Can environmental regulation produce wealth?


Author: Damien M. Schiff

The Natural Resource Defense Council's Switchboard Blog has this account of a recent speech given by Environmental Protection Agency Administrator Lisa Jackson at the National Press Club.  In her remarks, Ms. Jackson took the opportunity to note how, in her opinion, environmental regulation is a win for environmentalists and the economy:

[Jackson] debunked the false choice between protecting the environment and protecting jobs, making a strong and detailed case for why environmental degradation is in fact an obstacle to economic prosperity.  Indeed, she said, a clean environment ensures a strong economy.

"I've worked in environmental protection for 20 years," Jackson said.  "I've seen meaningful environmental efforts met time and again with predictions of lost jobs and lost revenues.  Lobbyists and business journals have done such a good job of engraining it into our way of thinking that many of us believe, sadly, that we must choose between our environment and the economy."

I am no economist, but Ms. Jackson's observations strike me as problematic on at least two grounds.

First, "creating" jobs by enacting environmental laws that impose affirmative (and costly) obligations does not necessarily increase wealth in society.  After all, the "broken window" fallacy makes clear that forcing people to dig ditches that otherwise aren't needed doesn't increase wealth.  Environmental regulation may (or may not) indirectly produce wealth; but Ms. Jackson has an uphill argument if she means to argue that environmental regulation, universally, directly produces wealth.

Second, Ms. Jackson presumes that all environmental regulation either explicitly or implicitly operates with sensitivity to economic concerns, but that is plainly not so.  Just one obvious example:  the Endangered Species Act (ESA) is designed to protect endangered species "whatever the cost" (at least, so saith the Supreme Court in TVA v. Hill).  Now, how can such regulation necessarily be economically beneficial if it is deaf and dumb (by design) to economic concerns?  Isn't such regulation just as likely to be economically costly?  I concede that some environmentalists might respond that the ESA, for example, is not an economic winner for the United States, but that the economic costs that are imposed are more than amply offset by the noneconomic, intangible benefits derived from preserving species and the biota.  Surely, one could argue that point till the cows come home, but whatever its merit, that point can't help Ms. Jackson, who instead believes, perhaps naively, that we needn't "choose between our environment and the economy."