What's Good for the Environment is Good for the Economy

A friend who lives in the Pacific Northwest sent me a short recent article from the Oregonian that reports an interesting letter to President Bush from over 100 economists, including 2 Nobel Prize winners. As I've blogged before, mainstream economists (even those employed by the Bush administration) regularly find that environmental regulation is good for the economy. It is also important to remember that environmentally destructive policies are also bad for the economy:

The letter said the economic importance of agriculture, logging, mining and commercial fishing have diminished steadily, both in terms of numbers of jobs and levels of pay. As the population increases, habitat for fish and wildlife shrinks, and many native species face extinction.

"Reversing the trend becomes more expensive over time," the letter said. "As ecosystems are degraded, they provide fewer economically valuable services, such as cleansing the water in streams, and communities therefore must provide replacement services with water-treatment plants."

Government subsidies of irrigation, logging, livestock grazing and mining prop up activities that could not survive in efficient market conditions, the letter said. Artificially low costs for roads, water and pollution create false impressions of the cost of urban sprawl, according to the scientists.

The article includes a quote from a White House spokesman denying that Bush policies threaten the environment. But the economists know better and understand the administration's public rationale. Indeed, their critique of the administration's economic argument is important and should be repeated. Policies bad for the environment are bad for the economy and policies good for the environment are typically good for the economy:

"It is precisely the policies we see threatening economic growth in the West that are promoted as stimulating jobs and income and so on," Whitelaw [a University of Oregon professor of economics and president of ECONorthwest, an economic consulting firm] said. "There is definitely a disconnect between the professionals who study this stuff day in and day out and those who are implementing the policies, even though each of the two groups purports to serve the same purpose -- economic prosperity."

Among those signing the letter were Robert Solow, professor of economics at the Massachusetts Institute of Technology and the 1987 winner of the Nobel Prize for economics, and Kenneth Arrow, professor emeritus of economics at Stanford University and the 1972 winner.

"Often in the case of natural resource use, the beneficiaries of the environment are scattered," Solow said. "Whereas the people who lobby and push are a much smaller number of individuals who will profit in a big way from being able to use the resource."

Arrow said he felt the Bush administration's encouragement of tradable permits to reduce air pollution from power plants is good for the economy. But drilling for oil in the Arctic National Wildlife Refuge and encouraging logging on national forests would hurt the economy in the long run, he said.

"A lot of these things that are bad for the environment are bad period, from any efficiency point of view," Arrow said. "They represent government subsidies, which create inefficient production."

Oregon is a key battleground state and the environment is an awfully important issue in the Pacific Northwest (and elsewhere). Hopefully, some of these economists are working with Environment 2004, the political campaign to focus on environmental issues in swing states.