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Life Arts    H3'ed 7/12/11

Sleeping with the Enemy: Economists who Side with Polluters

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RFF was left identified mostly with its faith in resource abundance and free markets, embodied in their monumental bible,   Resources in America's Future , edited by Francis Christy, Jr.   and Neal Potter , both my personal friends.   As their   friend, however, I began finding some tendentious flaws in their methodology.   I expressed these only at internal staff meetings, but thereupon Hans Landsberg, a senior staffer at RFF, told me in authoritarian tones to stifle it, those matters were settled.   Landsberg was a veteran of the wartime OSS, whatever that may say about CIA contacts.   RFF personnel were forever globe-trotting, advising 3rd-world governments, and I couldn't help wondering. Dominating foreign-sited resources was a key to resource optimism.

 

At this point I diverted my efforts to researching and writing a monograph refuting the then-standard academic notion that imperialism is national defense, and national defense is   a "public good" from which all gain equally.   I thought I was contributing an important point to orthodox economics, but instead I learned another lesson:   to become a non-person, buck the myths that power lives by.   I presented my findings proudly to friends and colleagues.   I expected enthusiasm   and alliance -- it was a time of anti-war demonstrations -   but got warnings from friends, and silence from others.   I began to realize I was keeping the wrong company.

 

Soon, however, the first OPEC price revolution upended RFF's house orthodoxy, leaving it looking foolish.   I remained in Coventry, however --one reaps no gratitude by forecasting how the errors of others will land them in the soup.   Being correct and offering ways out only makes it worse.  

 

I was born lucky, though.   At this point the New Democratic Party (NDP) suddenly and unexpectedly swept a Provincial election in B.C.   A friend there, Bob Williams, rose immediately to second in command after the Premier.   As Minister of Lands and Forests he was in charge of collecting rents from all the "Crown Provincial" lands, some 90% of B.C.   He offered me a rare opportunity to found a new institute , with a budget from the Provincial Government and some administrative control.   We named it the B.C. Institute for Economic Policy Analysis.

 

The B.C. Institute, 1973-76

 

My Institute sponsored a series of scholarly conferences, to be published by the UBC Press.   One was a major book on pollution control, edited by veteran Irving Fox and tyro James   Stephenson.   This was to be, in my dreams, a major guide to Pigovian effluent charges, tailored to B.C..   Meantime, though, Coase's influence had spread among establishmentarian economists, fast as an epidemic.   Canadian J.H. Dales in 1968 published Pollution, Property, and Prices, pushing the idea of tradable permits "to protect the commons" (and enrich the permittees and their bankers who would advance front money for them to buy the permits).   2/3 of my Canadian conferees embraced this in preference to Pigou.  

 

One of these "Canadians" was retiree Irving Fox himself, who had been Director of Research at Resources for the Future during the ascendancy of Pigovian thought there.   This disappointed me, and disillusioned me with conventionally trained economists.   I began to understand, better than ever, Ray Marshall's astute insight heading this article.

 

In principle Coasians profess not to care what worthy few get the original entitlements.   Just privatize them and that panacea the market will take it from there.   In practice, however,   a select company of ancient and honorable polluters get them.   We now call these "offset rights", a new form of property.   In the L.A. Basin (South Coast Air Quality Management District), a few have grown rich by establishing their respective histories of pollution which they can now sell to others who wish to continue this wholesome tradition.   The demonstration effect on those contemplating new and as yet unregulated forms of pollution may be imagined.   

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Mason Gaffney first read Henry George when a high school junior , and became notorious among his classmates for preaching LVT to them . H e served in the S.W. Pacific during W.W. II, where he observed the results of land monopoly in The (more...)
 
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