Saturday, January 21, 2012

Intervention, Scarcity, and the Environment: It's Not Easy Being Green

I've come across a number of items related to economics and the environment recently. One of the overriding themes is that, because economic goods are scarce, all interventions into the economy, even for the sake of the environment, requires the bearing of costs.

David Bier contrasts the different perspectives on recycling by Newt Gingerich and Julian Simon and sides with Simon's position that we should "recycle only if it is worth it." It might not be worth it, because recycling is not free and in many cases, the costs may outweigh the benefits. This principle is also the theme of Roy Cordato's provacatively entitled classic, "Don't Recycle: Throw It Away!"

Word has also come that BP Solar, an huge alternative energy player that received a $7.5 million grant four years ago, has decided to exit the solar energy industry because it is unprofitable. It seems that there has been so much investment lured into the industry, in large part because of government subsidies, that prices have fallen to a point where firms are having trouble making it without continuing subsidies.

In his book Eco-nomics, Richard Stroup uses the case of the 2000 Los Alamos, New Mexico fire to explain that along with any benefits to be had from environmental regulation, there come costs. Stroup recounts how, during the 1990s the Forest Guardians sued the federal government to cease logging in the national forest in New Mexico. In 2000 there was a fire that destroyed most of the forest the advocacy group wanted to preserve. The fire was so devastating because little thinning out of small trees had occurred the previous decade because of lobbying by environmental groups.

As Stroup notes,
It’s one thing to be passionate about protecting the environment. It’s another thing to be successful at it. Many laws have been enacted in the United States to clean up pollution or preserve natural beauty, but many of them have unintended consequences. They don’t save the species they were supposed to. Or they don’t clean up the rivers as Congress intended. They end up costing a lot of money, often creating large government bureaucracies that can’t seem to achieve the goals that seemed within reach when the agency was formed or the law was passed.
None of the above should be taken to imply that we are not to care about the environment. It is simply to not that all of our actions, including environmental regulation, incur costs. As Kermit sang, "It's Not Easy Being Green."

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