Tuesday, February 03, 2009

The logic of pollution: exporting our mess

"Just between you and me, shouldn’t the World Bank be encouraging more migration of dirty industries to the LDCs [less developed countries]? I can think of three reasons: 1) The measurement of the costs of health- impairing pollution depends on the forgone earnings from increased morbidity and mortality. From this point of view a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that. 2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low costs. I’ve always thought that under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. . . 3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income-elasticity. The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-five mortality is 200 per thousand."

- The Economist, Feb. 8, 1992

This quote, an World Bank internal memo signed by its then chief economist, Lawrence Summers, illustrates the logic of a narrow view of economy that fails to place it in a larger context. Although this memo puts it bluntly, this logic is at work every time the bottom line is seen as the bottom line.

Obama has recently appointed Lawrence Summers as head of his National Economic Council.