Things Are Better than We Think (And Could Be Better Yet)
Economic Growth Improves Environmental Quality
JUNE 01, 1994 by JANE S. SHAW
Filed Under : Capitalism, Environmentalism
Jane S. Shaw is a Senior Associate of the Political Economy Research Center (PERC) in Bozeman, Montana.
To an objective observer, Americans’ attitudes toward the environment must be puzzling. Many Americans think that our forests are being destroyed by logging, that the world’s natural resources are disappearing, that hundreds of species are going extinct each year, and that the future, with a depleting ozone layer and imminent global warming, is bleak. But when Americans look outside their window or travel on vacation, they in fact find clean air and clean streams, and miles and miles of open space and forestland.
Furthermore, current information casts doubt on worries about the future. Most of the nonrenewable resources that people feared would skyrocket in price, materials like copper and tungsten, are cheaper than they were ten years ago. And in spite of two decades of worry about energy, the world is awash in oil.
Although human beings may be having an effect on the climate, careful study of these issues indicates that the impacts are likely to be modest. The ozone layer is not being ripped apart by floating chemicals; even if there has been five percent depletion, as some pessimists suggest (and no one is sure), the loss has about as much impact on skin cancer as moving south sixty miles, for example from Palm Beach to Miami. Fear of global warming is based on computer models of climate that are so inadequate that they are essentially speculation. And recent satellite studies of the Amazon suggest that the rate of deforestation may be about one-fifth of what scientists previously thought.
The fact is that the environment in the United States is generally a healthy one, and the alarms about global problems (deforestation, ozone, the greenhouse effect) are exaggerated.
The world does have environmental problems, but most of them are quite different from the ones that we read about daily. James R. Dunn and John E. Kinney recently wrote a paper that included two lists of environmental problems. The first came from a poll of Americans taken by The Wall Street Journal and the National Broadcasting Company in April 1990. It listed environmental problems in order, based on the number of people who thought they were serious problems. At the top were hazardous waste sites, water pollution from industrial wastes, occupational exposure to toxic chemicals, oil spills, and the destruction of the ozone layer.
Then came a list of environmental problems developed by an Ethiopian geologist, trained in the United States but familiar with a number of African nations. At the top were diseases (such as sleeping sickness, malaria, and dysentery), soil erosion, loss of soil nutrients (primarily due to lack of fertilizer), lack of sewage disposal and contamination of water by human bodily wastes, insufficient facilities for treatment of drinking water, and lack of refrigeration.
“The lists have virtually a 100 percent lack of correlation,” said Dunn and Kinney. “The U.S. list is mostly a media list in the sense that the public must be told of most problems (that is, most citizens do not really see or feel the problems on a daily basis).” In contrast, “the African problems are obvious to everyone who lives there.” They are “megaproblems, pervasive, largely visible everywhere and result in decreasing food production, very high infant mortality, severe social problems, a decreasing average human life span, and a decrease in human productivity, average income, and quality of life.”
The Role of Economic Growth
Nearly every one of the problems cited by the Ethiopian geologist could be corrected by economic growth. And, indeed, the attractiveness of the American environment (and that of most developed nations) has come about because of economic growth.
There are two reasons for the link between economic growth and a better environment. One is that greater wealth leads to greater demand for environmental quality and the willingness and ability to sacrifice to attain it. Until people have food on their tables, they can’t be terribly concerned with the view from their windows. Only after they have basic sanitation (which millions of people still lack) can they worry about making streams and lakes pristine. In the United States today, people are wealthy enough to willingly pay higher taxes and higher prices for goods, if necessary, to assure that the environment is clean.
Environmentalists themselves offer the best illustration of the connection between economic growth and environmental protection. The readers of Sierra, the magazine of the Sierra Club, have (according to Sierra’s 1992 reader study) an average income of $79,400, compared with the average American adult’s income of $37,100. These wealthy people want a clean environment and they are willing to pay for one.
A second reason for the good environmental record in the West is that the Western countries are capitalistic. Contrary to much popular rhetoric, capitalism has characteristics that spur pollution control and environmental improvement, even without an Environmental Protection Agency.
For example, most pollution is waste. The smoke that contributes to air pollution is often unburnt fuel. Profit-making companies have over the years tried to save fuel by reducing pollution. One of the early measures of air pollution, the Ringelmann number, was developed by engineers trying to save diesel fuel.
Profit-making companies have incentives to be efficient. Economist Mikhail Bernstam compared the use of energy in capitalist and socialist countries. He found that the market-based economies used only 37 percent as much the energy as did the socialist nations to produce the same output.
Market-based economies conserve on other materials as well. In 1965, for example, 164 pounds of metal were needed to produce 1,000 beverage cans. But that went down to 35 pounds by 1990, the change caused by the shift to lighter-weight aluminum and a reduction in the amount of material used. Competition pressured the companies to use less raw material.
And environmentalist Randal O’Toole points out that we can thank the automobile for the dramatic regrowth of forests in the twentieth century! By displacing horses, the automobile eliminated the need for so much pastureland for horses, so millions of acres of farmland reverted to forest.
These points—the fact that economic growth leads to greater demand for environmental quality, and the fact that capitalism discourages waste—help explain the improvements in the Western countries. Of course, profit incentives do not completely eliminate all waste. Traditionally, common law was also a tool that people used to protect themselves from extreme pollution, and today laws and regulations are widely used to prevent pollution. Interestingly, however, evidence suggests that air pollution declined faster in the United States in the 1960s, before passage of the Clean Air Act, than it did after passage of the Act.
Why the Worry?
So, in the face of such good news, why are Americans so worried? Perhaps because when the most severe problems have been solved, the more abstract ones surface. There is always more to be done.
But there are other reasons, too. While environmental groups played an important role in publicizing the need for improvements in air and water pollution in the past, today many are bureaucratic organizations whose programs depend on large memberships and steady donations. It is in the interest of these groups to keep fear alive. In a paper given at the Mont Pelerin Society in 1991, PERC Senior Associate Richard Stroup observed: “It is ironic that to date, at least, the media and most voters seem not to have recognized that representatives of environmental groups face the same conflicts of interest [as business executives do]. They may be nonprofit, but their financial health and expansion depend on donations and government grants, both of which are likely to be enhanced if they can convince the public that crisis looms.”
Stroup also points out that reporters are trying to break into print and editors are trying to win readers with dramatic scare stories. Even scientists get into the game. While their science may be honest, the way they interpret their results (say, on global warming) may determine whether their laboratory gets additional funding or not. And government agencies find that “a crisis loosens the purse strings and paves the way for increased power or ‘tuff,’” says Stroup. Politicians, always ready to take advantage of public perceptions, have based policy on heavily slanted information about environmental problems. Such policies may have unfortunate consequences. For example, government regulations requiring fuel efficiency have led to smaller cars, which result in more highway deaths. The explosion of the Challenger space shuttle in 1986 seems to have been caused by the withdrawal from the market of asbestos-based putty that was used to seal the o-rings. This withdrawal stemmed from the EPA’s campaign against asbestos (largely unwarranted, it turns out). The current government campaign to eliminate CFCs (such as Freon) will raise the price and energy requirements of refrigeration around the world, adding to the troubles of the world’s poorest people. Fewer, smaller refrigerators mean more food poisoning and less fresh, wholesome food.
So the environmental picture is mixed. As long as economic growth occurs, we can expect a better environment, but if we use our resources to fight largely imaginary disasters, we may end up harming those whose environments are in the worst shape. 
- S. Fred Singer, “My Adventures in the Ozone Layer,” National Review, June 30, 1989, p. 36.
- Richard S. Lindzen, “Global Warming: The Origin and Nature of the Alleged Scientific Consensus,” Regulation, Spring 1992, pp. 97-98.
- David Skole and Compton Tucker, “Tropical Deforestation and Habitat Fragmentation in the Amazon: Satellite Data from 1978 to 1988,” Science, Vol. 260, June 25, 1993, p. 1905.
- James R. Dunn and John E. Kinney, UNCED: Environmentalists vs. Humanity? Unpublished paper, May 28, 1992 (available from PERC).
- Sierra Reader Survey: 1992 MRI Reader Study, p. 1.
- Mikhail Bernstare, The Wealth of Nations and the Environment (London: Institute of Economic Affairs, 1991), p. 24.
- Lynn Scarlett, “Make Your Environment Dirtier—Recycle,” The Wall Street Journal, January 14, 1991.
- Randal O’Toole, FREE Perspectives (Seattle, Wash.), Autumn 1993, p. 14.
- Robert W. Crandall, Controlling Industrial Air Pollution: The Economics and Politics of Clean Air (Washington, D.C.: The Brookings Institution, 1983), p. 19.
- Richard L. Stroup, Stratospheric Ozone Depletion: Anatomy of a “Crisis,” paper given at the Mont Pelerin Society meeting, August 1991, Big Sky, Montana, PERC Working Paper 91-13, p. 18.
- Robert W. Crandall and John D. Graham, “The Effect of Fuel Economy Standards on Automobile Safety,” The Journal of Law & Economics, April 1989, pp. 97-118.
- Warren Brookes, “Is Lead Another Asbestos Racket?” The Washington Times, December 12, 1991, p. G-I.