In this
chapter, Farber first states that feasibility is the first and main criterion for
deciding whether an environmental protection goal is achievable. Determining
feasibility involves determining economic feasibility. If the costs of environmental
protection exceed the benefits, then that is a recipe for disaster. First,
feasibility, then cost-benefit analysis. While cost-benefit analysis may be a
mechanical means to making the inevitable tradeoffs of environmental analysis,
it is often inadequate by itself. It is better as a secondary approach to back-up
feasibility analysis.
Legal scholar Cass
Sunstein has been a proponent and expert on cost-benefit analysis since the 90s.
I have read some of his fascinating work in this area. Sunstein pioneered the
use of cost-benefit analysis, noting that it was not just useful in situations
addressing market failures, but that it could be useful for any environmental
policy analysis, and it should be required by government regulators, which it
now is. However, cost-benefit analysis is not complete by itself.
“There are too many judgment calls and too many
unquantified factors in environmental problems.”
Those unquantified factors must also play a role. Sunstein
believes that public values should trump private preferences in environmental policy
analysis. Where market failures are the main concern, cost-benefit analysis can
be done on purely economic terms, but where risks are inequitably distributed,
such as in cases where certain groups of people bear more environmental harm
burdens, or in environmental justice issues, economic analysis alone will not
suffice. Where to start is an important consideration. This involves a
presumptive environmental baseline. Farber writes:
“The commitments now embedded in federal law generally
take an environmentalist baseline, with a presumption in favor of environmental
protection. Sunstein would abandon this baseline for a more detached stance.
The result would be to designate economic efficiency as the presumptive
outcome, shifting the burden to those who advocate other values.”
Farber disagrees with Sunstein’s argument in favor of
neutrality, arguing instead that counting the interests of polluters and those
who bear the burdens of pollution equally does not remove value judgments as
intended, but is rather a value judgment itself. Farber argues that the choice
of a neutral baseline is dependent on cost-benefit analysis, which itself is
dependent on willingness to pay (WTP). However, how much someone is willing
to pay for environmental protection is not the only criteria available. There
is also a willingness to accept (WTA). Studies have shown that there is
often a big difference between willingness to pay and willingness to accept. According to studies, people are willing to accept double what they are willing to pay.
Farber quotes a 1990 paper by Jack Knetsch:
“Asking people to accept payment for a degradation in
the quantity or quality of a public good simply does not work in a contingent
valuation survey under many conditions, yet substituting a WTP format where
theory specifies a WTA format may grossly bias the findings.”
Farber argues that using WTP is basically equivalent to
making a baseline that favors economic efficiency over environmental protection.
Environmental Baseline Choices
Farber gives
three choices of a baseline: common law, which gives the regulated party
presumptive entitlement and is often equivalent to the pre-regulation status
quo, neutrality, in which no presumptive entitlements are allotted, and a
baseline based on the beneficiaries of potential regulation. Sunstein
pointed out that common law is often unworkable. In terms of air and water
pollution control, the dangers of carcinogens, and hazardous waste, the third
baseline, that of the beneficiaries of environmental protection, has been the
favored choice. Farber refers to this as an environmentalist baseline. He
presents the usual arguments as an environmentalist regulatory approach vs. a libertarian
deregulatory approach. While a neutral baseline may be appealing because it
gives no advantages, it does not consider our rights to environmental protection
to be more important than a company’s right to put those rights into question
by polluting at certain levels.
Farber calls the
neutral baseline a fallacy. He gives the environmental law example of Boomer
vs. Atlantic Cement Company, a 1970 New York decision, where a cement
company, in conjunction with a nearby existing quarry, was built near residences.
It is a nuisance law case that involves property rights as well. It is a very well-known
case in American legal education. The residents complained about the effects of
cracks in their houses from blasting at the quarry and the fine dust that would
coat everything in its path and breathing it was probably not good as well. The
concrete plant and quarry, however, were major employers in the area so they had beneficial
economic effects on the region. The outcome was that the plant stayed open, and
the people affected were generously compensated for the damage. The company had
acquired the land in secret so there was no way for those stakeholders affected
by the pollution to be involved in the hearing process. That is something that
is not likely to happen in current times. Farber notes:
“To adopt a neutral baseline is not itself a neutral
decision; it is based on a value judgment of symmetry between polluters and
victims.”
Farber
advocates for a hybrid of cost-benefit analysis and feasibility analysis for defining
a baseline. The cost-benefit analysis part favors an environmental baseline,
which has been the default in many cases. The feasibility analysis provides a “reality
check” of the cost-benefit analysis. Farber thinks that feasibility analysis
does need some constraints to be most effective and that cost-benefit analysis
should be used as a benchmark to determine what is feasible. It should not be
too open-ended. Feasibility should ideally be practical and sensible.
The Case for a Hybrid Approach of Cost-Benefit and
Feasibility Analyses
Environmentalists
have not been fond of cost-benefit analysis, arguing that economic benefits
should be weighted lower than environmental impacts. That is likely a useful
argument in some cases but not in others. Cost-benefit analysis has been criticized
for treating human lives as commodities. However, that is really the only
way to quantify costs and benefits in a reasonably consistent manner. We have economic
standards, and we have environmental standards. There is the market and there
is the environment. Their interrelationships are only partially quantifiable
and this limits the effectiveness of cost-benefit analysis. The uncertainty of
assigning values often remains. Farber argues that we simply can’t reduce these
issues to purely economic terms. Assigning values is equivalent to making
judgment calls.
“If cost-benefit analysis is attacked for
cold-bloodedness, feasibility analysis is often considered soft-headed and
wedded to foolishly expensive methods of controlling environmental problems.
Feasibility analysis is often attacked for requiring inefficient “command-and-control”
regulations, in which the EPA directs particular firms to achieve the specific
level of pollution control it considers feasible.”
The hybrid approach of cost-benefit and feasibility
analysis should not be conflated with “command-and-control” methods that often
over-regulate, he notes. This is simply an acknowledgment that economic
feasibility, not just technological feasibility, should be a major part of
feasibility analysis. Again, he notes that cost-benefit analysis by itself is
limited. Combining the two in a hybrid approach is equivalent to a pragmatic
approach. Both methods of analysis have particular merits. Cost-benefit
analysis can be more easily standardized by carrying over assigned values from
one case to another. Feasibility analysis has the advantage of being more
useful in situations where the data is messy or scant and where social values
are less easily quantified. Combining the approaches may to some extent guard
against the pitfalls of each individual approach. Each approach makes value
choices. The cost-benefit approach utilizes discount rates and valuation
problems. These can be difficult to understand for those not used to evaluating
problems in such a way. The hybrid approach adds in more understandable metrics
like significant risk, feasibility, and gross disproportionality. The case
against using cost-benefit analysis alone is simply that we can’t leave environmental
decisions to economists alone. Thus, he notes that cost-benefit analysis should
assist rather than control regulatory decisions. It can provide a check on unreasonable
regulation but it should not be the sole basis for the decision process.
“It {cost-benefit analysis} functions best as a
critical resource to prevent misguided decisions, rather than as an effort to
make hard social decisions on spreadsheets.”
Judges and the
courts are also guided by interpretations, often canonical, of the legislative
intent of statutes like the Clean Water Act and the Clean Air Act. Interpreting
ambiguous statutes has been a point of argument for decades. The recent reversal
of the so-called Chevron Deference, while widely panned by environmentalists for
shifting deference in ambiguous cases away from regulating agencies to Congress
and the courts, will likely still defer to the expertise of the agencies in most
cases. It is not likely to change legal interpretations when judges make
decisions, although in cases of the political ideological makeup of judges,
those with the most judges and cases and in the case of SCOTUS, the current
conservative majority, will have more influence to interpret as they see fit.
Judges are not experts in environmental science, so they are not expected to overrule
those who are, at least in most cases. In the case of Congress, it is that body
that has the final say and the power of rulemaking. Supporters of the recent SCOTUS
decision say that it puts the power of decision-making back where it should be,
namely Congress, but also the courts, and takes it away from agency expertise.
But it should not be forgotten that this is to be applied only where ambiguity
is well-acknowledged.
Farber notes that
his hybrid approach is really at play in most current regulations (1999). He
also notes that Congress often backslides on regulations by allowing extensions
and variances. He says that is equivalent to slipping feasibility through the
back door. He also quips that environmental policy has had an orientation that
was too static and not dynamic enough. His principle for risk management is as
follows:
“To the extent feasible without incurring costs
grossly disproportionate to any benefit, the government should eliminate significant
environmental risks”
That is a great, if necessarily vague, way to put it, and
the bottom line of the chapter and this summary and review, I think.
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