Wednesday, October 31, 2007

Cheney Vs. The Environment

I recently read the above article/blog which discusses the Cheney Vice Presidency with respect to the environment. It is evident that on many occasions Cheney has sided with economic growth rather than environmental concerns. Most specifically, this article discusses an instance where Cheney chose to promote irrigation flow to farming and ranching communities in Oregon rather than protect endangered salmon on the Klamath river; the river that the irrigation canals channel off of. His reasons obviously stem from political motives in many cases but that's not the ethical implication that I want to address. Rather, I want to discuss the certain market failure implications on both sides of this matter.

First, let's look at the negative externalities associated with accomodating ranchers and farmers. If you accomodate the ranchers, that means largely draining the river and most certainly killing large numbers of Salmon. It is necessity that we discuss the fact the negative externality does not land on the fish! That is to say we should not consider the interests of the fish in deciding whether or not there is an externality. The externality, on the other hand, is going to affect the people that have decided that fish have some level of value to society, be it intrinsic, monetary, etc. Therefore those PEOPLE will be harmed because they will no longer have the pretty little salmon to look at or do whatever they want to with. By choosing to give farmers water rather than protect water levels on the Klamath, a negative externality will almost certainly be imposed on those who value the fish over farms.

Next we look at the negative externalities from the farmers' and ranchers' perpective were they to have not recieved water in the name of protecting Salmon. If, in the name of protecting the environment, water was granted to the people who value the lives of the salmon, then farmers and ranchers of that region would have most certainly lost large amounts of revenue as their already hurting growing season would have nearly come to a halt. Additionally, consumers of the goods produced from farming and ranching in that region will now be stuck with greater shortages and higher prices. So there is a negative externality or externalities on this side of the coin as well.

I think it's important to point out two things in discussing the rights and wrongs of this issue. First, we have to continually keep in mind that when evaluating externalities, we have to evaluate HUMAN harm or HUMAN gain because humans are the active members of society... not fish. Everthing non-human is merely a resource to society. So to say that there was a negative externality imposed on the fish would have been entirely false.

Additionally, I think there needs to be some level of discernment when judging whether or not to promote economic interests over environmental concerns. I would recommend that some sort of hierarchy be developed in order to evaluate this. For example, if this choice was whether or not to protect salmon over building a brand new Hilton, then I would probably have a problem with choosing luxury over the future of environmental well being. However, this was farmers and ranchers producing and selling food and basic necessities to society. I don't understand what environmentalists would have us do on this issue. Eventually, population growth requires larger amounts of food to accomodate a society. And in growing food distribution, it may have to come at the cost of some environmental characteristics.

So we've established that either way you look at it, a negative externality WILL be imposed on someone. So much for pareto optimality. Personally, I think the right decision was made to protect the water resources ranchers and farmers use for their well being. This whole issue goes back to the valuing of human interests versus animal interests. By protecting the livelihood of the salmon in the Klamath both producers and consumers would have been harmed due to the lack of water.


Larry Eubanks said...

Much of your discussion mistakenly uses the term externality. For example, you say that if government allows water to flow to farmers, then there will be a negative externality with respect to those who value fish more. An externality is inefficiency that is associated with market allocation, i.e., the idea is that an externality is a markte failure. Your illustration involves a cost resulting from government policy choices. If there is inefficiency it should be identified as a government failure; not as an externality which is a market failure.

I suggest there is another question that is very important to consider with the issues you discuss. Who owns the water? Water is a private good because it is excludable and rival. People hold property rights to water. I suspect that for the case you discuss the farmers own well specified property rights to the water that they say should be delivered to them. If this is the case, then if government decides to enforce it's policy decision that water must stay in the river, I think this would amount to a taking of property rights by government. We won't likely find efficiency in such a taking. On the other hand, if government were to buy the water rights from the farmers (or perhaps if an environmental group bought the water rights), then we would likely find efficiency in the reallotion of the water resource from farmers to others.

When we look at externalities it is often useful to ask who owns what. While people concerned about salmon may say they are worse off if water is taken for farming because salmon will die, it seems important to ask if those same people have a property right in the salmon. If they don't, then is it clear that we want to accept an assertion that they have been harmed? And, let's not forget Coase, which perhaps suggests the point noted above. That is, those who value protecting these salmon could consider buying the water rights from the farmers.

Larry Eubanks said...

I have a second area for comment. You suggest that if this was about using resources to build a brand new Hilton that you would likely have a problem with choosing luxury over protecting the natural resource. Since the case involves food instead, you support making the choice for food.

I'm wondering if you can say you have a problem with choosing luxury without also, at least by implication, making judgments that amount to evaluating preferences? If not, then I'm wondering what value judgments you would use to justify the use of force (i.e., government policy) because of specific preferences? Of course, when we do efficiency economics, one of the value judgments we rely on is that we will not evaluate or question the preferences people hold as bad.