Revenue Law and
the Environmental Legal System
David William Spain, B.A., L.L.B.
[Queensland University of Technology Law School /
November 1996]
INDEX
1. OVERVIEW
2. NEOCLASSICAL ECONOMICS AND THE ENVIRONMENT
(a) Neoclassical Economics
.....(i) Overview
.....(ii) Market Failure
.....(iii) State Failure
(b) The Tragedy of the Commons
.....(i) Overview
.....(ii) Decimation of Raw Resources &
Biological Capital
.....(iii) Atmospheric Pollution
.....(iv) Australian Economy
(c) Incommensurate Goods
.....(i) Overview
.....(ii) Existence Values
.....(iii) Intergenerational Equity
.....(iv) Health & Sanity
.....(v) Private Ownership of Natural
Resources
(d) Modern Neoclassicists
.....(i) Pigou, Coase & Boulding
.....(ii) Neoclassical Rallying
.....(iii) Cost Benefit Analyses
(e) The Sustainable Market
.....(i) The Nature of ôDevelopmentö
.....(ii) Low Impact, Low Demand
Sustainable Lifestyle
(f) Triangulation
3. REGULATORY CHARACTERISTICS OF THE ENVIRONMENTAL LEGAL SYSTEM
(a) Overview
(b) Command & Control Regulation
(c) Facilitation of Consensus
(d) Economic Instruments For Environmental Purposes
.....(i) Overview
.....(ii) Discharge Fees
.....(iii) Treatment Fees
.....(iv) Environment Taxes & User
Fees
.....(v) Product Charges
.....(vi) Tradable Pollution Rights
.....(vii) Tradable Resource Rights
.....(viii) Deposit Refunds
.....(ix) Performance bonds
.....(x) Subsidies for Non-Pollution
4. SITE REVENUE -- GENERAL
(a) Introductory
(b) Assessment & Collection Mechanisms
(c) Broad Economic Effects
(d) Specific Planning Effects
(e) Site Revenue and the Environment
(f) Political Realities
5. STRUCTURE & OPERATION OF ECONOMIC INSTRUMENTS FOR
ENVIRONMENTAL PURPOSES
(a) Overview
(b) Independent Authorities
(c) Calculation of Charges
.....(i) Introductory
.....(ii) Target of the Charge
.....(iii) Discounting
.....(iv) Purpose of Reserve
Benchmarks
(d) Assessment of EIEPS for Point Pollution
.....(i) The Nature of Point Pollution
.....(ii) Difficulties in Monitoring &
Assessing Point Pollution
.....(iii) Categories of Wastes
.....(iv) Neutralization of
Non-Hazardous Wastes
.....(v) Neutralization of Hazardous
Wastes
(e) Assessment of EIEPS for Non-Point Pollution
.....(i) The Nature of Non-Point
Pollution
.....(ii) Peculiar Difficulties of
Non-Point Pollution
.....(iii) Carbon Sequestration
(f) Assessment of EIEPS for Renewable Resource Extraction
.....(i) Introductory
.....(ii) Valuation of a Renewable
Resource
(g) Assessment of EIEPS for Non-Renewable Resource Extraction
.....(i) Introductory
.....(ii) Auctioning Quotas for
Non-Renewable Resource Extraction
.....(iii) FinderÆs Fees
(h) Earmarking of EIEP Revenue
6. CONCLUSION
***
1. OVERVIEW
Due to the dominance of neoclassical economics over the world's
markets, the value of resources extracted from, and of pollution
emitted into, the planetary environment has been largely disregarded
and discounted. This has led to ruthless private exploitation of the
global
commons, manifesting in unrationed extraction of raw resources
and damage to land, rivers, sea and air. Only by integrating economics
with ecology can "sustainable development", which meets
current needs without compromising the future, occur. That integration
cannot be left up to profiteering industry nor indulgent indigenous
governments and requires forceful intellectual demand.
To some extent, in the more developed nations, environmental
externalities have been curtailed by command and control
regulation, but the bulk of the externalities (especially
non-point pollution) continue unabated, with severe effects upon
human health and viability, other species, global climate and
intergenerational equity.
It is possible to minimize central planning and state control, yet
to retain the free market as the facilitator and regulator of
production and exchange, provided that the environmental legal
system adopts appropriate economic instruments which address and
redress these externalities. In this way a true & viable
economic efficiency can be eventuated. Given resource constraints,
and if equity is to be achieved between the developed and developing
worlds, the new stasis will inevitably involve decentralized,
co-operative, self-managing, low-impact, low-demand communities, but
there need be no diminution of the quality of life.
The appropriate economic instruments must be operated against, or
rather as part of, a Site Revenue economy, where annual rental value
of sites privately occupied is collected as public revenue (in lieu
of all forms of taxation). In this regard, such instruments address
not only the locational values of sites but also resources extracted
out of them and wastes expended into the global commons.
The Site Revenue system must be adopted globally. All rentals
within the Site Revenue system should reflect market pressures on
the basis that the bequest value of existing species and habitats is
inestimable, that a safe minimum must be retained of all biological
stocks, and that known raw resources must be rationed, at any given
time, on a 1000-year plan. Whilst general rentals from locational
value of sites may be paid into general revenue, rentals in respect
of environmental externalities must be earmarked for expenditure
specifically related to those impacts.
2. NEOCLASSICAL ECONOMICS AND THE ENVIRONMENT
(a) Neoclassical Economics
....(i)
Overview
The standard neoclassical model of an economy is an abstract, blackboard
theory, which bears little relationship to the real world economy.
It envisages a self-perpetuating, "closed circuit" where
boundless, free resources are endlessly converted by labour into
goods and services and finally become resources again. Consumer
prices are seen as having a natural stability reflecting resource
availability & extraction costs, production costs and demand.
As a result of viewing the environment as a boundless,
common-property resource with zero price, goods in neoclassical
economies were produced with high pollution externalities and sold
unrealistically cheaply, thereby stimulating over-demand and
exacerbating degradation. Neoclassical markets fail to audit or
account for a plethora of external impacts & incommensurate
goods, whether public, private or non-human, thereby systematically
undermining ethical responsibility. In their encouragement of
material acquisition (pace the clamouring protestations of
subjectivist & 'liberal' devotees), industry and the values-free
"ideal" market shape & serve hedonistic and "want-regarding"
motivation whereby fortuitous, shallow preferences, which
indulgently disregard ideals, are easily driven by the perverted
blandishments of advertising.
In fact, raw resources are neither endless nor produced, but
rather are in limited supply and extracted. Moreover, extraction and
transformation of them (e.g., using fossil fuels to supply energy)
and expulsion of their final wastes both exploits and depends upon a
world outside of such closed circuit. The real economy is in
fact linear (in its prior & subsequent dependency) and
dissipative in the way it uses potent materials and, having
converted a fraction into human capital, expels the vast bulk as
useless, low-grade heat or toxins by the remorseless process of
entropy.
Indeed, it has been cogently argued that incompetent or corrupted
professors from the neoclassical and Keynesian school of economics
deliberately and/or negligently attempted to pervert & debase
their discipline and serve vested interests. The method used was to
disguise the value of land (or sites generally) as a unique factor
in production by subsuming same within the broad aggregate of
'capital' generally, and by this obfuscation of basic economic
concepts to forge mind control over economic thinking so as
to distort perspective upon, or blinker from view, the potency of
locational and environmental factors. Thus did economic theorizing
bifurcate from the real world and, adding to its fundamental
estrangement preoccupation with the ôintellectual toyö of
mathematical modelling, lead to its current confusion, inutility and
intellectual dead-end. The mystery of persistent economic failure is
thus explained.
This extraction and consumption of raw resources, and this
expulsion of wastes, may benefit industrial shareholders &
consumers, but beyond that is conducted at the expense of the global
commons. The raw resources involved are (recycling aside) no longer
available for use by others or by future generations. The pollutants
expelled not only damage species and threaten intergenerational
inheritance, but impinge in various ways upon the amenity, health
and materials of others.
It has now become apparent that unrestrained "cowboy"
extraction of resources and waste disposal by dilution and dumping
are no longer viable due to a burgeoning planetary population, the
moral imperative to maintain intergenerational equity, the impact of
extraction upon the biosphere and the massive quantity and potency
of wastes, which, even if diluted and dissipated, resurface in
ultimate overloaded sinks. Yet the neoclassical market still
basically prevails such that dominant political and industrial
attitudes continue to endorse both an indefinitely growing economy
and private enrichment at public & environmental expense.
"Sensible, economical conservation ... is too prosaic, and
besides it violates the .... credo of preferring the most
resource-using solution. Real men don't conserve resources; real men
have vision and acquisitive genes, they sally forth like their
warrior progenitors and grab more. Conservation is for sissies..."
Only forthright collective action can constrain these impacts,
which will be ignored by individualistic free enterprise. Such
collective action must, moreover, be international in scope, since
merely national constraints (e.g., using resource extraction charges
or pollution fees) can be subverted by relocating industry offshore
to regions with "comparative advantage"-- a process much
assisted, the days, by the high mobility of both capital &
cosmopolitan management.
....(ii) Market Failure
Neoclassical economics praises efficiency, that is, production of
the most (so as to satisfy all demands) at least cost. It is a
concomitant of this attitude that efficiencies (i.e. aggregate
benefits) may be improved but at the expense of equities (ie by
causing a minority to lose). So far as human loss is concerned, it
can be argued that (provided the costs of doing so are not too
high), this sacrifice may be redressed by redistributing income
(e.g. by giving the dole to farmers dispossessed by mining), and is
not integrally a concern of law. An important concept in considering
ôefficiencyö of this type is Pareto efficiency,
which exists when a situation cannot be changed to make someone
better off without at the same time making another worse off.
The neoclassical ideal, efficient market fails to exist in
reality, because it discounts the inarticulate and unborn,
monopolies subsume competition, transaction costs intervene and
informational asymmetry prevents all parties knowing all relevant
factors, thereby rendering competition imperfect. Also ôfreeloadersö
benefit from 'public goods' to which they have not contributed
(e.g., lighthouses, defence): an unattractive proposition to private
enterprise.
More particularly, for our purposes, a vast range of unpriced
adverse impacts upon third-parties and the environment are ignored.
Only the efficient anthropocentric allocation of an economy's output
is weighed, whilst ignoring the environmental impact which the scale
of the throughput has upon the communal environment. Modern markets,
virtually ubiquitously, fail to reflect (and so "externalize")
environmental impacts, whether occasioned by consumption of
non-renewable resources or by unconstrained pollution. Conventional
economics endorses maximization of instant throughput (ie of
production, sales, turnover and profit) and has little regard to
increasing efficiency whilst maintaining substance in the long-term.
This failure to integrate economy and ecology renders impossible
the Pareto-efficient allocation of resources: it makes some people
(eg shareholders and consumers) better off but only by making others
(e.g. natives, downstream communities, future generations --
not to mention species) worse off. In considering any calculation of
market efficiency it is essential that account be taken of the true
value of raw resources extracted, natural capital harvested and
pollution externalized. Any such adjustment is complicated: neat
dollar values cannot be defined.
Measuring and constraining impacts is crippled by the lack of
common units and methods for assessing or pricing environmental
degradation, or any accepted resource accounting system. This lack
leads to an underpricing of resources and of impacts with consequent
burgeoning consumption and pollution. Depletion of human capital
(e.g., by living off savings or by running down machinery with no
sinking fund for its replacement) is not treated as income, but
consumption of natural capital is. Rather than treating resources
exported and pollution engendered as being costless givens having no
downside on GNP, National Resource Accounting should be adopted to
analyze and trace physical resources and so identify impacts &
demands, thereby facilitating planning and reflection of
externalities in national accounts.
This failure to value the environmental commons as a public good
is, in reality, not so much an inherent or necessary free market
failure as the construction and imposition, by treacherous academics
and financiers, of a deceptive and fraudulent market.
....(iii) State Failure
State failure generally (including the failure to master
environmental externalities) is occasioned by inherent corruptions
in democracy, pathologies in bureaucracy and perversions in the
market-state interface, and by the confusions, self-interests and
buck-passing which bedevil this complex politico-bureaucratic
organization.
State failure is exacerbated in democracies due to its inherent
structure. Politicians are elected by popular vote and tend to
function from base motives, in their own short-term interest (of
remaining in office, getting rich etc.), without regard to the
global commons or to future generations. Politicians rarely have
technological expertise and are exposed to capture by bureaucrats &
industrial lobbies. Industry possesses detailed information but has
a strong interest in constraining remedial action and in influencing
or ameliorating the design of anything which must be done. Indeed,
the power of such lobbies is insidious and can render conflict
stillborn, thwarting its very entry into the political agenda (as
remains the case with the Site Revenue debate).
Politicians are thus prone, in their decision-making, to many
improper (selfish or short-sighted) influences and lobbies. Such
sectional pressure cripples altruistic and informed political
motivation, especially where desirable reform would impact upon
welfare dependents. This is especially so as regards housing, food
and fuel prices, which are invariably substantially distorted since
markets in such products are shaped by decades of public
intervention reflecting significant political resistance against
green revenues which reflect 'true' environmental costs. The
market-state interface has become very blurred, given state
participation in the market and widespread use of private
contractors (who often gain powerful leverage to define strategies).
State failure is evidenced by inappropriate laws, easy permits,
lax regulation, failure to curb externalities or prosecute, secret
profiteering and even active bribery and corruption: a multiplicity
of costly regulations ineffectively combating symptoms rather than
causes. The most viable policies are not so much regulatory/removal
as either structural (reducing demand, eg the need for private
transportation and fuel) or preventive (e.g., by "clean
technology" reducing raw material input and waste), but there
is little will for their adoption and implementation.
Whilst vulnerability exists at State & Federal levels, the
greatest dangers occur where extensive environmental
responsibilities are delegated to politically-sensitive local
authorities which strive for a consensus with industry. Where
industry and development forces are able to (in effect) bribe
politicians or councillors by "campaign donations" etc.,
the unfavourable interaction between the market and the state is at
its most incestuous and the rout of public decency is complete.
The bureaucrats comprising government instrumentalities, like
free-enterprise individuals and their political masters,
also rationally pursue their own self-interest at the expense of
ideals . Thus, a hydro-electric or a municipal waste authority will
tend to inflate its empire by building dams or sewerage works as if
these were ends in themselves, rather than mere means. Failure to
impose effective, integrated pollution control at the source (opting
instead for lax licensing, dilution and end-of-pipe solutions)
spawns a burgeoning and wasteful bureaucracy and extensive but
largely idle treatment empires which can ultimately encourage rather
than constrain production of polluting material lest costly works
lie idle and appear superfluous and officials become unemployed.
This leads to distortion, bias and ineffectiveness in regulations
since the authorities create the necessary empire (of employees,
power & budget) merely on paper potentials (not in actual or
effective investigations and prosecutions). Bureaucrats prefer
central control and routine solutions, neither of which are
sufficiently flexible to deal with the complexity of environmental
externalities. Case-specific solutions (which might entail
bothersome thought and initiative) are ignored and expensive
solutions (which build well-paid but vapid regulatory empires)
displace prevention.
Both regulatory bureaucrats and regulated industries exist
symbiotically in a sphere of specialist technicality (for which
wealthy industry, ever effective in lobbying, holds the relevant
data) which politicians and laymen cannot enter. They talk the same
jargon and each hopes to be head-hunted for plum jobs with the
other: this leads to "regulatory-capture" (which is
usually tacit, informal and subliminal) of bureaucrats by
eco-industrial complexes. Once they are in cahoots (usually
endorsing central control and routine mass solutions) specific
abuses are impersonalized into anonymous, general categories.
Responsibility is distanced into remote and sluggish bureaucracies
and the wool is quickly pulled over public eyes.
In this way, the bureaucrat-industry cartel milks taxpayers' funds
and perpetuates its own indulgences. The more industry is allowed to
impact the environment unhampered, the more revenue can be squeezed
-- for a few decades -- out of the artificially expanding economy,
the more empires there are for bureaucrats with pretend clean-up
campaigns, and the more profits for the few. The devil laughs all
the way to the bank. Only disasters (such as cholera outbreaks or
the hole in the ozone layer) tend to break this cartel's grip nexus
(which is more the incremental result of the bureaucratic and
regulatory process than a deliberate conspiracy) and refashion
meaningful policies.
As a result of this state failure, for two decades industry has
been allowed to mass-produce in usual or enhanced volumes, subject
perhaps to dilution and end-of-pipe regulations and subsidies which
have been a boon to bureaucratic empires, done nothing to constrain
the mounting quantum of externalities, and (by displacement) has
created new problems. These problems are essentially iatrogenic
(doctor-induced) and multiply the problem, not least because
repairing activity is more expensive (for the state) than prevention
and increases dependence on taxation of growth industry.
2(b) The Tragedy of the Commons
....(i) Overview
Imagine yourself as a herdsman in the Sahel at a time when the
total population of herd animals has just reached the carrying
capacity of the land. Suppose you have a chance to acquire ten more
animals. Suppose also that you are in complete possession of the
facts -- that you understand carrying capacity and the dangers of
transgressing it. Should you, or should you not, add ten more
animals to your herd?
Since the additional animals are... ten more than the carrying
capacity, all your animals will have a little less food per capita
next year than this. So will everyone else's animals. So will every
other country. Even so, you expect a net gain from the acquisition,
for this reason: the gain is all yours, but the loss (from
transgressing the carrying capacity) is shared among all the
herdsmen. Your share of the loss is only a small fraction of the
total. Balancing your gain against your loss you decide to take on
ten more animals. In economics this is called a rational decision.
To behave otherwise would be to behave irrationally--in the short
run.
Every other herdsman in a commons must, if rational, reach the
same decision -- not only this year but in every succeeding year. In
the long run this kind of behavior produces disaster for all, as
overgrazing turns semidesert into desert. Even if you understand
completely the disastrous consequences of living by the rules of the
commons, you are unable to behave otherwise. The rules pay you to do
the wrong thing.
As a good citizen you might refuse to add to your herd, but what
makes you think every other herdsman would also be a good citizen?
If even one participant in the commons should act in a "selfish"
(read, "rational") way, your restraint would go for
nought. As selfish and rational exploiters appear at the expense of
the public-spirited, envy will cause some of the latter to join the
"rational" decision makers in their ruinous behavior.
What might begin as the selfish rationalism of a few, ends in the
corruption of the many.
The land, rivers, oceans, atmosphere, climate, and all natural
species inhabiting them were not made by humanity yet are,
basically, a common good freely available to all and hence a commons.
However, freedom rationally to pursue self-interest by exploiting a
commons brings ruin to all, and this remains true whether that
commons be local grassland or the ecosphere.
For millennia all work was performed by people and animals eating
food energized by the sun, but for the last century over 90% of work
has been performed by energy derived from limited stockpiles of
fossil fuels containing millions of years of accumulated
photosynthesis. For a time, say as late as 1950 (aside from
localized tragedies), there may have been some justification for a
general sense that basic resources were endless and that natural
systems would cleanse wastes. Against this background, the ôcowboyö
ethos of allowing finders to keep resources (subject to a few
extraction costs and royalties) and encouraging the mere dilution
and dissipation of pollutants (eg via ocean outfall, high
smoke-stack or toxic dump) seemed a fair enough way to go.
[Incidentally, it should be noted that the resultant pattern has set
up an expectation of rights to extract or pollute which have no
acceptable basis].
Exploitation of renewable biological resources (such as forests
and fish) exceeds natural replacement of the stock and is eroding
basic capital. The result has been mounting loss of vegetation,
erosion of topsoil, species extinction etc. This loss diminishes not
only the beauty and complexity of the planet but even the food
supply and social harmony of humanity. Environmental goods (such as
clean air and water) are scarce commodities which are widely valued
but which have for centuries been used and abused by individuals and
industry generally for private gain, often to the disadvantage of
those at remote locations. The social costs of such use must be
covered by the social benefits.
Technological improvement and potency, together with swelling
population, are spawning far-reaching global environmental impacts
from pollution, resulting in rapid degradation of the ecosphere.
Specific areas of impact include greenhouse gas emission,
stratospheric ozone depletion, toxicity build-up in dumps, pollution
of coastal waters, etc. Apparent advances in agricultural
productivity (based on broadscale mechanized farming, fertilizers
and agriculture) in fact is accompanied by excessive clearing of
vegetation, the acidification erosion and salination of soil
(leading to deforestation and desertification), loss of biodiversity
and eutrophication of surface water. Natural ecosystems are
amazingly varied and resilient but biospherical impacts and stresses
may be complicated and diverse. Often a combination of factors
(e.g., acid rain, discharge toxicity, soil compaction, salination
etc.), create a chronic predisposition which an inciting factor (eg
drought, frost or mechanical injury) may tip over the edge. Whilst
local environmental decline has occurred over the millennia, only
now is pollution of air, water and land becoming so universal as to
affect the vast bulk of people and diminish profitability of major
industries (e.g., tourism and fishery).
Without constraints, an individual's cost of purifying waste will
always exceed that of dumping it in the commons. Realizing this,
many environmentalists placed general faith in government
intervention and indeed perceived communistic planned economies as
having a systemic advantage over free economies as regards
collection of information and application of constraints. The
crumbling of communism has disclosed massive environmental abuse
(e.g., in the ocean-dumping of nuclear wastes and the diversion of
waters feeding the Aral sea) and revealed how misplaced was this
latter belief. Indeed, that general faith too is now withering as
failure persists to tackle pollution at source. Certainly there has
been increased governmental intervention, but it has been limited to
mere dilution, which does not constrain production of pollutants per
se.
Whilst most people in industrialized countries (comprising 20% of
earth's population but consuming 80% of its wealth) tend to dismiss
these impacts as remote and concern with them as alarmism, and
whilst politicians and economists in advanced countries have
as yet done little to come to grips with the issues, the fact is
that severe indicators exist and it is foolish to ignore their
warning.
(ii) Decimation of Raw Resources and Biological Capital
It takes about 1 hectare of agricultural land to feed one person
in a rich country, but such land (which is diminishing through
erosion) comprises only about 1.5 billion hectares of the 13 billion
hectares on Earth, placing an absolute cap on the population
sustainable. The average per capita annual consumption of biological
resources in the rich world is 15-20 times that on the poorest half
of the world's people. Approximately 40% of all non-oceanic plant
and animal life is harvested by humans, yet catch rates are
diminishing (there is evidence core biological stocks are being
consumed), the bulk of the industrializing world is at present only
partially impacting and our population may well double. This bodes
ill for global peace.
Extensive academic studies over the past decade, whilst largely
ignored in government policy, solidly establish that at present 20%
of the earth's population (at present 8 billion, projected by 2065
at 11 billion), being able to bid in hard cash (and by their
continued consumption to continue doing so), consume 80% of its
natural capital. The production thereby engendered is usually
unsuitable for the needs and budgets of the world's poorest half.
As regards exploitable reserves of mineralized ore (both known
and likely), if 11 billion people were to consume them at current
rates they would be totally exhausted within 30-40 years. Technical
advance cannot solve these problems, and seabed deposits might in
general double quantities as regards only a few items (e.g., copper
and manganese). The cost of extracting minerals (presently 560
litres of oil p.a. per American) is also rising.
Yet estimates of world oil supply indicate a serious situation
where production may peak about 2000 and dwindle to 1/3 by 2025: gas
reserves are roughly equivalent. Broadscale nuclear energy appears
unlikely due to massive construction costs and accident and waste
problems, whilst nuclear fusion is far from perfected and may be
quite limited due to shortage of lithium. Natural energy sources
(wind, solar, tidal, hot rock) have decent potential, especially if
constructed whilst existing metals and fossil fuels are available,
but encounter expensive and wasteful storage problems and cannot
sustain anything like current regular consumption of energy from
fossil fuel. To obtain energy from coal, especially the sulfurous
brown coal of China, would exacerbate the Greenhouse effect. To
prevent the carbon content of the atmosphere increasing any further
fossil fuel use must be reduced by 60-80%: if this were done
immediately, each person in a rich country would receive only 1/18
of present consumption.
It is quite impossible that all the world's population could
attain the material wealth currently enjoyed by advanced nations.
Sustained economic growth is not possible because human activity
already fills the available ecological space. Dominant ôadvancedö
patterns of lifestyle and consumption are unsustainable: fundamental
changes and major reductions in resource use must be confronted.
There need be no, or little, reduction in quality of life is that
transition is planned wisely and done in good time. Yet, far from
reining in growth, world economies are pursuing it: at 4% pa growth
sixteen times as much will be produced in 70 years. Such multiples
are manifestly absurd, and cannot be achieved by promoting the
service sector (much of which is dependent upon electricity, tourism
and travel). In any event, economic growth increases inequality and
polarization: the economy is driven by greed for profit and market
share, not by need, and it is a delusion that growth actually
improves experienced quality of life.
There are strong grounds for concluding that present levels
of resource use and environmental impact are totally unsustainable,
yet we are committed to an economic system which will seek to
multiply them many times in coming decades, without limit. It is
difficult to understand the mental functioning which enables almost
all economists and politicians to proceed as if there is no need
whatsoever even to consider possible limits to growth.
Our economic theory takes into account only monetary values. It
is therefore incapable of dealing with the most important values and
costs the real economy involves, such as the value of species,
ecosystems, communities, peace of mind, security etc., or the cost
of the anxiety, stress and depression inflicted on workers,
unemployed and poor people, or the cost of the noise an airport or
highway imposes. Whilst conventional economics praises maximum
consumption and sufficiency is irrelevant, perhaps we should
be more concerned with optimum patterns. "To define sufficiency
one must ask æsufficient for what? The answer is sufficient
for the good life. "
....(iii) Atmospheric Pollution
The massive, rapid and unprecedented emission of ôgreenhouseö
gasses blanketing the Earth's atmosphere since the Industrial
Revolution has raised average planetary temperature by some 0.5oC in
the past century and is likely, upon current best estimates, to
raise planetary temperature by 0.5oC per decade, effecting unknown
climatic, rainfall and disease changes. Greenhouse gasses
include CO2 from the burning of fossil fuels for energy and
transportation, methane (CH4), CFCs from refrigerants and NO2 from
fertilizers and nylon manufacture. By swelling the upper layers of
the ocean and melting ice the Greenhouse effect is likely to raise
sea-level some 20 ( 10 cm by 2030 and some 65 ( 35 cm by 2010.
Changes in sea temperature can destroy fish-stocks (eg collapse of
the herring stock in the English Channel when sea temperature
dropped by 0.5oC during the 1930s).
Ozone in the stratosphere is formed by the impact of light upon
oxygen molecules and protects the Earth from ultraviolet radiation.
Man-made "inert" chlorofluorocarbon [ôCFCö]
gasses (much used as refrigerants until recently) in the
stratosphere are ionized by solar ultraviolet radiation to free
chlorine ions, which scavenge free ozone by catalytic reaction,
allowing ultraviolet rays through to the planetary surface where is
can cause cancers and inhibit photosynthesis, especially in
phytoplankton which is so vital as the base of the oceanic food
chain. Other pollutants (e.g., sulphur) have short atmospheric
residence and fall out as a deposit or acid rain within the
immediate locality or directly down-wind.
....(iv) Australian Economy
At present the mining and agricultural industries in Australia
are exporting some $40 bn and $20 bn worth of Australian natural
wealth per annum. In many ways the agricultural industry is also a
miner -- of topsoil (which is lost via erosion from hard-hoofed
animals or as minerals in grains and meat) and of vegetation. Adding
to this $60 bn income some $22 bn from manufactures, $14 bn from
inbound tourism and some $4 bn from investments gives Australia its
total foreign income of $100 bn per annum, which total is $20 bn
short of our foreign expenditure at $120 bn per annum (being $85 bn
on goods, $20 bn interest repayment on $250 bn debt, and $15 bn
external tourism).
Clearly modern Australia is selling off the farm,
plundering the trust fund which belongs to future generations, in
order to pay for its consumption of consumer goods. This
plundering involves not only loss of natural capital but also
extensive environmental and expense. The massive wealth being
generated by this exploitation of natural capital, is being
squandered upon imported consumer goods, with little being invested
into our own manufacturing infrastructure. Indeed, to have a booming
manufacturing sector would strengthen the Australian dollar, making
our exported minerals less competitive.
This is the motivation underlying political and bureaucratic
kowtowing to vested interests as reflected in reluctance to capture
the locational value of sites (thereby fostering speculation in them
and diversion of investment from productive enterprise) and the
delay in enabling establishment of an Over-The-Counter sharemarket
(which would enable funding of small-to-medium enterprises). It also
explains the excessive destruction of protective tariff barriers:
whilst exposure of native industry to competition is healthy in
principle (so as to avoid protecting mollycoddled industries with
flabby managers and greedy unions), the exposure of competent home
industries to foreign competitors enjoying unequal advantage (eg in
exploitative labour laws or in liberties to degrade environment),
whilst keeping our currency weak and serving mining interests in the
short term, destroys vital home industries and skills and is counter
to long term national interest. Of course, any local tariffs
collected to balance unfair conditions in exporting countries should
be applied -- regardless of national boundaries and jurisdictions --
only to remediate such unfair conditions.
2(c) Incommensurate Goods
....(i) Overview
Incommensurate goods are attributes of reality which cannot be
valued by the market. They include existence values, bequest values
and such valuable Aristotelian intangibles as friendship,
health and sanity. Incommensurate goods tend to be ignored in the
neoclassical marketplace, and to the extent that it ascribes value
to them, it does so arbitrarily and invalidly.
....(ii) Existence Values
Existence value is the value attributable to the existence
of a species quite apart from humanity. Metaphysically, it is
arguable that flora, fauna, biosystems and even geographical
features and places [all hereinafter severally and jointly termed "natural
entities"] have objective intrinsic values, which exist apart
from human ends and evaluation. The anthropocentrist (with
ontological extravagance) argues in reply that humanity is the
ultimate measure of all value and source of evaluation, so value
cannot exist without humanity. Both positions are unsubstantiated
emotional assertions: whether values can or cannot exist without the
"perceptions" of human evaluators, they may nevertheless
ultimately have (or not have) humanity as their sole object. The
real debate about values is essentially biological, ethical and even
economic (in a long-term, practical sense), not metaphysical.
Biologically, natural entities can flourish or decline quite
irrespective of humanity. Sometimes a halt to the flourishing of a
species (e.g., decimation of an ant colony) is essential to its
survival, or the death of an individual creature (eg an earthworm)
is essential to the flourishing of another (e.g., a kookaburra).
Clearly, at a biological level, independent of humanity, individual
natural entities have their own goods, as do collectives of them; so
do ecosystems, independently of their constituent parts. Moral
imperatives do not necessarily follow for humanity from recognizing
natural entities as biological goods: we may remain indifferent or
antagonistic to the good of cockroaches or the HIV virus.
Under broad anthropocentric valuation, the flourishing of
specific natural entities may range from "good" for
instrumental (i.e., exploitation) reasons (e.g., oceanic fish
stocks), through "good" despite their non-exploitation
(e.g., black cockatoos) -- or indeed because of same (e.g., unspoilt
wilderness) -- to "bad" (e.g., funnel web spiders). How
far can we legitimately take this? We cannot adopt a simple
utilitarian approach and endorse extensive or blanket destruction of
some things (e.g., bushland or even rainforests), so that our
suburbs can profitably sprawl and our Parliament House be nicely
lined, on the basis that this serves "the greatest good of the
greatest number". To do so involves an impossible cross-species
ascription and calculus of values, and is akin to endorsing the
hedonist utilitarian who legitimizes the pleasures of the sadist and
child molester.
Objective environmental goods (e.g., clean air and water, natural
vistas, silence free of raucous engines, biodiversity, resource
availability, healthy pollution sinks) are essential to Aristotelian
well-being. It is possible to accommodate such "existence"
values into human calculations, but the difficulty is quantifying
them independently of subjective human evaluation. No doubt some
reflection of value for incommensurate goods appears in the price of
commodities or sites, but the precise quantum of that reflection is
difficult to comb out, and is perforce merely partial: such goods
have inherent worth and this is not to be equated with the price of
icecream. What is the dollar value of a viable fragment of remnant
bushland in a sea of suburbs, of a sustainable koala population, of
retaining the species humpback whale, of the last stands of wispy
vulnerable casuarina scrub upon which depends the black cockatoo?
Ultimately, the best case for an environmental ethic must proceed
on Aristotelian lines: valuing natural entities for their own sake
is good because doing so deepens and defines our humanity and is
constitutive for our own flourishing. Aristotelian well-being shuns
mere "want-regarding" preference satisfaction as shallow "supermarket"
motivation, an ignorant and indulgent pandering to uninformed
desire. It is "perfectionist", aiming at informed
definition of the "good life" by requiring recognition and
satisfaction of "intrinsic" ideal principles and values,
transformed by education and experience beyond the narrowly
utilitarian and commercial, having inherent worth and transcending
monetary price. Such principles are truth, virtue, health, sanity
and friendship, because these "answer to good and competent
evidence" and striving for them cultivates that detached
perspective which is the essence of being human.
It is quite irrational to crave a debauched world or a ôsaucer
of mudö. The conclusion is inescapable that economics cannot
properly constrict its discipline and the intrinsically-valuable
non-human world to market satisfaction of ecologically-malignant
anthropocentric demands or financial profit now, at the expense of
long-term public health, future generations and other species.
Natural entities and resources are not extrinsic instruments created
for human indulgence.
....(iii) Bequest Values:
Intergenerational Equity
Intergenerational equity is concerned with the moral imperatives
of what sort of world we hand on to our children and grandchildren.
We are indebted to our forebears for the physical infrastructure
they constructed, the knowledge they developed and channeled and the
institutions they forged, and we depend upon future generations to
develop our initiatives and to appreciate our achievements. Our
identity spreads over time: despite ongoing arguments about
weighting of values, we have an obligation to ensure
intergenerational coherence in a joint community.
In modern times, fragmentation of decentralized community life
(identified with place, kin and occupation) due to specialization
and high mobility (in land-ownership, labour and residence),
together with intense economic pressures, the impersonality of
corporatization and hedonism, have bred uncertainty and sacrificed
that natural intergenerational concern which characterized
traditional families. The modern individual or family is far more
likely to focus on a temporally local horizon, constrict obligation
to instant kin and community (who can benefit or harm us) and
myopically exploit the global commons for personal gain.
The perception that "we can freely harm future generations
since they cannot harm us" diminishes the pertinence of a proud
and worthy reputation (which cannot exist in subjective delusion and
can only be objectively formed by subsequent peer group judgment)
and involves a debilitating loss of historical perspective on the
evolution of humanity. It also entails the dangerous assumption that
death terminates consciousness, rather than liberates it from the
body, and that Creation (despite having manifested freewill entities
in order to forge an infinite comprehension of itself) will involve
no objective judgment upon individual acts and attitudes, however
damaging.
At present, in our market-dominated economy, the worth of goods
and activities is measured by an unethical and irrational "cost-benefit
analysis" which discounts future impacts and those upon the
global commons, and attributes dominant value to satisfying "actual"
(i.e., temporal and often shallowly materialist, rather than informed)
human desires. Such cost-benefit analysis is anthropocentric and
short-sighted, failing to address intergenerational equity and the
unarticulated, intrinsic, non-instrumental "existence"
needs of non-human entities.
To some extent, the interests of future generations may be
vicariously reflected in the concerns of those now alive (e.g. of
parents for their grandchildren), however such reflection is
precarious and (due to prevalence of egoistic preferences)
inadequate. Humanity has a general moral obligation to conserve
viable tracts and colonies of all kinds of existing habitats and
species, together with assured availability of known exploitable
resources: these have an inestimable (not just a minimum) bequest
value.
....(iv) Health and Sanity
The health, sanity and balance of individuals is incommensurable
in value. Whilst the course of an illness may be valued, in some
sense, by aggregating the cost of medical care, prescriptions, loss
of earnings, pain and suffering etc., ultimately what has been lost
is beyond pricing. To the extent that a polluted, toxic or even just
ugly and blighted environment causes or conduces to that anomie and
spiritual ennui common in industrialized societies, depression,
ill-health or even death, the costs -- whilst largely ignored by
neoclassical economists -- rapidly become simply incalculable
....(v) Private Ownership of Natural
Resources
Traditionally the common law attitude has been that, as regards
the commons (as distinct from private land) each person has an
unlimited personal right to extract, mine, hunt, catch or pollute as
much as that person pleases. This attitude ignores both external
costs (i.e., on others "downstream") and existence rights
of species per se, and leads both to over-exploitation of resources
and the over-development of environmentally-valuable land held in
private ownership. Monopolistic rights may foster a false restraint
in exploitation so as to preserve longevity of the resource and
maximize scarcity value.
Raw resources, both non-renewable (e.g., ores) and renewable (eg
timber and wild fish, were bestowed by Creation, not made by
humanity, and must be treated as common goods (at most). There is no
moral basis (especially given intergenerational perspective) for one
person claiming ownership of them, even is s/he did "get there
first" or pay a "vendor" money for the "rights",
and this remains so whatever may be the assertions of a domestic law
Traditionally, at most, royalties have been charged by states for
regular commercial logging or extraction, since supply of these
resources is seen as a public good (generating employment and
profits). Such royalties have tended to be relatively nominal (just
to assist with management costs), and are not rationally priced on a
market basis. In no instance (except perhaps at that of the single,
manually-labouring man at the margin), given the potency of human
co-operation and mechanized equipment, can the unregulated private
extraction of resources be permitted to continue.
2(d) Modern Neoclassicists
....(i) Pigou, Coase and Boulding
During the 1920s, the English economist Pigou (oppressed by the
mounting urban smog of central London) originated the simple but
visionary concept of externality taxation as being essential for
market equilibrium. His intent was to enable an equivalence between
private profit and the net social product. Pigou was also concerned
with the waste (for trivial purposes) of natural product currently
but not permanently abundant. Although he neither specified methods
for calculating the tax nor earmarking its expenditure, it seems to
be implied that the tax would equal the damage and be applied to
remedy it: in theory, this would lead to an optimal stasis. However,
he saw externality taxes as being not so much reparations for "damage"
as a pragmatic fund to be earmarked for constraining, abating and
repairing abuses of the externalities involved, e.g. by maintenance
of public cleansing facilities (such as tertiary sewage works or
forests) and by public research into and development of cheap and
unpatented solutions. His ideas gathered little headway during the
comparative resource abundance and limited pollution at that time,
swiftly followed by Depression and World War, and did not begin to
enjoy policy implementation until the 1970s.
During the 1960s Ronald Coase criticized the failure, post-Pigou,
of theoretical environmental economics to weigh the real-market
transaction costs inevitably arising from environmental pollution,
and the extensive costly frictions inherent in the (hugely complex
and fragmented) political and institutional constraints and tensions
bedevilling this problem. These monstrous constraints, and all the
variables concatenating them, are traditionally ignored by
simplistic, neoclassical "blackboard" economists.
Coase assumed that externality taxation or state regulation would
be so costly as to be unjustifiable and endorsed a laissez-faire
approach. He asserted that if private property rights were better
defined (in effect, by privatizing the environment, giving each
citizen a right to clean air, no industrial fallout etc.), then
externalizers would compensate those affected (under threat of civil
liability), or those affected would buy off the externalizers. Coase
thus envisaged granting or auctioning tradable permits to
established industries, by way of "offset rights" to
compensate for new restrictions. Incidentally, a side-effect of this
was to thereby enable:
"ancient and honorable polluters à to grow rich by
establishing their respective histories of pollution which they can
now sell to others who wish to continue this wholesome tradition.
Those needing air to breathe? Well, according to the modern
philosophers they can enter the market, buy up offset rights and
retire them".
Upon this basis -- assuming zero transaction costs -- an
identically efficient outcome would eventuate in either instance,
regardless of whether industry has a right to pollute or citizens
have a right to a clean environment. If insertion of a stack
scrubber is the most efficient way to curtail loss then it will be
inserted, in the first instance by affected citizens and in the
second by the factory. Of course, the party who bears the
expenditure (irrelevant from the point of view of aggregate
efficiency) is a matter for the law. However, zero transaction costs
are impossible, since it is bothersome and time-consuming for
affected citizens to identify each other and decide what to do, then
and execute that decision. Coase recognized this, and concluded that
the preferred legal rule is the one which minimizes transaction
costs.
Coase's attempt to buttress neoclassical economics by painting
environmental externalities as essentially private property
concerns, is bound to failure. Whilst his emphasis on recognizing
transaction costs is valuable, Coase is basically fallacious and
flawed since he errs in seeing externality taxation as a method of
compensating those affected rather than constraining the
externalizers -- or better still, neutralizing their externalities.
Ironically, he fails to perceive that complicated transaction costs
will be minimized or avoided if there is no right to pollute, for
then the onus of finding a solution falls upon a few polluters
rather than a multitude of citizens. Moreover, payment of
compensation to affected parties would involve further
inefficiencies, such as complex and dubious methods of assessment
and attraction of "gold-digging" plaintiffs. It is simply
impossible to assess the dollar-value of impacts or even (in the
case of diffused pollution) to locate, weigh and attribute
externalities. Nor are environmental goods "open access"
property so much as common (or state) property. Going even further,
to ascribe "private rights" in it -- a concept very alien
to existing laws -- creates terrible distributional and
intergenerational conflicts (whereby the present private "proprietors"
of (say) a river's purity may "sell it down the drain" and
relocate themselves. Coase ignores intergenerational and existence
rights.
During the 1970s Kenneth Boulding questioned whether human welfare
(which economics ostensibly serves) was a state or a process, a
stock or flow. His thrust was that human welfare is a stock and that
therefore consumption of non-renewable raw resources and
irreversible pollution of environment, whilst they might temporarily
add a few goods to the marketplace and enrich a few producers,
overall and permanently diminished that stock. Given the increasing
magnitude of the impacts upon a fragile, limited spaceship
Earth, a cowboy mentality of grabbing what you could for
yourself whilst you could (regardless of nett welfare) was
inappropriate. Only by adoption of National Resource Accounting,
reflecting resource extraction and externality impacts, could
anything approaching an accurate GNP be defined.
....(ii) Cost Benefit Analyses
Rearguard neoclassical economists persist in granting blank
cheques for over-exploitation, and argue that opposition to "want-regarding"
indulgence is somehow illiberal or totalitarian, lacking neutrality
amongst plural conceptions of "good", or that the moral
duty of this generation is only to hand the next a certain standard
of living and not to necessarily preserve biological stocks, or that
technology and human inventiveness will overcome all shortfalls.
In fact, only environmental capital is autonomous in its extended
existence, and all human and man-made capital depends upon it.
Modern neoclassical economics regards proposals for taxes on
environmental externalities as a price which reflects the "damage"
caused and, as such, will constrain excessive production and
consumption until an optimum balance is struck. They also purport to
be able to compute the macro-economic effects of policy changes
(e.g. implementation of pollution and resource rentals) by
modelling, thereby foretelling what cessation of demand,
unemployment etc. to expect. If this rearguard is correct, then a
scientific, mathematical method is at hand whereby appropriate fees,
charges, taxes etc. can be assessed so as to redress the Pareto
inefficiencies foisted upon others by the environmental
externalities of the traditional neoclassical market. They propound
extraordinarily varied and complicated formulae purportedly enabling
the valuation of environmental assets (vistas, ore deposits etc.)
and externalities (from pollution etc).
There has never been a problem is assessing the dollar value of
direct costs of environmental degradation. Thus a relatively clear
dollar value can be determined for rebuilding a marble wall eroded
by acidic exhausts; paying for medical fees, pharmaceuticals and
loss of earnings occasioned by ill-health; the reduced value of a
blighted site; relocation expenses etc. Unfortunately, however,
things are not that simple: these outlays are only one sliver or
reflection of the impacts, and other fractions (such as the
aesthetic or antiquity value of the ancient wall, or the true human
cost of the ill-health and loss of home) are incommensurable.
Calculating a value for the myriad ramifications of environmental
externalities, so as to quantify and provide a balancing control
mechanism, can rapidly become a hugely complex exercise. The cost
benefits to be analyzed are both macro-economic (e.g., fossil fuel
pollution may have costs, but it brings wide benefits e.g., in
transport systems) and social-disequilibrium (e.g. in the personal
ramifications of poor health and oppressive aesthetics, such as
manifest in depression, anomie, vandalism or criminality). Even
then, were an economist, with tremendous diligence and transaction
costs, to somehow explore and weigh all of this intricate, endless
maze, Aristotelian, existence and bequest values (which are
impossible to assess empirically), would remain ignored.
Disregarding the benefits of earmarking, and envisaging payment of
proceeds into general revenue, exacerbates the deficiencies.
Economics has not developed a method of ascertaining the worth of
environmental assets taking into account their actual or potential
use value, aversion to losing same [option value], and
ascription of bequest value: even then, the impossible moral problem
of anthropocentrically asserting (or denying) some existence value
remains. Some neoclassical rearguard even deem it feasible to value
intergenerational resources, as if some lump-sum could be calculated
(by aggregating some individuals' monetary assertions) and paid now
for the right to decimate or destroy, say, whales or stocks of North
Atlantic cod. In any economic cost-benefit analysis, it is essential
to factor in the clear needs of the inarticulate, whether non-human
species or unborn generations of humanity.
Whilst it is inevitable that pollution and resource charges will
raise prices, alter demand and change patterns of employment, the
ways and extents it will do so and the alternatives engendered in a
free economy are far too complicated for any computer to analyze in
advance. Only say half the relevant data can be collected and
factored in, and by the time that is done same is out of date
anyway. Macro-economic modelling, dealing with hugely complex and
volatile scenarios and necessarily limited by inaccurate data
(especially at inter-sectoral levels) and value-judgments (e.g., as
to the worth of increased public health), are bound to be of limited
utility. Indeed, to the extent that such modelling has any utility,
it indicates that the nett effects of environmental policies are
relatively small, since they encourage use of new and efficient
machinery, incite improved efficiency of process and raw-material
input and stimulate employment on new fronts.
Notwithstanding this, rearguard classical economists (virtuously
endorsing "consumer sovereignty" as regards their "exogenous
preferences") assert that indirect impacts can be "contingently
valued" by aggregating how much those affected by environmental
impacts (eg by bad air, dust, noise or ugly aesthetics) would be
willing to pay to end the impacts (or to accept -- e.g., via higher
wages -- for surrendering any legal rights regarding them). In this
way, they say, an appropriate determination redistributing income
can be made unaffected by public policy or legal rights.
However, contingent valuation is a dubious methodology,
impossibly complicated and distorted by inherent biasses. It is only
marginally better than complete ignorance. They are flawed due to
the difficulty of surveying comprehensively, the incompleteness of
the information presented, the situation being hypothetical, the
tendency of those polled to assert irrational random or vague
figures (knowing they need not pay, or will wish to avoid doing so),
confusion of different values pertaining to use of the resource
(e.g., for recreation or personal exploitation as with fishing) and
to non-use of it (e.g., its option, existence and bequest value),
and in any event downstream distortions arising from
problem-displacement. In any event, such determinations are
inherently suspect as being bluntly anthropocentric (ignoring other
species' preferences) and intra-temporal in the sense of ignoring
intergenerational equities. All cost-benefit analysis should be
regarded as an impossibly arbitrary and unethical assertion.
The conclusion has to be that all exercises of mathematical
modelling which attempt to ascribe dollar values to environmental
impacts, and hence to enable scientific weighing of their cost
benefit, are void and vain. The only firm basis upon which to
proceed is that environmental impacts should be nil, or if
temporarily inflicted, completely remediated (via revenue
instruments) as much as possible.
Part
2