The Threatened Environment
In recent years we have come to realize that several threats to the environment are fundamental. One is acid rain, which is created by the millions of tones of sulphur dioxide and nitrogen oxides spewed out of North American smokestacks and automobile exhaust pipes. The oxides mix with water vapor in the air to form weak sulphuric and nitric acid, which later falls as acid rain. The result is increased acidity in lakes, which has curtailed the ability of many fish to reproduce, and in the soil, which has slowed the growth of trees and increased their vulnerability to disease.
With every news report, the externality dimension of environmental problems seems to become clearer. For instance, it was recently reported that Lapp villagers in northern Sweden and Norway were forbidden to eat local reindeer meat after their herds became contaminated by fallout from the nuclear accident at ChernobyI in far-off Ukraine. Similarly, Canadian wildlife scientists have found high levels of PCBs and other contaminants in polar-bear livers.
But some pollution problems involve such dramatic externalities that the whole world is affected. One example is the greenhouse effect. The steadily rising and essentially irreversible concentration of carbon dioxide in the earth’s atmosphere causes it to trap increasing amounts of the heat radiated by the planet. The general warming trend is expected to have disastrous effects, including mass starvation in some less developed countries, flooding of entire coastal areas, and severe droughts on the Canadian Prairies, perhaps within the next fifty years.
Another worldwide threat is in the upper atmosphere—the thinning of the layer of ozone, a bluish gas that shields the earth from the sun’s ultraviolet rays. Synthetic chemicals called chlorofluorocarbons (CFCs) are depleting the ozone layer. One estimated result is that the chance of getting skin cancer is now 8 to 16 percent greater than it was in 1950.
Hazardous wastes (such as those from nuclear plants, industrial manufacturing, laboratories, and medical institutions) represent yet another critical environmental problem improperly disposed, they can threaten all forms of organic life. Unfortunately, little has been done so far to solve this problem. Indeed there are many instances in which industrialized countries have literally just shipped the problem off to the poorest of the less developed countries—countries unequipped with the necessary storage and treatment facilities, and certainly too poor to deal with the serious environmental problems that will follow. For example, in 1988 the government of Guinea-Bissau signed a contract with two British firms to receive 15 million tones of pharmaceutical wastes over a five-year period. While this arrangement was very inexpensive from the firms’ point of view, the payments to Guinea-Bissau totaled more than four times that county’s national product. It makes it difficult to solve the problem when parts of the world are so poor that they are forced to regard such transactions as “good deals”.
The users of the world’s resources simply must be made to take the external costs of their actions into consideration when making their decisions. The people who are hacking down the world’s rain forests at the rate of 1200 hectares an hour are literally cutting away the lungs of the earth, since rain forests contribute a large percentage of the oxygen in the earth’s atmosphere. But these individuals are not necessarily evil: in many cases, they are forced to overuse the environment for their own or their country’s immediate survival. For example, some developing countries’ needs for foreign exchange to pay for imports compel them to cut timber faster than it can be regenerated. They simply cannot afford to worry about the future.
Obviously, many of these problems cannot be solved without political decisions to redistribute income to the less developed countries, and to define property rights. But the right kinds of political and institutional changes will be forthcoming only if they are rooted in an understanding of the externality dimension of environmental issues.