Such intangible Property is arguably the legal
foundation of the knowledge-based economy (Chartrand 2007).
With respect to ‘real’ Property there are two principal forms of
Title. First, allodial Title refers to absolute ownership without
service or acknowledgement of or to any superior. This was the
practice among the early Teutonic peoples before feudalism. It is
important to note the political and economic as well as legal
implications of such myth. For example, leading up to the English
Civil War of the 1640s Parliament needed an argument to counter the
‘Divine Right of Kings’ claimed by the Tudors and the Stuarts. They
found it in Anglo-Saxon Myth. Among the ancient Anglo-Saxons the
chief was chosen by members of the tribe based on throneworthiness,
i.e., the candidate who could provide the most loot, pillage,
plunder and rape. Ancient Anglo-Saxon kings were thus invested with
authority by the people and hence Parliament is supreme (MacDougall
1982). Allodial ownership is, however, virtually unknown in Common
Law countries because ultimately all Property is subject to the
Sovereign – Crown or State. In this sense there is no such thing as
absolute private property.
Second, fee simple or ‘freehold’ is the most common form of Title
and the most complete short of allodial. It should be noted that
the ‘fee’ refers not to a payment but to the estate or Property
itself as in the feudal ‘fief’. Fee simple is, however, subject to
four basic government powers - taxation, eminent domain, police and
escheat (derived from the feudal practice of an estate returning to
a superior Lord on the death of an inferior without heir). In
addition, fee simple can be limited by encumbrances or conditions.
These may include limitations on exclusive possession, exclusive use
and enclosure, acquisition, conveyance, easement, mortgage and
partition. In addition it may or may not include water rights,
mineral rights, timber rights, farming rights, grazing rights,
hunting rights, air rights, development rights and appearance
rights.
Proprietors – allodial or fee simple – may, subject to limitations
in their Title, lease, let and/or rent their real Property In the
Civil Code tradition the legal right to use and derive profit or
benefit from Property belonging to another person (so long as it is
not damaged) is called ‘usufruct’ from the Latin meaning ‘use of the
fruit’, not ownership of the tree. In Common Law, one might call it
‘tenant title’. It does not constitute legal Title but does entitle
the holder to use the Property and to have that right enforced by
the State against the legal Titleholder and others.
Finally, there is occupancy or possession-based Title. In effect,
this invokes ‘squatter’s rights’. It does not represent legal
Title. Nonetheless, if possession by occupancy is not disputed it
may, in time, become legal Title.
European Civil Code
The European Civil Code emerging from the French Revolution draws
heavily on the old Roman law especially the Institutes of
Justinian. Observing the relative lack of interest in the
concept of common property over the last three hundred years of
Anglosphere legal tradition, Carol Rose has tried to revivify Roman
concepts of public property lacking in the English-speaking
tradition. In effect, she concludes that the evolution of
Anglosphere law has been dominated by questions about private, not
public property (C.
Rose 2003).
There are five categories of public property under Roman law: res
nullius, res communes, res publicae, res universatitis and
res divini juris. To begin, the Latin word res means
‘thing’. Res nullius refers to things that are unowned or
have simply not yet been appropriated by anyone such as an
unexplored wilderness. Res communes refers to things that are
open to all by their nature, such as oceans and the fish in them.
Res publicae refers to things that are publicly owned and made
open to the public by law. Res universitatis refers to things
that are owned by a body corporate, i.e., within the group
such things may be shared but not necessarily outside the group.
Finally, res divini juris (divine jurisdiction) refers to
things ‘unownable’ because of their divine or sacred status
(Kneen
2004).
The Commons (Natural & Artificial) & International Law
The Natural Commons
There is, however, another class of environmental problems for which
market equilibrium fails to internalize all relevant costs and
benefits. This concerns common or shared resources. In December
1968, Garrett Hardin, a biologist, published
“The Tragedy of the Commons”.
The article was based on his presidential address to the Pacific
Division of the American Association for the Advancement of Science
in June 1968. Hardin demonstrated unfettered competition for
natural resources within and between countries was destroying the
natural commons, a.k.a., the environment or biosphere
including air, water, land and biodiversity living therein. Given
such resources belong to everyone yet to no one, i.e., they
are ‘public goods’, competitive self-interest dictates getting for
oneself as much as possible as quickly as possible with no
consideration for others – past, present or future. This is “The
Tragedy of the Commons”. Unfortunately, a variation also plagued
Second World or communist command economies resulting in even
greater environmental damage, debilitation and destruction.
The Artificial Commons
As noted in 1.0 Introduction there are sciences of the natural and
of the artificial, i.e., human-made. The most important
‘artificial’ commons is knowledge. First, knowledge is
non-excludable in that once published one cannot be easily excluded
from knowing. In fact, the word ‘publish’ derives from the
Anglo-Norman meaning “to make public’ or “to make known” which, in
turn, derives from the Classical Latin publicre meaning to
make public property or to place at the disposal of the community.
Second, knowledge is a non-rivalrous good, i.e., your consumption
does not reduce the quantity available to me. Excludability and
rivalrousness are necessary conditions to internalize economic costs
and benefits into market price – the idealized outcome. But how can
something be exchanged in a market, i.e., bought and sold, if one
cannot stop others from taking it for nothing and, if they do take
it one’s inventory is not thereby reduced?
The answer is intellectual property rights like copyrights, patents,
trademarks and registered industrial designs. Such rights, however,
must be imposed by the State thereby breaking one of the implicit
tenets of the standard model of market economics – no government
involvement in the economy. In fact without government there can be
no knowledge-based economy.
In economic theory, IPRs are justified by market failure, e.g.,
when market price does not reflect all benefits to consumers and all
costs to producers such as when market price does not include
pollution costs. These are known as external costs and benefits,
i.e., external to market price.
IPRs, in this view, are created by the State as a protection of, and
incentive to, the production of new knowledge which otherwise could
be used freely by others (the so-called free-rider problem). In
return, the State expects creators to make new knowledge available
and that a market will be created in which it can be bought and
sold. But while the State wishes to encourage creativity, it does
not want to foster harmful market power. Accordingly, it builds in
limitations to the rights granted to creators. Such limitations
embrace both Time and Space. They are generally granted only with
full disclosure of the new knowledge, and
only for a fixed period of time, i.e., either a specified number of
years and/or the life of the creator plus a fixed number of years;
and,
only for the fixation of new knowledge in material form, i.e., it is
not ideas but rather their fixation or expression in material form
(a matrix) that receives protection.
Eventually, however, all intellectual property (all knowledge)
enters the public domain where it may be used by anyone without
charge or limitation. In other words a public good first transformed
by Law into private property is transformed back into a public
good. Growth of the public domain is, in fact, the historical
justification of the short-run monopoly granted to creators of
intellectual property. Even while IPRs are in force there are
exceptions such as ‘free use’, ‘fair use’ or ‘fair dealing’ under
copyright.
In many ways the public domain is the inverse of a natural resource
commons. First, use of the public domain does not reduce the
quantity of resources available to others. Second, in its normal
state the public domain grows and will continue to grow until the
collapse of human civilization in its contemporary incarnation.
Third, while there can be no subtractions from the public domain
through use, additions are not simply additive. Rather, additions
combine with existing knowledge mutating and generating yet more new
knowledge. Or, in terms of Isaac Newton’s famous aphorism: “If I
have seen further it is by standing on the shoulders of Giants.”
The public domain is not a domain of scarcity but of fertile
abundance. In this sense the public domain, unlike any natural
resources commons, exhibits increasing returns to scale.
International Law
Law is backed by the coercive power of the Nation-State.
Sovereignty, at root, is the State’s monopoly of force. As suggested
by John R. Commons (1934), the probability of the State (or rather
its officials) exercising this monopoly to enforce contracts (rule
of law) is a primary concern for all business enterprise everywhere.
Jus cogens
Between Nation-States, however, Law relies on jus cogens or the
presumptive norms of international law, arguably the most elemental
of which is pacta sunt servanda: meaning ‘agreements must be kept’.
Such “higher law” may not be violated because it serves the
interests of the entire international community, not just the needs
of the individual States. There is, however, no definitive statement by
any authoritative body of what constitutes jus cogens. Rather
they tend to arise out of case law as well as changing social and
political attitudes Such norms can be both affirmative as with
pacta sunt servanda or prohibitive as with prohibitions against
aggressive war, crimes against humanity, war crimes, maritime
piracy, genocide, slavery and torture.
According to pacta sunt servanda, all instruments in force
are binding on Parties to them who, in turn, must perform them in
good faith. Thus Parties cannot invoke domestic law in the case of a
State, or internal rules in the case of an International
Organization, as justification for failure to perform. The only
legal exception is when this norm conflicts with another, e.g.,
the prohibition against slavery, in which case according to Article
53 of the 1969 Vienna Convention on the Law of Treaties such
instruments are void.
If a State fails to perform there may or may not be legal recourse
for other parties to an agreement, e.g., WTO dispute panels
or appeal to the International Court of Justice. Only at the extreme
will the Security Council of the United Nations ‘legitimize’
coercive force against a treaty-breaker.
Accordingly the complex web of global and regional agreements,
conventions and treaties rests on the ‘good faith’ of Nation-States.
Each comes to the table with its distinct legal tradition as well as
wants, needs and desires. To ratify an instrument, however, usually
requires a State to adjust domestic laws that conflict with treaty
obligations.
With respect to the environment international law effectively
establishes the property rights of Nation-States. Such agreements
include:
International
Convention for the Protection of New Varieties of Plants,
1961
Biological and Toxin Weapons Convention,
1972
Convention on International Trade in Endangered Species of Wild
Fauna and Flora,
1973.
Budapest
Treaty on the International Recognition
of the Deposit of Microorganisms for
the Purposes of Patent Procedure,
1977
Law of the Sea Treaty, 1982
Vienna Convention on the Protection of the Ozone Layer, 1985
Montreal Protocol on Substances that Deplete the Ozone Layer, 1987
Rio Declaration on Environment and Development
1992
UN Convention on Biodiversity,
1992.
Kyoto Protocol to the United Nations Framework Convention on Climate
Change, 1997
Cartagena Protocol on Biosafety,
2000.
International Treaty on Plant Genetic Resources for Food and
Agriculture, 2001
For a more complete list please see Wikipedia’s
List of international environmental agreements.
2.4 Cost/Benefit Analysis, Present Value & the Precautionary
Principle
As demonstrated with respect to private goods the analytic engine of
economics is about choice, specifically constrained maximization.
In the case of consumers, maximization of happiness constrained by
income (the Demand Curve); in the case of producers, maximization of
output subject to cost (the Supply Curve). Under conditions of
perfect competition the point of intersection of these two curves
marks the ideal outcome of quantity and price. All benefits go to
the consumer and all costs are paid by the producer, i.e.,
all benefits and costs are internalized in market price. When any
cost or benefit is external to market price there is an
externality. It is only through public intervention such as taxes,
quotas, legal action (including establishing property rights),
etc. that externalities can be accounted for and an appropriate
price/quantity outcome achieved, i.e., approximation of the
perfectly competitive outcome.
Public intervention in the marketplace, however, generates costs,
e.g., enforcement costs of pollution control. In the case of
public goods for which no private market effectively exists the
question becomes how much to produce and at what cost? Both public
intervention and production of public goods involves not just
economic but also political questions, i.e., political
economics. Over time various techniques and principles have emerged
to guide public sector decision makers. We will examine three:
cost-benefit analysis, present value and the precautionary
principle.
Cost-Benefit Analysis
The preeminent economic technique for justifying public intervention
in the marketplace or in production of public goods is cost-benefit
analysis. Innovated by the Tennessee Valley Authority during the
1930s (part of the ‘New Deal’) cost-benefit analysis involves
calculating all relevant cost and benefits of a project. In the
simplest terms, if benefits outweigh costs the project goes forward;
if costs outweigh benefits it does not.
Benefits and costs, however, come in two flavours – those that can
be quantified and generally expressed in dollars and cents and those
that cannot. These can be called tangible and intangible costs and
benefits. Ideally all tangible costs and benefits are quantified at
market prices. Some intangibles can then be estimated in
quantitative terms using techniques such as ‘willingness to pay’
surveys. Others cannot. At the end of the day, in good
cost-benefit analysis, the quantitative cost/benefit ratio is
calculated but then subjected to a value judgement with respect to
the importance of non-quantifiable cost and benefits.
In addition to tangibles and intangibles, cost-benefit analysis also
recognizes first-round, second- round and subsequent effects. A
market example is the impact of a frost on Florida orange juice.
The first round effect is a higher price. A second round effect
involves consumers shifting from more expensive orange juice to less
expensive apple juice. The increase in demand for apple juice,
however, causes its price to rise (second round effect) which in
turn leads to a shift towards other substitutes and so on and so
on. In cost-benefit analysis a decision must be made as to how many
ripples should be included in the analysis.
Costs and benefits also have a spatial dimension. Should only local
costs and benefits be included or also regional, national and
international ones? Similarly some are near term while others
stretch out into the distant future. How far out in time should the
analysis stretch? Furthermore, both costs and benefits are subject
to increasing risk as they stretch further and further out into the
future. Some risks can be subjected to probability calculation;
some cannot. And some risks have a high probability but limited
impact while others have a low probability but significant impact –
so-called ‘Black Swans’ events. In addition costs and benefits of
an intervention are distributional in nature. Some win; some lose
raising questions of equity or fairness. Needless to say
cost-benefit analysis is a technically demanding field involving specialized expertise.
In some cases cost-benefit analysis is simply not possible. In such
cases a second-best approach may be used - cost-effectiveness.
(a) Measurement of Costs & Benefits
There are two distinct sets of costs and benefits associated with
the environment. The first set concerns pollution and damage
to human health and to the economy. The second concerns
valuing the contribution of environmental assets to the economy.
(i) Pollution
When a substance is introduced into the environment - air, earth or
water - through human production or consumption of goods and
services it may or may not have detrimental effects on human health
and/or on the wider biosphere. In the past such effects were
generally noticed only ex poste, i.e., after the fact.
Increasingly, however, with more stringent environmental regulation,
their effects may be determined ex ante, i.e., before the
fact, before introduction into the environment. In
either case a two step process is taken. First, a risk
assessment is conducted to determine if there a cost and its
magnitude. Second, risk management is conducted to determine
the most cost effective way - technological and/or behavioural - to
manage its effects.
With respect to risk assessment a four step process is involved:
Hazard Identification - Does the substance cause harm?
Dose-Response Assessment - At what levels and after what duration
does harm result?
Exposure Assessment - Who is affected and how are they exposed?
Risk Characterization - What is the overall harm to the general and
specific sub-populations, e.g., children?
Generally risk assessment relies on 'hard science'.
Laboratory experiments on animal or plant surrogates as well as
field research on exposed populations can determine the nature and
magnitude of harm. Based on this evidence health care costs
can be estimated and 'life and limb' analysis conducted, e.g.,
how much is working life income reduced by exposure. Thereby
total cost can be estimated
Risk management, on the other hand, depends mainly on 'soft
science', i.e., the sciences of the artificial. Various
techniques are used to determine the most cost-effective way to
reduce both the quantity and effects of the pollutant. This
can be done three ways:
Survey Approach - Ask those generating the pollutant about the most
cost-effective ways to reduce it.
The problem of revealed preference arises in this case.
Polluters (both producers and
consumers) have an incentive to overestimate the cost of reduction
in order minimize
regulatory control.
Engineering Approach - Research existing and potential technologies
to cost-effectively minimize
pollution for the typical polluting firm or consumer.
The problem is that not all
firms or consumers have the same production or consumption function
and
hence actual costs of implementing the technology or behavioural
change may be
significantly higher than the typical situation.
Combined Approach - Both survey and engineering approaches are used
to balance the opinions of
polluters and available technologies.
The benefits of reducing pollution can be calculated using risk
assessment and the costs of instituting control estimated through
risk management. A balance must then be struck between how
much reduction at what cost in return for what benefit. What
this means is that in most cases total reduction is not achieved but
rather a cost-effective level at which marginal benefits of reduction equals
marginal cost.
What is not considered by the author of the required text is the
feedback loop of pollution on the costs of doing business (Fig. 2.1 Feedback Loop.
). Pollution of the air, earth and water affects not just
human health and/or the biosphere but also business
that rely on them as inputs to the economics process. For
example, a firm relying on water such as a beverage company needs
clean water. If the source is polluted it or the community as
a whole must bare the costs of purification in the form of direct
business expenses or increased taxes. Similarly in a community
like Port Hope in Ontario years of using radium to make the dials of
clocks glow has polluted the soil and any business wanting to use
the site of such former businesses must face (or the community) the cost
of cleaning up and disposing of the polluted earth.
(ii) Environmental Assets
Fig. 3.1 page 37 of the required text summarizes the author's
view of measuring the value of environmental and resource value.
In summary these include use, option and non-use values. Use
value is generally determined at market prices. For example, how
much in entrance fees is collected at national or provincial parks
together with costs of getting there and any spending that takes
place within the park. Option value or option demand is
generally determined using surveys asking citizens how much they
would be willing to pay to ensure such sites are available even if
the respondent does not use it. Finally, non-use value is
similarly determined using surveys asking citizens how much they
would be willing to pay to ensure a given site is preserved in
its natural state.
The most important distinction is between revealed vs. stated
preferences. Nobel Prize winning economist
Paul Samuelson formulated the theory of revealed preference in
1938. It has arguably become one of the laws of economics
along with the laws of demand and supply. In short it
states that preferences are revealed by the observed behaviour of
consumers and producers in the market place. Choices made,
putting down the money, reveals the real preferences of economic
agents. This contrasts with asking them to state their
preference. There are, Samuelson argues, always incentives for
agents to hide their true preferences. For example, if asked
how much a citizen would be willing to pay to live close to a fire
station the citizen will tend to underestimate benefits to avoid the
possibility of increased property taxes. Accordingly, revealed
preference is the preferred method of mainstream economics with
survey techniques subject to question, no matter how sophisticated
their design or statistical tools applied.
Below I provide an expanded version of the author's figure providing
'one-liners'
summarizing the different techniques used to estimate the
value of environment assets. While revealed preference
techniques generate the most reliable information stated preference
techniques must be used when there is no market or market related
evidence available. The limitations of Contingent Valuation
techniques or willingness to pay or willingness to accept using surveys
are subject to listed biases but are not always described or
explained in
the text. Attribute-Based Models, on the other hand, rely on
analysis of
Lancastrian 'attributes'
named
after economist Kelvin J.
Lancaster (1924-1999). Lancaster argues that
consumption
involves not a good as such but rather its
varied attributes or characteristics. It is these
attributes that are desired rather than the good itself.
All of the listed
techniques are,
in effect, attempts to derive the demand curve for environmental
attributes such as clean air, earth & water, natural beauty, et al. The
measurement of such values can be used to justify retaining a given
site instead of some form of development, e.g., roads,
bridges, community expansion (sub-divisions), etc.
MEASUREMENT Of ENVIRONMENTAL & RESOURCE ASSETS
METHOD |
REVEALED PREFERENCE |
STATED
PREFERENCE |
Direct |
Market Price
Simulated Market |
Contingent
Valuation or
WTP/WTA Surveys asking about the
willingness to pay for a hypothetical change in
an environmental good or service
Strategic Bias: wants to affect outcome
Information Bias: lack of experience
Starting-Point Bias: pre-defined choices
Hypothetical Bias: contrived choices
Observed Discrepancy WTP/WTA
Benefit Transfer/Meta-Analysis |
Indirect |
Travel Cost
Services & Access Costs
Comparative Site Characteristics
Hedonic Property
Value
Comparative Housing Prices
Hedonic Wage Value
Comparative Wages
Avoidance
Expenditure
Spending to Reduce Damage |
Attribute-Based
Models
Conjoint Analysis
Alternative Attributes Surveys
Choice Experiment
Preferred Alternative from a Choice Set
Contingent Ranking
Alternative Amenities
|
Present
Value
As benefits and costs extend out into the future they become ever
more uncertain. One calculates their current worth – their present
value - using a discount rate. The higher the rate, the lower the
present value of future benefits or costs. Determining the
appropriate discount rate is critical to properly valuing future
costs and benefits.
With respect to public intervention or production of public goods
there is, however, an added dimension to present value – politics.
While future benefits or costs may be significant they are
politically discounted to maximize election and re-election of
politicians and governments. Three examples demonstrate.
First,
with an aging electorate politicians are more concerned with present
older voters than with future generations. Quite simply future
generations are not politically relevant unless the current
generation says so at the ballot box.
Second, there is the political ‘edifice
complex’. A new $100 million bridge or building bearing a
politician’s name is much more valuable politically than an annual
$20,000 paint job required to preserve and maintain an existing
structure for 100 years. Arguably the much reported deterioration
of public infrastructure in the United States and Canada reflects
this political discount rate.
Third, no matter political intentions
about the future the reality is we simply cannot know for certain
what future generations will want, need or desire from us today.
This is especially important
when considering questions of sustainability. The concept of
sustainability is roughly analogous to the economic concept of a
'steady state' where the existing pattern of economic activity
continues through time. In the view of some economists
resources are highly substitutable or fungible. Technological
change will, in this view, provide a substitute for any resource
that is depleted through current use. Whether or not it is
appropriate to preserve a current resource for future generations
thus becomes a question of substitutability.
A
related question is preservation (non-use) versus conservation (wise
use) of a natural resource. Economist Joe Bain in his classic
Industrial Organization lays out the question:
For any of a group of industries
whose operations involve extraction of natural resources
(mining, petroleum production, agricultural cultivation,
lumbering, commercial fisheries) a significant dimension of the
market performance of the firms engaged involves how well they
do in the matter of “conservation” of resources. To paraphrase
the popular literature on this matter, conservation in an
economic sense of course does not mean non-use or simple
deferment of use, but “wise use” of the resources being
exploited. In technical terms, good conservation requires a
choice of technique of exploitation, time pattern of production,
and time pattern of investments and other costs, which together
yield an optimal net social benefit relative to costs over all
future time periods in which society is interested. In
determining this optimum, distant future benefits and costs
should be appropriately discounted by whatever rate of “time
preference” society wishes to assign in assessing the relative
importance of current as opposed to future benefits and
sacrifices. And conservation performance is poor to the extent
that enterprises deviate from this abstract ideal.
An adequate operational definition
of ideal conservation performance is extremely complex and next
to impossible to apply fully in the evaluation of actual
performance. Using the definition just given as a guide,
however, it is possible to identify certain types of gross
departure from good conservation which would have to be censured
under any acceptable criterion. These include:
1. Exploitation of resources by a
technique that raises both present and future costs above the
obtainable minimum while reducing or not increasing the amount
of resources ultimately recovered, or the amount of use obtained
from resources over time.
2. Unduly rapid or intensive
current use of resources which has the result of impairing (or
eliminating) future use of the resources to a degree not
compensated by current additions to output.
3. Pinching on current costs or
investments in the use and development of resources in a way
that curtails future use or raises future costs of use to a
disproportionate degree.
What of the actual performance of
industries in regard to conservation? Of course, only a minor
proportion of all industries are sufficiently involved in
extraction to make conservation an issue, and for these we do
not have highly organized, systematic information on which to
base an overall appraisal. However, a broad scattering of
evidence on individual cases suggests that, among extractive
industries, conservation performance is or has very frequently
been poor.
Thus we observe in petroleum
production in the United States a history of gross elevation of
recovery costs coupled with a substantial reduction of ultimate
recovery of available petroleum, attributable largely to the
selection of techniques in the context of competitive
exploitation of individual oil pools by antagonistic interests.
In both lumbering and commercial fisheries, and in some
agriculture, we find that a serious long-run depletion of
resource productivity has resulted from overintensive immediate
rates of extraction or exploitation of the available resources.
In much of agriculture, a history of pinching on current costs
for or investments in the preservation of the land (against
erosion or reduction in fertility) has resulted in long-run
losses in soil productivity.
These deviations from reasonably
good conservation performance seem in large part attributable to
four things: (1) antagonistic exploitation of resource deposits
by competing interests, in which a competitive race to capture
the resource or its output before others do results in a
disregard of long-run yield considerations; (2) an inherent
“short-sightedness” of firms engaged in exploiting resources -
firms that attach much less importance to distant future
production than society would, or than they do to immediate
profits; (3) competitive conditions which bring about such low
returns to firms in some extractive industries that they cannot
afford to invest in the long-run maintenance of resource yields;
and (4) stupidity. Whatever the cause, poor market performance
in the matter of conservation has evidently been chargeable
against firms in many extractive industries. It is encouraging,
in the light of this, that in the past twenty or thirty years
there has been a rapidly increasing body of governmental
regulations designed to encourage or require better conservation
performance on the part of these industries.
Bain
1968, 425-427
The Precautionary Principle
Cost-benefit analysis involves calculation of the probability and
magnitude of costs and benefits associated with a new technology,
public intervention in the market place or production of public
goods and services. If probable benefits outweigh probable costs it
is approved; if not it is rejected.
Applying the ‘precautionary principle’ means that if a new
initiative has any chance of generating irreversible harm, no matter
its short-term benefits, it is rejected in spite of a positive
cost-benefit ratio. In fact, the precautionary principle is both an
economic and moral criterion. It invokes a social responsibility
to protect the public from harm if scientific investigation finds a
plausible risk. In the Rio Convention mentioned above and in the
European Union, the precautionary principle has been made into a statutory
requirement. Its application is most apparent with respect to
genetically modified foods. In the Anglosphere cost-benefit
analysis has consistently found them to be a good investment. In
most cases natural and genetically modified crops and animals are
treated as equally safe. In the European Union, however, the remote
possibility of irreversible harm to human health or the environment
has led to significant restrictions on the use of genetically
modified foods including labeling of all products. Some
observers argue that this 'plant protection racket' is fuelled by a Veblen
Effect, named after economist
Thorstein Veblen who introduced the concept of 'conspicuous
consumption':
The Plant Protection
Racket
By Thomas R. DeGregori
Butterflies and Wheels, 2003.
Inferiority as a Luxury Item
Before the Industrial Revolution, artists and artisans would strive
to make a work as perfect as possible. They used the technologies of
their time to make as fine a product as their skill and limited
technology allowed. Given the long painstaking efforts involved in
creation, such items were few in number and available to only a
minuscule number of elites. They were the crowning achievement of
their time and brought great prestige to those fortunate few who
owned them. Renaissance painters used the mathematics of perspective
to create their trompe l'oeil (a French term meaning "trick the
eye.") David Hockney's recent claim that some of the Renaissance
artists achieved realism by using a camera obscura to design their
paintings is controversial and shocking to many today but one
wonders whether it would have mattered to anyone prior to the
Industrial Revolution (Hockney 2001).
With the advent of the Industrial Revolution, one of the qualities
that allegedly makes a craft item superior became its demonstrable
inferiority. Before that time, increasing precision was one aspect
of the way in which artisans sought to refine and improve their
craft. Nineteenth and twentieth century technology not only carried
this refinement beyond the point that our hands or eyes can detect,
it did so with mass production. Today some people will point with
pride to the imperfections that indicate handcrafting. Thorstein
Veblen makes reference to the "claims to excellence put forward" for
some products that "rest in some measure on the degree of its
approximation to the crudities" of earlier inferior technologies
(Veblen 1934, 121). Veblen was referring specifically to the very
expensive books produced by William Morris and the Kelmscott Press.
Veblen went into great detail on the means and methods used for book
production by the Kelmscott Press and scathingly referred to their
"painstaking crudeness and elaborate ineptitude" (Veblen 1934,
122). William Morris, an ardent socialist and leader of the Arts and
Crafts movement, earned his livelihood by selling his non-industrial
arts and crafts to those made rich by industrialization.
In
Veblen's example of book production, limiting an edition is the
ultimate reversion to a criterion of earlier technology to enhance a
product's pecuniary value (Veblen 1934, 122). It is an
artificially-contrived scarcity, whether it be in a "hand-produced"
item of William Morris or the mass-produced results of technologies.
The crudeness must be contrived to be different because modern
industry has taught us how to turn out great quantities of high
quality items (Kouwenhoven 1967, 35).
No
previous transformation was as beneficial to human enterprise and
creativity as the Industrial Revolution. Yet it was damned for
being dehumanizing, and its technology was considered antithetical
to artistic endeavors. The dualism between thought and practical
action that characterized earlier civilizations such as that of
classical Greece was revived with a vengeance. It is more than
appropriate that among the anti-technology artists and artisans,
there was a revival of Greek forms in neoclassicism. William Blake,
who is famous for his reference to "dark Satanic Mills," was himself
"dependent upon prosperous patrons for his livelihood" (Boime 1985,
111). The "fiery chariots," the furnaces, and other technologies
were important images in Blake's poetry and drawings, reflecting
more of an ambivalence to industrialization than is recognized by
many who quote him. The neoclassicism in fine arts that followed
Blake and the revival of Greek ideals were facilitated by "one of
the first and most refined products of modern manufacture ... the
steel pen, which everyday recorded the images, means, and ideas of
the new era" (Howard 1985, 790-2). Steel pens were better and they
were cheaper (Howard 1985, 794).
By
the late 19th century, the elitist mania for handcrafted items led
to an interest in "primitive" art which pre-Industrial European
elites would have considered too crude to be art. A strange
contradiction emerged as the art was praised while those who created
it were degraded. Leah Dilworth uses Veblen's analysis when writing
about the demand for crafts produced by Indians of the American
Southwest in the late 19th and early 20th centuries. Mass-produced
objects had a "sameness" to them, and because they were
mass-produced they were by definition "perceived as being common and
it is this commonness that the leisure class objected to." To Veblen
the leisure class "preference for the singular marks of
imperfection, or marks of the hand, became ‘honorific'." For
collectors of Indian crafts, "singularity and the mark of the
maker's hand were highly valued" (Dilworth 1996, 154-155 and Veblen
1934). The belief in the eventual "dying out" of the Indian,
undoubtedly further enhanced the value of the craft. It was
"natural" and "authentic."
One can appreciate "primitive" art and the great works of earlier
times apart from any crudeness or extraordinary effort to achieve
perfection. The elite's preference for that which is inferior was
carried over to other areas of life. Occasionally manufacturers
found it profitable to advertise the inferiority of their
technologies such as "fire-brewed" beer when any brew master will
testify to the superiority of electric kettles for more precise heat
control.
As
societies become more affluent and wages rise, hand made products
become more expensive, sometimes prohibitively so. Even reaching out
for overseas production in low wage countries is not always
effective as these areas are seeking to improve their lot with low
cost industrial production serving a mass global market. Affluence
also creates an ever-growing class of well-off consumers, many of
whom seek to emulate the crudities of consumption of the elites. The
crude items of every day use that were the few meager processions of
the poor have become the prestige consumption of the affluent. To
acquire the "authentic" or "natural" or "real," be it in
construction with expensive stone or wood or in foods, eating only
the rare or organically grown - these natural lifestyles are
expensive because the means for providing them are extremely
limited, making it a way of life possible only for a privileged
portion of the world's population. Time magazine had a cover story
on "The Simple Life." A perceptive correspondent for The New Yorker
made an "unofficial tally of Time's ‘expensive, high tech and
sophisticated’ stuff, as against the new simplicity's ‘recyclable,
cheap, plain and nostalgic’ stuff." The results were:
‘Recyclable, cheap, plain and nostalgic’ goods ... : $459.40.
‘Expensive, high tech and sophisticated’ equivalents: $145.83.
He concluded that he didn't think that he could "afford the simple
life (The New Yorker 1991, 30, and Time 1991, see also Carlson
2000).
It
seems that the poor can no longer afford the crudities that were
once their lot in life and have to make do with the products of
industry when they can afford any consumption at all. Even the
poverty of Gandhi was costly, as his trademark goats had to be
boarded when he was in urban areas, prompting the often-paraphrased
comment of Edgar Snow that Ghandi never realized how much it cost
the Indian rich to keep him in his poverty.
Consumption of inferior products has become a growth industry in
affluent societies particularly in the area of food and health where
the fetish of ‘inferior is better, safer and healthier’ has deep
ideological roots. Terms like "organic," "biodynamic," "all
natural," "alternative therapies," "herbal" and "holistic" have lost
any meaning that they may once have had and are to be understood as
endowing a commodity with immeasurable, not fully definable vital
properties. The quintessential inferior vitalist product is the
homeopathic remedy whose mystic vitalist potency is derived from
having virtually every last molecule of the "medication" diluted
away.
The Vitalist Revolt
The ongoing vitalist revolt against the emergence of modern
chemistry and agricultural science since the work of Antoine Laurent
Lavoisier, Friedrich Wöhler and Justus Baron von Liebig is most
evident in food production and consumption. First it was claimed
that it was impossible to synthesize an organic compound, and then
it was argued that minerals could not be used to help plants grow.
When these claims were disproved, the argument was made that the
food grown using minerals as fertilizer lacked some vital or living
force. To Lady Balfour, a proponent of "organic agriculture" and a
founder of the Soil Association in England, Liebig's "naive theory"
that inorganic material could be used in plant production, did
result in increased food production but the food was nutritionally
inferior (Balfour 1948, 50-51 and Balfour 1976, 56). It lacked a
"vital quality," as the modern world, "largely ruled by chemistry,"
had neglected the "continuity of the living principle in nature"
(Balfour 1976, 25).
The emergence of synthetic urea brought an even stronger response
-it was man-made, alien to the environment and dead, in the words of
Rudolf Steiner. We must remember that the movement for "organic" or
"biodynamic" agriculture was first a response to the use of
synthetic fertilizer and not to pesticides. Synthetic fertilizers
have proved their worth and there is no question that we would not
be able to feed 6.3 billion people today without them, nor could we
do so for the expected 9 billion people in 2050 when population
growth is expected to level off or even decline (Smil 2000 and 2001,
159). Though many believe in the mystic vitalist properties that
manure provides to the crop, plant physiology tells us that manure
has to be broken down in the soil and that the plant takes in
cations and anions that are no different from those provided by
synthetic fertilizer. The difference is that with modern agronomy,
the farmer can more accurately provide the needed nutrient in proper
proportions with synthetic fertilizer than with manure whose
nutrient content may vary considerably.
However post-modernists and others may attack modern science, it has
permeated our society sufficiently that there is often a felt need
to find scientific evidence to justify a belief, even essentially
vitalist ideas like the belief that "natural" is better. Having
failed to prove that "organic" produce was superior in any other
way, its proponents have now turned to the argument that its
superiority results from its being less well protected from
competitors, which means that it is being produced in an
agronomically inferior way. After all, from the earliest
agriculture, farmers have sought to protect their crops from
competitors such as other plants, rodents, birds and microorganisms.
In the attempt to find nutritional benefit in "organic" food crops
on the basis of their being less well protected, the advocates are
venturing into a mine field where there is a vast array of
unexploded ordinance.
Trace Amounts
The "organic" enthusiasts never seem to tire of trying to find
evidence of the superiority of their product. In March 2002, yet
another study was announced which purported to show that "organic"
vegetables were more nutritious than those that were conventionally
grown (Baxter et al. 2002). Canned soups made with "organic"
vegetables were found to have a higher level of salicylic acid than
vegetable soups that were not labeled "organic." These higher levels
were the result of the fact that the organic plants were less well
protected against various forms of infestations, and they expressed
salicytes to protect against the invaders. Since farmers from time
immemorial have sought to protect their crop, being less successful
at it could be defined as being inferior, but an Orwellian
inferiority where inferior is really superior.
Salicylic acid is the active ingredient in aspirin for which there
is a claim that it has beneficial health effects for those who take
one or two a day. This was taken as tantalizing evidence of
nutritional superiority that warranted further research even though
salicylic acid is not known as a nutrient. No matter how heroic the
efforts to hold other factors constant, it is difficult to take
seriously a study comparing commercially canned vegetable soups
where one could either have compared the vegetables directly or made
the soups themselves to make sure that everything else was the same
except the vegetables.
Even if we accept the study's validity, its conclusions are still in
doubt. The tiny amount of salicylic acid that they found was 117
nanograms/gram. This is "1/10,000,000 of a gram or 0.00001% or
(1/100,000 of 1%). For a typical 400 gram serving of soup at 117
nanograms/gram = 50,000 nanograms of SA, which is 0.005% of a gram,
or 0.05 milligrams of salicylic acid, or 1/20th of one milligram"
(Avery 2002). A bowl of organic soup provides "roughly 1/6,000 of a
standard aspirin compared to conventional soup" which provides "only
1/36,000 of an aspirin" (Avery 2002).
A
more recent paper found that foodstuffs produced by "organic" or
"sustainable" methods produced more phenolics because they were less
protected (Asami et al. 2003). Once again, phenolics are not thought
to be a nutrient but they are believed to be anti-oxidants and
therefore possibly helpful in preventing cancer. If being less well
protected is the source of the alleged benefit, then conventional
farmers could reduce the protection that they provide plants and
thereby improve their "nutritional" value. Of course this would
reduce the farmers' output and raise the price of the product.
Consider all Factors
In
my view as an economist, the authors missed the point that
consumption of fruits and vegetables is price sensitive, so that
even if the authors are correct one would still have to balance the
alleged nutritional benefits of the foodstuffs with the reduction in
the consumption of them, particularly by those in lower income
groups who need them most. Phenolics and salicytes are called
secondary metabolites because they are not essential for the plant's
metabolism. They are expressed in response to some attack against
the plant. Some secondary metabolites have been found to be rodent
carcinogens. Simply stated, if a plant is less well protected than
it will be producing a variety of chemical defenses and it is likely
to be carrying some residue from whatever attacked it. It is not
valid or good science to cherry-pick what one wants to measure and
ignore the rest. One has to look at the total potential benefits and
harm to be able to say anything meaningful about the difference
between various forms of plant production, and then one has to
consider the cost factor for any judgment about nutrition to have
any validity. The authors of the articles, finding "organic" foods
have more nutrients, fail to test for higher levels of other
secondary metabolites that may be carcinogenic, nor do they test for
higher levels of a microbial infestation that may have caused the
plant to express the chemical toxins.
In
my judgment, it would be helpful if authors spoke about the
increased production of "chemical toxins" to ward off infestation in
less well-protected plants. After all, in spite of the use of the
term "chemicals" as a pejorative, chemicals are what the plant is
producing. And if they are being produced to protect against an
invader then they are likely to be in some way toxic to it. Once we
have the generic category of "chemical toxins" than we can proceed
to enumerate them and identify which are (or may be) beneficial to
humans, which are (or may be) harmful to humans and which are likely
to be neither. Unfortunately, just as we have words like "organic"
that are endowed with vitalist virtues, we also have terms like
"chemicals" and "toxins" that have been so demonized that sensible
discourse using them has become almost impossible.
Much of the opposition to transgenic food crops is that they are
allowing and will increasingly allow farmers to produce food crops
with reduced pesticides or even no pesticides and use agronomic
methods such as sustainable conservation tillage which prevent soil
erosion, conserve water and preserve biodiversity in ways that
"organic" agriculture cannot. When honestly and properly understood,
pesticide-free transgenic food crops (crops using lower amounts of
less environmentally toxic pesticides than the "all natural"
pesticides of "organic" farmers) undercut the benefits of "organic"
food consumption. This means that conventional farmers could
mass-produce food that more than matches the alleged health and
environmental benefits of "organic" food at a lower cost and price.
Why then, would anyone buy "organic" food let alone pay a premium
for it? Further, the transgenic food crops have vastly lower levels
of fungal or other infestation, and as recent pro-organic studies
show, they produce far fewer toxins. Even the most optimistic
supporters of pest resistant Bt corn and cotton fully expected that
in time some insects would develop resistance to their bioengineered
insecticide (the Bt gene expresses a protein fully digestible by
humans but lethal to target insects), yet six years have passed and
"target insect pests have developed little or no resistance to Bt
crops thus far, according to US Department of Agriculture-funded
scientists." Ironically, the diamondback moth "evolved resistance to
Bt sprays used by organic growers, but no pest has evolved
resistance to transgenic Bt crops in the field" (Fox 2003, see also
DeGregori 2003). The irony is of course that it is the organic
growers who have vociferously complained that the transgenic Bt
varieties would lead to the emergence of super bugs resistant to
their Bt spray.
More than 500 species of insect have evolved resistance to one or
more conventional insecticides. So far, the track record for Bt is
better. In the field, only one pest, the diamondback moth, has
evolved resistance to Bt sprays, and none has evolved resistance to
Bt crops. Despite this success, the incredible adaptive ability of
insects means that resistance remains a threat (Fox 2003).
Transgenic food crops using rDNA are the most predictable and
therefore the safest form of plant breeding humans have ever
devised. And almost everywhere in the world they are regulated, as
they are the only food crops where we know what to test for. The
potential for enhanced nutrition or even using the plant to express
a protein that has pharmaceutical capabilities at an incredibly low
price is enormous. But in the perverse logic of inferior-is-better,
because "organic" foods are inferior to those resulting from
transgenic food crop production, they are really superior.
Never has human food production been safer or more abundant than it
is now. But we must always remember that in any human endeavor,
there is never 100% certainty. The food crops in the field today,
conventional and "organic" alike, are the products of 20th century
plant breeding. In addition to the traditional crossing of closely
related types, throughout the last century there emerged
mutation-breeding using either highly toxic mutagenic chemicals or
gamma radiation from a nuclear source that immediately produces
random, massive change throughout the plant's genome. There is
nothing predictable in the outcome here. What could be more
frightening to the consumer should critics wish to use it than for
our food to be the product of carcinogenic chemicals or
radioactivity (which of course it is not)? But of course this would
leave nothing on the shelves or in the fields for people to eat. In
addition, plant breeding has added techniques such as somaclonal
variation, protoplastic cell fusion, embryo rescue, self-pollination
and tissue culture to put crops in the field and food on our table.
Again, there is nothing predictable here but of course that is the
intention, namely to produce quickly as much variation as possible
so that the plant breeder has more possibilities to choose from.
The use of tissue culture in plant breeding has also often resulted
in somaclonal variation of plant lines and irregular phenotypes or
field performance. Somaclonal variations are mutational and
chromosomal instabilities of embryonic plants regenerated from
tissue cultures (Haslberger 2003).
Unfortunately, these "chromosomal instabilities" persist for some
time not only in the original crop but in future crops in which it
is part of the breeding stock.
These instabilities may result from activation of dormant
transposons in the chromosome. The consequent genetic variability is
known to persist for many generations and is difficult to eliminate
by backcrossing (Haslberger 2003).
Yet our food supply remains safer than it ever has been. And we must
never forget that these mutation crops are very much a part of the
crops of the "organic" farmers whose opposition to synthetic
pesticides requires them to use varieties that are more resistant to
disease infestation.
Natural Toxins
It
is interesting to note that in searching for the possible
"unintended consequences" of rDNA. the most serious unintended
outcome was found in crops from "traditional breeding.
a traditionally bred squash
caused food poisoning, a pest-resistant celery variety produced
rashes in agricultural workers (which was subsequently found to
contain sevenfold more carcinogenic psoralens than control celery)
and a potato variety Lenape contained very high levels of toxic
solanine (Haslberger 2003).
These crops are no longer cultivated (Kirschmann and Suber 1998,
Ames and Gold 1990a and Prakash 2001). The most recent episode was
an outbreak of "killer zucchini" which produced the "only food scare
in recent history in New Zealand" and interestingly it "stemmed from
the farming methods of organic farmers and others who use
unconventional farming practices" (LSN 2003). In February 2003,
Zucchini with "high levels of natural toxins" was sold on the
vegetable market and resulted in "several recorded cases of people
suffering food poisoning" (LSN 2003). We often worry about the
toxicity resulting from spraying crops but rarely are we as
concerned about those from not spraying them.
An examination of common factors shows the levels of toxin
apparently increased among zucchini growers who did not spray their
crops. Unusual climatic conditions meant there were huge numbers of
aphids about in January and insect predation is sometimes associated
with increased levels of toxins in plants (LSN 2003).
In
this case, there was a "clear link between increased toxin levels
and older open-pollinating varieties of seeds" (LSN 2003). It is
another of the "inferior is superior" views that there is something
inherently virtuous in farmers planting their own saved seeds but it
is "likely zucchini grown from saved seed will therefore be more
vulnerable to toxin build-up" (LSN 2003).
The scientists who reviewed the "killer zucchini" case were very
clear that the "most likely cause of the build-up of toxins is a
genetic weakness in older varieties." However worthy the farmer's
intentions may have been, "the growers' decision to use older
varieties and to save seeds is likely to have resulted in a health
risk for consumers - something which has never happened with crops
derived from genetic modification" (LSN 2003).
The work of Bruce Ames and two different National Academy of Science
studies have shown that over 99.9% of the toxins that we ingest are
the natural products of plants, and as we have noted, most of them
are rodent carcinogens (Ames et al. 1990a&b, NAS 1973 and NRC 1996).
Worst of all from the inferior-is-superior perspective, with rDNA,
conventional farmers will mass-produce better protected food with
fewer toxins in the plant and on it. Mass production means that
those who consume these safer foods are not partaking of some
special virtue, apart from better health.
Some Ideas are Dangerous
The inferior-is-superior food fetish is harmless as long as it is
the exercise of personal consumption practices of those who can
afford it. But it has taken a nasty turn, as these ideas are now
lined up in opposition to the use of the latest and best in modern
science and technology to contribute to meeting the needs of a
growing world population for improved nutrition provided in an
environmentally sustainable way. When these ideas galvanize street
protests, the burning of crops in the field and buildings, the
destruction of research in improved crop production, and other
actions that make advances in agriculture more difficult, then these
ideas have become dangerous and must be countered vigorously and
continuously with better ideas. Freedom of speech and freedom for
research must protect the minority but also the majority that may
wish to carry forward the enterprise of science/technology and
promote the benefits that they allow. This means that the laws
protecting crops in the field, research, and researchers must be
enforced. Modern agricultural science has given us much and our task
is both to defend it and to find ways to allow access to those who
have not fully realized these benefits.
Scarcity and Snob-value
In
addition to higher levels of nutrition and cleaner, safer food,
modern consumers now have an incredible array of foodstuffs from
around the world as well as an opportunity to savor, with some
frequency, cuisines from cultures whose culinary delights were
unknown to their parents or grandparents. In an article
appropriately titled, "Mean Cuisine," Greg Critser asks the
question, "Why, in a time of unprecedented abundance for
everyone--vine-ripened Mexican tomatoes for $1 a pound! World-class
reds and whites from Montepulciano d'Abruzzo for $5 a bottle! An
international glut of inexpensive extra virgin olive oils and
cheeses and nuts and fruits at Trader Joe's and Price Club! - why oh
why are the chefs of America so dour, so chary - so very very very
bummed out?" (Critser 2001). "Why the big change" Critser asks? "Ten
years ago, a pint of cold-pressed, extra-virgin Italian olive oil
would set you back about $20. It was scarce, and so it was the
chef's preference. Today one can buy a gallon for the same price.
Today, of course, imported oil is not the chef's choice" (Critser
2001). The answer is abundance, and abundance is a threat to the
values of snobbery of the critics of modernity.
Critser adds that the "culprit is globalization." The foods,
particularly, those that were once imported at a price beyond the
reach of ordinary citizens, have now become common and relatively
cheap in supermarkets across the land. Globalization has been the
mechanism by which the increasing global food production leads to
greater diversity of available foodstuffs and therefore greater
choice, but it also deprives the snobs of that sense of exclusivity
in the items they consume. In a world of increasing free trade and
technological advancement, the food snobs seek to pursue an
anti-trade ("buy locally"), anti-technology agenda in order to
preserve their status and self-esteem, even if it is at the expense
of continuing the increase in food production to meet a growing
world population and make the technologies of accessibility and
abundance available to those who have not had the opportunity to
benefit as fully as others from them. Rules that make items of
consumption more expensive, restrict access to them to those who can
afford them, thus making them more prestigious. Whatever the
rhetoric used to defend them may be, the fact remains that those
actively opposing the advance of science and technology are also
working against the well-being of the less fortunate citizens of
this planet. Humanism and science are today, as in the past,
intricately interrelated in the endeavor not only to understand the
world but also to make it a better place for all who call it home.
Thomas R. DeGregori (http://www.uh.edu/~trdegreg/)is a Professor of
Economics at the University of Houston and the author of the
forthcoming book, Origins of the Organic Agriculture Debate Iowa
State Press: A Blackwell Publishing Company - http://store.yahoo.com/isupress/0813805139.html
- which formed the basis of much of the material in this paper along
with material from his other recent books.
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2.5 Links