Inequality and Environmental Protection

James K. BoyceDepartment of Economics & Political Economy Research Institute

University of Massachusetts, Amherst

New Economics Summer Institute, Boston College, June 2012

Democracy

Oligarchy

Market State

What’s the “right” level of environmental protection?

BCA prescription: the “efficient” level of pollution

Level of Environmental Degradation

$MC

MB

Neoclassical “optimal” level

BCA normative rule: maximize Net Present Value

Level of Environmental Degradation

$MC

MB

Neoclassical “optimal” level

NPV

Interpersonal aggregation in BCA

NPV = net benefit = benefits minus costs summed over all individuals

NPV = bi i

where bi = net benefit to individual i

Let them eat pollution?

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 of dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.

- Lawrence Summers, “Let them eat pollution,” The Economist, February 8, 1992.

Valuing human health risks The role of purchasing power

Marginal benefits of reduction in poor countries

“Efficient” level in poor countries

Beyond purchasing power: From normative prescription to

positive description

Decision power.

Agenda power.

Value power.

Event power.

Event power

Event power: another example

Siting of hazardous facilities in Louisiana’s “Cancer Alley” began before the Voting Rights Act of 1965.

Changing power balances:the environmental justice movement

Recall: BCA rule

max bi

i

where bi = net benefit to the ith individual.

If bi > 0, individual i is a winner;

if bi < 0, individual i is a loser.

PWSDR

max πi bi

i where πi = power of the ith individual

BCA

Level of Environmental Degradation

$MC to losers = |Σbi| where bi < 0

i

MB to winners = Σbj where bj > 0 j

Neoclassical “optimal” level

PWSDR: (i) winners more powerful than losers

Level of Environmental Degradation

$MC to losers = |Σbi| where bi < 0

i

MB to winners = Σbj where bj > 0 j

Neoclassical optimum

Power weighted MC to losers = |Σπibi|

i

Power weighted MB to winners = Σπjbjj

Actual level

PWSDR: (ii) losers more powerful than winners

Level of Environmental Degradation

$MC to losers = |Σbi| where bi < 0

i

MB to winners = Σbj where bj > 0 j

Neoclassical optimum

Power weighted MC to losers = |Σπibi|i

Power weighted MB to winners = Σπjbjj

Actual level

Which is more widespread?(i) “too much” environmental degradation or (ii) “too little”?

Benefits (in the forms of consumer surplus and producer surplus) are correlated with wealth: the rich consume more and own more stock.

Even if costs were evenly distributed, net benefits (bi) are correlated with wealth.

Power (πi) is correlated with wealth, too. Net benefits and power tend to be positively correlated.

Cases where the winners are more powerful than the losers are more widespread.

PWSDR two hypotheses

1. Direction: Environmental costs will be imposed disproportionately on people with less power.

2. Magnitude: Greater power inequalities will lead to higher levels of environmental degradation.

Valuing human health risks The role of political power (πi)

Power-weighted marginal benefits of reduction (poor countries)

Actual level in poor countries

Valuing human health risks Purchasing power + political power combined

Marginal benefits of reduction in poor countries

Actual level in poor countries

Power-weighted MB of reduction (poor countries)

PWSDR two hypotheses

1. Direction: Environmental costs will be imposed disproportionately on people with less power.

2. Magnitude: Greater power inequalities will lead to higher levels of environmental degradation.

Voter Participation

Tax Fairness

Medicaid Access

Educational Attainment

POWER DISTRIBUTION

Measuring interstate variations in power distribution

Interstate variations in the distribution of power

Rank State Score

1 Minnesota 2.32

2 Maine 1.65

49 Alabama -1.61

50 Mississippi -1.74

Source: Boyce, Klemer, Templet & Willis, “Power Distribution, the Environment, and Public Health,” Ecological Economics, 1998.

Environmental policy rank

7

5

49

46

The new environmentalism:Beyond sacred groves and sacrifice zones

For more, see The New Environmental Activists. Online at: http://www.peri.umass.edu/fileadmin/pdf/New_Environmental_activists.pdf.