Prosperity, Pollution, and Public Choice

by Holly Fretwell
Last week the Wall Street Journal printed a debate between Peter Singer and Bjorn Lomborg discussing the potential of reducing poverty while enhancing the environment. Both ignore the reality of public choice issues.

First, it is important to understand the correlation between poverty and environmental degradation. Lomborg explains this well and has spent decades of research and some 500 pages in his book The Skeptical Environmentalist to back his statements. “As we get richer,” he says, “and such immediate concerns as water, food and health become less of an issue, we become more open to environmental concerns.” As nations develop and move through something like the industrial revolution, environmental degradation tends to increase, at first, and then decrease (see also Yandle on the Environmental Kuznets Curve). This holds true for many, though not all, environmental pollutants.

Second, good intentions won’t pave the way to prosperity or environmental quality. While Singer proposes we donate to organizations that help the poor, Lomborg suggests we spend $100 billion annually on research and development. Both seem admirable propositions from an ethical standpoint but are likely to do little to enhance individual and environmental welfare. It is the effectiveness of the money doled out that is in question. In his own defense, Lomborg points to some unintended consequences of centralized decision making.

The subsidization of ethanol was supported by the environmental lobby (and others) with (mostly) good intentions to enhance renewable energy (among other things).  Policy makers and lobbyists did not consider rising food prices resulting from increased demand for corn. More direct to my argument, who knew that corn ethanol was not the renewable energy source of the future? A private investor incurring losses will weigh potential future gains and can quickly redirect finances if deemed appropriate. Government policy is not so quick to act. Even after decades of dispute over the efficacy of ethanol and a lack of real environmental benefits, it continues to be subsidized. What prevents Lomborg’s and Singer’s donations from a similar unintended fate? Spending on foreign aid is another example of well intended but often misused funds.

Rather than intentions, good institutions that reward innovation will enhance prosperity and environmental quality. To some it may sound more ethical to take from rich Peter to give to poor Paul but if we are looking for results, not means, markets provide better signals to help reduce both poverty and environmental degradation.

Originally posted at Environmental Trends