Controlling Pollution; H. Sennholz

HANS F. SENNHOLZ "POLLUTION is a classic example of failure of the private enter prise system." At least this is what we are told by countless critics of environmental pollution. Private property and the profit motive are held responsible for polluting man's environment with ever-increasing quantities of wastes or effluents. As the by products of economic production and consumption, such as gasses, solid or liquid wastes, or released energy in the form of heat or noise, the effluents are said to overload the capacity of the en vironment to assimilate them, which is injurious to human, ani mal and plant life. Pollution is affecting the comfort, well-being, Delivered November 19, 1972 before Board Members and guests, The Foundation for Economic Education, Inc., Irvington-on-Hud son, New York. Dr. Sennholz, a Trustee of the Foundation, heads the Department of Eco nomics at Grove City College - Pennsylvania.

and possibly even the survival of the human race. Such serious charges must ulti mately be answered by biologists, chemists, and physicians. But for the sake of argument let us as sume that the pollution problem really is as serious as described by the environmentalists. Let us then search into the causes of the di lemma so that we may find the cure. For only an understanding of the causes can lead us to a possible solution. The explanations so popular with environmentalists appear to be taken directly from the armory of political and economic radical ism that blames the private prop erty order not only for aU eco nomic shortcomings but also nearly all human vices. These ex planations. invariably misinterpret the causes and consequently pre scribe solutions that are either 67 68 THE FREEMAN Februa,ry ineffective or even detrimental to our environment. Even economists schooled in the classical tradition are joining the chorus of vocal critics. The private enterprise system, they contend, does not lead to maximum welfare because many social costs are ignored in the calculation of wel fare. Large blocs of "externali ties," which are social costs not included in private costs, are char acteristic of the enterprise system.

These extern alities are destroying our physical environment and pre cipitating disaster for the human race. Robert U. Ayres and Allen V. Kneese make such charges in an essay on "Production, Consump tion and Externalities." (Ameri can Economic Review, June, 1969, pp. 282-297). Private businessmen are discharging wastes into the atmosphere and water courses without cost to themselves. And consumers do not fully use up, through the act of economic con sumption, the material elements that enter production. Almost 3 billion tons of residue are going back annually into our environ ment. This is becoming unbearable, especially in mass urban societies with growing populations and ris ing material output. Ad hoc taxes and government restrictions are not sufficient to cope with the growing problem. Central, or at least' regional, control is needed; and above all, a new economics must be devised that considers waste disposal an integral part of the production and consumption process, and places it within the framework of general equilibrium analysis. "Under conditions of in tensive economic and population development the environmental media which can receive and as similate residual wastes are not free goods but natural resources of great value with respect to which voluntary exchange cannot operate because of their common property characteristics."

Such observations reflect an un bounded faith in the political and bureaucratic process. No matter what the grievance may be, the blame is always laid on private property and individual enter prise, and the solution is always more government! Who is Polluting? Even some of the facts are grossly misstated. The worst of fenders are not private business men in their search for profits, but government itself rendering eco nomic services in a primitive manner. Urban communities are polluted by an increasingly form idable cascade of solid waste, such as garbage and trash, rubbish and debris. According toa preliminary report made in 1968 by the Bureau 1973 CONTROLLING POLLUTION 69 of Solid Waste Management in the U.S. Public Health Service, only 64 per cent of the nation's people lived in communities that had refuse collection systems. About half of household wastes were collected by public agencies, and one-third by private collec tors; the rest were disposed by householders themselves. Most commercial and industrial wastes were handled· by private collec tors. And most of the dumps and incinerators were operated by public authorities or licensed con tractors. -working for public au thorities.

These facts primarily indict government rather than profit seeking enterprise for our environ mental crisis. Or, take the pollution of our waterways. Who is discharging pollutants into streams and rivers, lakes and oceans? Lake Erie, the most polluted inland body of water, is an example. According to independent surveys, the city of Cleveland is by far the worst of fender, followed by Toledo and Buffalo and other cities. Numer ous public sewer authorities dis charge thousands of tons of waste into the lake every day. So filthy is Cleveland's Cuyahoga River that it catches fire occasionally and traps tugs and boats in its flames. Surely, Lake Erie would suffer no serious· pollution were it not for sewer authorities established and operated by government. Under common law, the beds of navigable bodies of water are gov ernment property. Can it be sur prising then that government it self either is polluting the lakes and rivers or permits them to be polluted? To blame individual en terprise is an obvious distortion of facts.

It is true, public attitude toward government property usually dif fers from that toward private property. While the latter is gen erally respected and the owner protected in its use, government property is treated as a common good without an owner. Unless it is guarded by a host of inspectors and policemen, it is used and abused by the citizenry as if it were free. This common attitude can hardly be construed as recom mendation for more government ownership or control over environ mental resources. The Air We Breathe The third pollution that is often laid on the doorstep of profit seeking enterprise is the contam ination of the air we breathe. In a stinging criticism of the "con ventional wisdom" of economics, E. J. Mishan of the London School of Economics and Political Science called the private automobile one of the great disasters of the hu70 THE FREEMAN Februa,ry man race. It pollutes the air, clogs city streets, and contributes to the destruction of natural beauty.

The economic growth it represents conflicts with social welfare. ("Economic Priority: Growth or Welfare" in P oZitical Qua,rterly , January, 1969). Such a severe indictment of the automobile is tantamount to a rejection of one of the most splen did fruits of private enterprise. There are few, if any, private automobiles in collective econo mies, from Soviet Russia to Castro Cuba. The automobile means high standards of living, great indi vidual mobility and productivity, and access to the countryside for recreation and enjoyment. In rural America it is the only means of transportation that assures em ployment and income. Without it, the countryside would surely be depopulated and our cities far more congested than now. The air pollution in our cities, the smoke, haze, and smog, never theless present grave health haz ards to millions of city dwellers. Is individual enterprise that man ufactures those millions of auto mobiles not responsible for most of the city pollution?

Zoning and Other Intervention Again, the blame for the intol erable pollution of city air rests mainly with government. In particular, three well-established po litical practices have contributed to .the environmental dilemma. First, zoning has beco}lle a popu lar legislative method of govern ment control over the use of land. Primarily applied in urban areas, zoning constitutes government planning along "orderly lines," to control congestion in houses and neighborhoods, height, size and ap pearance of buildings and their uses, density of population, and so on. S'urely, zoning has shaped the growth of American cities ever since the 1920's when it became popular. Take Los Angeles, for instance. Radical zoning ordinances made it the largest U.S. city in area, a vast sprawling metropolis of more than 500 square miles in which trans portation is an absolute necessity. The resident of Los Angeles may travel a hundred miles every day to work, shop, eat, to attend school or church, or to seek recreation or entertainment. Public transporta tion cannot possibly meet the mil lionfold needs of Los Angeles transportation; only the private automobile can.

Secondly, in nearly all American cities public transportation has deteriorated to disgraceful levels of inefficiency and discomfort. The private companies that first pro vided the service were regulated and taxed into losses, and finally 1973 CONTROLLING POLLUTION 71 replaced by public authorities. Under their control, mass .trans portation has generally deteri orated in quality and quantity while the costs have soared, as in the New York City subways, for example. Union Tactics Public transport authorities are easy prey for militant unions. Pol iticians or their appointees can not easily resist the demands of teamsters locals and their allies, despite the resultant inefficiency and high cost. The traveling pub lic is frequently left stranded by organized work stoppages, slow downs, and other union tactics. When public transportation is most urgently needed, in the vaca tion or holiday season, it is often struck by one of the unions.

The privately-owned mass trans portation media are taxed by a host of government authorities until their services deteriorate or even sputter to a halt. The ex amples are legion. But the recent bankruptcy of the Penn Central Railroad illustrates the point. Even in bankruptcy, public tax authorities' are crowding the courts to force collection of their levies. While labor unions threaten nationwide walkouts, government tax collectors prey on railroad in come and assets. And when a com pany finally petitions its regulatory authority to halt some loss inflicting service, it may be denied the right to do so. If permission is granted, local courts may order the company to continue the serv vice and bear the losses. Can it be surprising, then, that service re luctantly rendered is minimal and poor? When public transportation is dismal, undependable and inef ficient, neglected and uncomforta ble, primitive and costly, people naturally provide their own trans portation. And millions of private automobiles are clogging the city streets adding their exhaust fumes to the city air.

In the "Free Goods" Class Finally, there is the tendency to treat road and highway invest ments, no matter how huge, as "free goods" that are available to anyone without charge. City gov ernments endeavor to provide ade quate approach roads for unre stricted use of the automobile, continually constructing new ex pressways on the city's fringes. It is true, a great number of high way taxes are levied on those who use the highways. The Federal government collects taxes on gas oline, lubricating oil, new auto mobiles, tires and tubes. A high way trust fund established by the Highway Revenue Act of 1956 receives and expends the excise 72 THE FREEMAN February taxes, which are the sole source of funds for the Federal aid highway systems. But as soon as an ex pressway is completed it is over crowded with countless automo biles speeding or crawling to the city. No matter how many millions of dollars were expended on its construction, it is "free" to the user who simply does not relate the tax on his gasoline or tire to a particular trip to the city. But Policy Free or minimal cost trash and gar bage collection by government agen cies Free dumps and incinerators oper ated by governmental agencies Free or minimal cost sewage treat ment Free lakes, waterways and harbors Free airport facilities Free highways Free public parks Zoning laws and ordinances Public transport authorities Labor legislation even if he were mindful of the tax aspect of the expressway, its convenience, speed and safety may exceed by far the tax cost. Thus, millions of suburban automobiles are rushing to or from the cities on billion-dollar highways, adding their exhaust fumes to our envi ronmental dilemma.

In summary, the following table clearly depicts the role of govern ment in environmental pollution. Effects Littering, hazard to health, air pol lution Hazard to health, air pollution Water pollution Water pollution, traffic congestion Air pollution, noise pollution Air pollution, traffic congestion Waste, littering Favoring the automobile over mass transportation, air pollution Inefficient service, promoting the au tomobile, air pollution Expensive and unreliable mass trans portation, promoting the automobile, air pollution 1973 CONTROLLING POLLUTION 73 Removing the Causes of Pollution As government is the prime polluter of our environment, we must call on government to cease and desist. All levels of govern ment must abandon their policies that invite, promote or even sub sidize the pollution. This is not to be interpreted as a call for further government intervention in our economic lives. On the contrary, the previous intervention that caused the deplorable conditions in man's environment cannot be im proved through more radical in tervention.The prior intervention must be removed step by step so that its destructive consequences can be gradually assimilated by nature.

First of all, government itself must cease to damage the environ ment. As owner of some 24 per cent of the land within the limits of the continental United States, as operator of many thousands of installations that sp·an the con tinent, the United States Govern ment probably is the worst pol luter (Cf. Dennis Farney, "Meet a Prime Polluter: Uncle Sam," Wall Street Journal, Sept. 23, 1970). If it is unable to manage its property without harming the environment it should .dispose of land and installations that lack significance for national defense. The economic services it renders free or at minimal costs should be left to the market place where economic costs and benefits are efficiently compared by the price system. For no matter who ren ders a service free or at minimal charges, misuse, abuse, and waste are invited. Governmental services are no exception. This basic knowledge of human action points toward a solution to many pollution problems. If gov ernment would cease to subsidize the polluters, the condition of the environment would instantly im prove. The interstate and inter city highways, for instance, pro vided at little or no cost to users, could be improved overnight if they were trea ted as scarce re sources, that is, as economic goods.

Road use charges that fully cover the costs of construction, main tenance, and administrative serv ices would greatly reduce their wasteful use and thereby the pol lution. It is true, use charges that cover the expenses of government services would probably be extra ordinarily restrictive as govern mental costs usually are excessive. Many government investments probably are malinvestments, made without economic considera tions but for political objectives. Use charges that fully cover all expenses would reveal the dread ful waste of resources .and thus hopefully discourage government 74 THE FREEMAN February from rendering a service that can be provided much more efficiently by the market. Deficient Property Rights Most pollution problems would soon be solved or at least allevi ated if all governments would halt their own pollution and cease to subsidize other offenders. It is true, some pollution undoubtedly would remain even after this clean-up. After all, individuals as prod ucers and consumers add smoke, soot, noise, waste, and other effluents to the environment.

But no matter who the offender should be, pollution that measur ably detracts from the property of other individuals or denies their rights to healthful living must be discouraged. This pollution by producers and consumers reveals unfortunate le gal deficiencies in the protection of private property. The law has always been and continues to be inadequate in its treatment of property rights, in particular, the liability and indemnification for damages caused by the owner's use of property. Ideally, the right of property. as a market phenomenon entitles the owner to all the advan tages of a given good and charges him with all the disadvantages which the good may entail. Over the centuries governments have again and again restricted or even abolished the rights of pri vate property. At other times the law, either by design or default, shielded the owner from somediB advantages of his property and charged other people with some of the costs, the external costs. Obvi ously, if an owner does not reap all the benefits of his property, he will disregard such benefits in his actions; and if he is not charged with all its costs, he will ignore such costs.

During the. nineteenth century, legislation and adjudication re flected enthusiasm for the rapid industrial and commercial devel opment. Legislators and judges understood the great importance of capital investment for economic betterment. They favored invest ments in industry and transporta tion and the productive employ ment of property. Unfortunately, they decided to hasten the econ omic development through tariffs, subsidies, land grants, and relief from some external costs. Thus, as the tariffs and subsidies encour aged some production, so did the relief from externalities. Some in vestments were made and some consumption took place just be cause part of the costs was shifted from the owners to other people and their property. The pollution of air and water was overlooked as a "public price" for economic progress, that is, some costs were 1973 CONTROLLING POLLUTION 75 shifted from one owner to another to encourage economic activity fa vored by government.

To remove this cause of pollu tion, no property owner - whether public or private - must be shield ed from the costs and disadvan tages of his property. Damaged parties must have their day in court and find relief from any harmful effect of someone else's property. They must be able to claim and collect damages for losses suffered, and obtain court injunctions, that is, restraining orders that protect their rights. Popular Solutions The growing awareness of en vironmental problems is laudable indeed. But the explanations given by "experts" today are taken straight from the armory of politi cal and economic radicalism. The private property order is sum marily condemned, and govern ment is hailed as the only savior from our self-destruction. More taxes and regulations, or better yet, comprehensive government planning and control, are to cor rect a deplorable situation. Many environmentalists would like to "ration the use of the en vironment" so that the quantity and type of effluents discharged into the environment are reduced to a level where the social costs are assumed to be equal to social benefits (Cf. Schreiber, Gatons, Clemmer, Economdcs of Urban Problems, Houghton Mifflin, 1971, p. 104 et seq.). Three basic meth ods of intervention are to achieve a short-run solution: direct con trols, taxes or fines, and subsidies.

Direct controls set minimum emissions standards for various classes of effluents. No polluter is permitted to emit more than a certain quantity of effluents, such as fly ash, sulfur dioxide, carbon monoxide, and the like per time period. Federal standards of emis sion by automobiles, for instance, were imposed on auto manufac turers. But unfortunately, such standards cannot achieve an effi cient level of··pollution abatement because the environmental condi tions in various parts of the coun try vary considerably. The car that adds its hydrocarbons and carbon monoxide to the pollution of New York City would have no visible effect on the environment of Farmers Mills in Pennsylvania. And the car that rarely leaves its garage in Big Horn, Montana, can hardly be likened in its environ mental effects to the Los Angeles taxi that is cruising the streets day and night. And yet, under the Federal standards many billions of dollars must now be spent on abatement equipment by all auto mobile owners regardless of social costs and benefits.

76 THE FREEMAN February Subsidies to Curb Production To abate pollution, some writers urge the government to subsidize polluters so that they may reduce production and thereby harmful emission. Such subsidies are lik ened to the "soil bank" that pays farmers to reduce their land under cultivation and thus production. But as the soil bank has not achieved its stated objectives, so must the pollution subsidy be ex pected to fail. After all, the poten tial demand for such payments is unlimited, while the reduction in pollution would tend to be negli gible. Effluent emission may also be attacked by fines and taxes. At first, government levies taxes in order to provide the facilities that are used free or at minimal cost by the polluters. It thus subsidizes the polluters, and then proposes to tax them for the pollution. Would our environment not be cleaner if government had not entered the scene from the outset?

It is true, a tax levied on the polluter may make him· consider the external costs of his activity. But it .offends one's sense of equity that government should pocket tax revenues as a compen sation for losses suffered by other individuals. If I am victimized by pollution, government will reap more revenue. A government in urgent need of revenue merely needs to promote more pollution through free services to polluters in order to derive more tax rev enue from the polluted public. A strange and yet so popular method of government intervention in our economic Iives ! Employ Space-Ship Technology As a long-run solution, we are urged to develop a "space ship" technology which recycles all waste and makes it reusable for future production, or to develop a technology that leaves no waste matter. Unfortunately, we do not know what the technology of the future will be. But we do know that the inventive genius of man that may bring forth a new technology can not assure its use and application.

History records countless examples of great inventions that failed to benefit man because a static so ciety would not permit any change, or at least lacked the capi tal resources needed for such changes. Inventions spring from individual freedom, and their ap plication from competition in a private property economy. This is . why one may be skeptical about a new technology that is chosen and enforced by government. But the ultimate solution, ac cording to more radical ecologists, must be sought in population con trol. After all, it is man's produc1973 CONTROLLING POLLUTION 77 tion and consumption that is pol luting the environment. A grow ing population must be expected to add to the waste that results in pollution, although the social costs per person may be reduced through technological advances. These en vironmentalists would provide fi nancial incentives for refraining from having children, such as an exemption of $3,000 on Federal income taxes to couples without children, or the payment of subsi dies to every woman in child-bear ing age who does not give birth during a given year. (Schreiber, Gatons, Clemmer, ibid., p. 115).

Man or Environment? Man or environment, that is the choice. As one is not compatible with the other, we are told, the radical ecologists choose the en vironment. They prefer grass and tree,ant and beast of the ferest over man. They would preserve nature undisturbed and in a natu ral condition, as in a jungle. However, the role of man on this earth is radically different from that of plant and animal. Al though man is part of nature, his intelligence permits him to wisely use environmental resources for his best interests. He is like a steward in the use of natural re sources who responsibly manages his environment in order to sur vive. His right to life embodies his right to manage the resources of nature. But how can he best manage his environment? What are the proper means to this end? As in all other human pursuits, freedom works best in releasing man's cre ative energy. In freedom, man economizes his use of scarce natu ral resources and strives to safe guard his life with the least pos sible waste. Merely to preserve na ture as man found it when he first set foot on this earth may appear to be easier, indeed, than the wise use of environment for the best interests of man. And yet, mere preservation denies not only the nature of man but also the very laws of nature. (Cf. Leonard E.

Read, "A Conservationist Looks at Freedom" in Then Truth Will Out, The Foundation for Economic Education, Inc., Irvington-on-Hud son, New York, 1971, pp. 74-83.) ~ IDEAS ON LIBERTY A Word of Caution WE undoubtedly need some preservation. But it cannot be the answer to the control of man's environment, for we are an eco logical part of that environment, and to preserve it makes us a museum-piece as well. Weyerhaeuser World, Apri11970 The Anatomyof UONSUMERISM MAXE. BRUNK THERE IS PERHAPS no better sub ject than Consumerism on which to polarize an audience. For ex ample, a conference of consumer organizations in Washington re cently graded the two Senators from New York State on how they voted on eleven so-called major consumer bills during the last term of Congress. One Senator received a perfect score of 100, the other, a score of zero. Both the Senators probably received a majority vote from this audience and both probably feel that they properly represented the majority view of their constituents.