If most relevant knowledge is location-specific and dynamic, decisions about "how clean is clean" and what remedies to use should take place closest to where the problem occurs. For air-emission problems, that might mean a local air basin. For decisions about siting a hazardous waste facility, that might mean bargaining between landowners adjacent to the site and the site owner.
The rationale for using decentralized bargaining approaches to address environmental problems lies not with any mystical faith that small is always beautiful, nor with the now-faddish notion that all that is good must come from communities. The rationale for these approaches builds, instead, on two premises. One is the importance of decentralized information in understanding and remedying environmental problems. The other is the importance of finding ways for real people affected by real conflicts of social space to undertake their own balancing act among competing values.
Several years ago, when the Mobro garbage barge out of Islip, New York, roamed the high seas in search of a place to unload its unappetizing cargo, nightly newscasters regaled viewers with tales of the NIMBY (not-in-my-backyard) problem. People increasingly don't want landfills--or any other "nuisance" facility--sited in their communities. But people do want to be able to throw out their waste, and the trash must go somewhere.
Political edicts directing communities to site landfills are one possible remedy. But such edicts simply override the concerns and preferences of affected individuals. Bargaining between would-be landfill operators and local communities offers another option--one already used by waste management companies. Sometimes called YIMBY-FAP (yes, in my backyard, for a price), these arrangements involve negotiations in which landfill operators offer a package of protections and benefits, including compensation, to affected landowners--or sometimes entire communities--in exchange for permission to site a landfill. The costs of the landfill are thus borne by all its customers, rather than only the property owners in the surrounding area. (The same principle applies in legal reforms aimed at requiring government "takings" compensation to landowners who bear the cost of such policies as wetlands protection. Society as a whole is buying an environmental good, and all the "purchasers" should bear the cost.)
These bargaining processes have shed light on several important decision-making conundrums.
First, surveys of New York citizens showed that acceptance of benefit packages depends on how the package is offered. Early direct involvement in the bargaining process is important to participants.
Second, perceptions matter. Just as people may "irrationally" want to buy cars with tail fins, so too they may "irrationally" dislike living next to a landfill, even if it poses no health hazards. In our study, "Too Little, Too Late? Host-Community Benefits and Siting Solid Waste Facilities," economist Rodney Fort and I note that "perception costs might be portrayed as distortions of reality, or as the inability of lay people correctly to assess the problem, but individuals will react according to their perceptions....The [perception] costs are real regardless of whether public perception is viewed as correct or rational by policy makers, scientists, and technical experts."
Technocratically minded environmental reformers fear that public perceptions will yield irrational demands, driving up costs to solve environmental problems--whether those problems involve building landfills or cleaning up Superfund sites. Those fears do not appear to be justified in circumstances where citizens face both the risks associated with a facility and enjoy directly the benefits--in the form of lower costs or higher compensation--associated with a particular remedy. Bargaining itself may serve as a discovery process, revealing more accurate information about both risks and benefits.
Unbounded fears may, in fact, be more likely to drive decisions toward "zero risk" in centralized decision processes. There, the costs of decisions are spread over an entire population, while the benefits from pursuing pristine clean-ups are enjoyed by those few near a particular site. The few then have an incentive to invest heavily in lobbying, while the many do not--with obvious results. Experience with many EPA regulations, and the very high cost per year of life saved associated with those regulations, confirms this observation.
The contrast between costly Superfund site clean-ups, which have occurred in a top-down, regulatory framework directed by the EPA, and more recent local remediation of abandoned industrial sites through negotiated settlements offers further testament to this point. Processes that create closer links between those who pay for clean-up costs and those who enjoy the benefits of clean-up offer a discipline missing from traditional top-down approaches. The locally negotiated clean-ups have, in general, been achieved at a fraction of the cost for Superfund sites.
Not all indivisible environmental problems will be well-suited to collective-negotiation processes, however. In a very imperfect world, sometimes national, state, or local restrictions may be the best we can do.
What distinguishes these circumstances? They involve a high degree of public consensus--even among the regulated parties--that limits or "injunctions" against the activity are appropriate. These are those very rare cases in which everyone would be better off if an environmentally damaging practice were ended, but where there will always be incentives to "cheat" unless a restriction can be enforced by law.
Most environmental problems do not share these characteristics, but some problems may come close--as in the use and discharge of acute, well-understood toxins into the air or water. Consider two examples: the case of the "mad hatter" and the problem of cadmium discharges into water in Japan. The term "mad hatter" came from the severe effects of using mercury in the hatter's trade to make felt hats. And in 1950s Japan, mining operations discharged cadmium into water that eventually found its way into the food supply, causing Itai-Itai ("ouch-ouch") disease that results in demineralization of bones. When the source of the disease was pinpointed in 1968, the Japanese government set strict effluent standards for cadmium and prohibited consumption of rice with cadmium concentrations above a specific standard.
In each of these cases, uniform standards on the handling, use, or disposal of these materials might reduce harm, coincide with broad-based public values, and lessen transaction costs associated with case-by-case bargaining or court remedies. In effect, a legal ban enforces a cartel, in which everyone in the industry is able to stop using the dangerous chemicals because they know their competitors will have to stop, too.
Such standards need not always emerge through government actions. When acute problems of this kind become known, the marketplace itself sometimes moves to eliminate use of the offending toxins. For example, after it became clear that vapors from chromium-plating processes resulted in serious health problems for workers, the costs from worker compensation claims drove industries to find ways of safely containing the vapors.
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