Reason Magazine - Contributors

Conservation, Not Commerce, Keys Revival Of Environmental Localism

lynns@reason.org (Lynn Scarlett) — Mon, 26 Mar 2001 00:00:00 EST

An oil spill off the coast of Santa Barbara in 1969 helped trigger a volley of federal environmental statutes. Those statutes left Americans with volumes of top-down prescriptions from the nation’s capital. Thirty years later, that top-down legacy is bucking up against opposition -- from citizens, city officials, some scientists, and sea-centered businesses -- along that same California coastline.

Just as the 1969 spill and its regulatory aftermath became symbolic of environmentalism in the 20th Century, the outcome of this new battle may be symbolic of what to expect from 21st Century environmentalism. Thirty years ago, in the political tug-of-war between localism and federal power, the feds prevailed. Voices for greater local control, however, are gaining momentum. California’s coastline politics is a microcosm of the waxing of this new localism.

The new localism is not mainly a battle between economy and environment. It’s a struggle over information -- over who has knowledge tailored to best manage ocean habitat and resources. The locals say they, not the feds, have that knowledge.

After the 1969 oil spill, federal lawmakers passed the 1972 National Marine Sanctuary Act to protect marine habitat and resources. Out of the act came the Channel Islands National Marine Sanctuary, created in 1980 to protect the marine area surrounding the five Channel Islands that lie off the south-central California coast. To protect marine resources, the act banned oil development, prohibited illegal discharges of fuel, waste, or other materials into the waters, and required permits for any seafloor alterations within marine sanctuaries.

Marine sanctuary managers were supposed to produce a new management plan every five years. It took, instead, almost 20 years before a new management plan began to take shape.

Two decades of accumulating ambition is getting condensed into an aggressive federal management plan that may call for expanding the original six-mile boundaries around the island, possibly extending the sanctuary all the way to the mainland shores. A new regulatory package may accompany the management plan. That package could restrict boat traffic through the zones, establish no-fish zones, and prohibit seafloor alterations, including the deposit of sand dredged from harbors.

Local port and harbor officials have no dedicated seat at the table of the Sanctuary Advisory Council that makes recommendations regarding sanctuary management. And even this council has no real decision-making authority. That authority lies with federal officials who run the marine sanctuaries.

North of the Channel Islands, harbor managers in Monterrey Bay have a taste of what this federal authority means. There, the marine sanctuary already includes the shore. Since the harbor comes within sanctuary boundaries, just about every harbor-management decision requires the OK from national sanctuary officials. Moving a boat-mooring block 50 feet, for example, can trigger review by these national officials. Harbor dredging can require approval by sanctuary authorities.

To date, sanctuary authorities have called municipal input on the sanctuary management plan premature. Wait, they have said, until the Environmental Impact Statement for the revised plan, which will include boundary-expansion options, is complete. Locals, in other words, can react to the plan. They cannot help shape it from the outset.

But local folks want to help shape the plan.

In part, their motivation is economic. The value of seafood landed in Santa Barbara and Port Hueneme to its south was $40 million in 1999. One estimate puts the total economic value of commercial fishing and related activity at $280 million for the area. Recreational fishing adds to that tally. Commerce through Port Hueneme generates $388 million annually and produces $34 million in tax revenues.

This is the same-old, same-old environment versus economy argument that has long sparked feuds over environmental policy. But the new localism debate goes beyond the matter of economics. Local (and state) officials say environmental protection is at stake in the sanctuary management plan debate. These officials say they have a better understanding of marine habitat than federal managers.

From Washington, “bigger” often looks better, translating into a sanctuary-expansion mindset. But local folks say wholesale implementation of large reserves, according to a report by the Ports and Harbors Working Group in the south-central coast area of California, “countervails conventional fisheries-management wisdom.” Local experience has shown that “fishing modestly over large areas is more prudent (and more likely to encourage resource sustainability) than fishing intensely over small areas.”

Yet expansion of the marine reserve area could squeeze fisheries into an ever-smaller area. The result, opines the Ports and Harbors Working Group, would be a “congestion externality” -- poor fisheries management resulting from crowding fisherman out of a larger area as “no-fishing zones” expand.

Dredge disposal looms as another potential environmental problem. Harbor dredging now occurs with oversight from federal, state, and local authorities. Timing and disposition of dredged sand are determined based on knowledge of local conditions. Federal usurpation of that local decision-making could well interrupt time-sensitive dredging needs, with adverse environmental consequences.

Thirty years ago, environmental protection had barely begun to surface as a high-priority value for Americans. Environmental protection efforts reflected that dim awareness -- such efforts were sporadic and tentative.

Today, environmental values are situated squarely within the American “psyche” -- over 85 percent of Americans say they are environmentalists to some degree. That environmental commitment shows up in local and state laws, in private conservation efforts, in investments in environmental research.

For the Santa Barbara coastline, this means 30 different federal, state and local agencies already oversee management of the Santa Barbara Channel and its harbors. Superimposition of a sanctuary “supra-authority” over this decision-making structure would sidestep the knowledge that comes from near-hand, long-time experience with local circumstances and conditions.

How the Channel Island sanctuary debate plays out may be a bellwether for 21st Century environmentalism. A growing chorus of voices -- on issues ranging from marine sanctuaries to grazing lands to watersheds -- is pressing for a greater local voice in environmental decisions that were relentlessly pushed to Washington, D.C., for the past 30 years. Their message? Local decision-making is critical to maintaining environmental protection and community well-being.

The Last Picture Postcard

lynns@reason.org (Lynn Scarlett) — Mon, 01 Jan 2001 00:00:00 EST

Fuzzy Logic

lynns@reason.org (Lynn Scarlett) — Mon, 01 Mar 1999 00:00:00 EST

Behind the Green Door

lynns@reason.org (Lynn Scarlett) — Mon, 01 Feb 1999 00:00:00 EST

Chemical Reaction

lynns@reason.org (Lynn Scarlett) — Sun, 01 Mar 1998 00:00:00 EST

Telephones, vitamin C, mammography film, wire insulation, kitchen sinks, aspirin, bridges, and white paper are among the essentials of modern life that share a common foundation: They either contain chemicals listed as toxic by the Environmental Protection Agency or require such chemicals in the manufacturing process. The EPA wants to reduce the use of those chemicals in the United States, and it thinks it has found a strategy that will work. It hopes that if it requires manufacturers to report publicly the amounts of these chemicals they use, companies will reduce chemical consumption to avoid negative publicity.

The EPA's focus on chemical-use reduction marks a fundamental shift in environmental policy. Under its proposed "materials accounting" policy, the agency is changing its emphasis from controlling the release of pollutants to reducing the consumption of certain materials as an end in itself--an end tied neither to reducing environmental risks nor to maintaining viable ecosystems.

No new law has authorized this shift. Rather, its origins lie in a 1986 bill, the Emergency Planning and Community Right-to-Know Act, that required certain companies to disclose information about the release into the air, water, or soil (and transfers off-site) of 336 chemicals, later increased to 650 chemicals. This so-called Toxics Release Inventory resulted in periodic reporting by companies of the listed chemicals on a volume basis.

Environmentalists have heralded TRI reporting as a triumph of "market" environmentalism, of directing economic incentives to green ends. The law required no specific reductions in chemical releases. But companies, loathe to report releases of high tonnages of the offending substances, quickly began reducing releases of TRI chemicals. A market response, say TRI's proponents.

"What gets measured gets attention," an EPA official quipped. Between 1988 and 1993, release of TRI-listed chemicals dropped some 43 percent.

These reductions in chemical releases did not necessarily correspond to reductions in risk; if risk reductions did result, it was by happenstance, not because the TRI reporting requirements were rigorously risk-based. Nonetheless, buoyed by these reductions, TRI champions pressed for broader reporting requirements. The 1990 Pollution Prevention Act redefined "releases" as TRI chemicals "entering anywaste stream." The EPA decided that this language included wastes that were recycled, even on site. Also included were wastes treated or incinerated for energy recovery.

The EPA's definition made the connection between TRI information and environmental risk even more tenuous. By 1993, actual releases into air, soil, or water accounted for less than 9 percent of total reported chemicals. The rest of the TRI-reported "waste" was recycled, recovered for energy, or treated to become nontoxic.

Of the 240 million tons of TRI-listed chemicals produced in 1993, some 1.4 million tons were actually released into the environment. Yet the EPA's system required companies to report nearly 17 million tons of chemical "waste." The EPA's revised definition actually meant total TRI-reported waste increased between 1991 and 1993, leaving the public with the highly misleading impression that ever-escalating mountains of toxic chemicals were poisoning the environment.

For example, hexane, a petroleum-derived chemical, makes up around 31 percent of the total volume of waste listed in 1995 TRI reports. But over 98 percent of the reported waste is actually recycled on site back into production processes. The 1995 TRI-reported hexane "waste" was 33 times greater than actual hexane production, since hexane is often used and reused in a continuous cycle. According to the EPA's perverse logic, this triumph of chemical recycling is reported to the public under TRI regulations as industry "waste."

"Materials accounting" information lends itself to such semantic games. Through a subtle redefinition of "pollution prevention," the EPA stated that the goal of TRI should be to reduce the production and use of toxic chemicals, rather than to reduce waste and releases of toxins into the environment.

In an October 1995 report to President Clinton, the EPA proposed measuring the amount of chemicals used in production processes and the amount shipped out as product or embedded within products. Included were chemicals in finished products, even if the production process transformed the chemical into a nontoxic form. For example, producers of polyethylene, a nontoxic plastic, would have to report the amount of ethylene--a TRI-listed chemical--used to make plastic resin.

Clinton, endorsing the new reporting concept, announced that "materials accounting is no longer an option...it will be added to TRI." Apparently ignorant of the EPA's terminology gamesmanship, Clinton cautioned, "where there is room for concern...is that more waste was generated by industry in 1994 than in previous years."

Reducing the environmental footprint, or total impact on ecosystems, of industry is a laudable goal. Achieving greater efficiency in resource use is a part of that process and may often include the substitution of less toxic materials for toxic ones. Market price signals already drive firms to find ways to economize on the use of raw materials, including chemicals.

But the EPA's expanded TRI reporting assumes that reductions in the use of all TRI-listed chemicals are always possible and desirable, independent of any other considerations. The new materials-accounting concept also presumes that data collecting and reporting will automatically improve upon Adam Smith's invisible "green hand" that already pushes companies to conserve resources.

Clinton, in embracing the EPA's view, naively announced that materials accounting would motivate pollution prevention. After all, the TRI listing applied just to 650 "specific dangerous toxins," of the many thousands of available chemicals. The assumption behind his remark was that plenty of nontoxic alternatives must exist as substitutes, or that products made from these chemicals could be altogether eliminated.

Not so, says the Chemical Manufacturers Association. The EPA's TRI list includes six of the eight basic chemicals derived from petroleum. Companies would have to report the amount of chemicals used in thousands of products made from petrochemicals, many of which have no known substitutes.

The TRI list of 650 chemicals also includes 20 percent of the earth's basic elements. Aluminum, antimony, bromine, chlorine, cobalt, chromium, copper, fluorine, lead, zinc, phosphorous, manganese--these and other basic elements are listed as toxic chemicals. There are no substitutes for basic elements.

One half of the top 100 chemicals produced and used in the United States are on the EPA's list of toxic chemicals. Many of the remaining chemicals, while not on the list itself, require inputs of EPA-listed chemicals in their formulation.

All these chemicals provide building blocks for over 70,000 different end products, many of which are nontoxic despite requiring some toxic chemicals in their manufacture. These products include many household comforts, basic infrastructure, and health care essentials.

Aluminum, for instance, is used in aircraft wings. Chlorine is used in computer chips, asbestos replacements, vitamin B-6, X-ray films, acetaminophen, saline solutions, packaging, and the treatment of drinking water. Benzene is used to make backpacks, tents, photocopier toner, bleached paper, niacin, and computer disks. Name a modern product and behind it will often lie a TRI-listed chemical.

If reductions in the use of these chemicals could improve human health and reduce environmental risk, the EPA's policy might make sense. But the link between use of these chemicals and environmental risk is virtually nonexistent.

As toxicologist George Gray of the Harvard Center for Risk Analysis told Congress, "Chemical use does not equal chemical risk....Simply knowing how many pounds are used provides no information regarding health and environmental risks." That's no information. None at all. Zero.

The initial TRI reports at least listed actual releases of chemicals into air, water, or soil where there was some potential for exposure. Yet even the original list of 336 chemicals did not result from any methodical risk assessment. Instead, these chemicals were taken from other lists of chemicals developed by legislators in two states, New Jersey and Maryland. And those lists derived mainly from surveys of companies in those two states that identified, primarily, the chemicals with the largest production volumes.

A risk-based reporting system would focus either on chemicals that pose very high risks or on those to which the public is likely to be exposed at potentially dangerous levels. TRI, introduced under the premise that people have a "right to know" the scope of chemical risks, misleads the public about these risks and exposures.

People should be informed about potential risks involuntarily imposed upon them. The "right to know," applied in this sense, simply reinforces historic common-law notions of justice. But expanding TRI to include materials accounting moves environmental policy into an entirely different arena in which "sustainability"--the current mantra--is equated with reduced consumption rather than lower environmental impact per unit of output. Risk becomes irrelevant.

As the EPA has noted, what gets reported may, indeed, get reduced. The more important question is whether that reduction generates any meaningful public benefit. With materials-accounting reporting, the likely answer is no.

Back to Basics

lynns@reason.org (Lynn Scarlett) — Wed, 01 Jan 1997 00:00:00 EST

The Demise of Environmentalism in American Law, by Michael S. Greve, Washington, D.C.: American Enterprise Institute, $29.95/$9.95 paper

In 1992, Defenders of Wildlife sued Manuel Lujan, then secretary of the interior, seeking to compel the federal government to apply the Endangered Species Act to foreign nations. The plaintiffs claimed they had visited ecologically sensitive areas in Egypt and Sri Lanka that later became sites of large-scale development projects funded by the U.S. government. These projects, the suit protested, threatened certain endangered species, thereby depriving the plaintiffs of the opportunity to observe these animals in the future. The U.S. Supreme Court ruled that the lawsuit's affidavits "plainly contain no facts...showing how damage to the species will produce 'imminent injury'" to the plaintiffs. The Court found the Defenders of Wildlife had no legal standing to sue.

This result, writes Michael Greve in The Demise of Environmentalism in American Law, marked a "direct challenge" to legal doctrines that had emerged over the previous 25 years. Greve, a political scientist and executive director of the Center for Individual Rights, a public interest law firm, argues that Lujan v. Defenders of Wildlife is one of several cases indicating that the courts have begun to question the basic philosophical principles of modern environmentalism.

It might seem odd that environmental regulations and related court cases have garnered so much national political attention. Federal environmental spending is just a fraction of outlays for national defense, Medicare, and other entitlement programs. And except for a handful of industries, private spending on environmental compliance pales in comparison to other costs imposed by government on business. So why all the fuss? The answer is that environmentalism is a coherent ideology that rivals Marxism in its challenge to the classical liberal view of government as protector of individual rights.

For Greve, the essence of environmentalism is a vision of "a world in which everything is connected to everything else." From this basic idea flow certain legal and political principles: "Environmentalism views common-law rights--such as private property and freedom of contract-- as a menace to an imperiled planet. It therefore aims to eviscerate common-law rights and to replace them with a legal regime that would organize transactions among individual citizens for a single public purpose, environmental protection. Environmentalism thus pushes toward a centralized, unlimited political scheme. To the extent that this scheme allows for 'rights' they are defined and circumscribed by public purposes." In the world of the courts, says Greve, this environmental paradigm has translated into an unprecedented erosion of property rights, a loosening of criteria for determining standing to sue, and a transformation of the courts' constitutional role.

The Demise of Environmentalism in American Law is an important book in three ways. First, it succinctly restates some key philosophical premises of modern environmentalism. Second, it offers a highly readable and subtle exploration of several central tenets of American constitutional law. And third, in exploring the environmental paradigm and its effects on American law, it also ends up offering a brief but perceptive exploration of individual freedom as expounded by classical liberalism.

Environmentalism, Greve explains, views the world "as an infinitely complex, interdependent, and fragile place" where "small events may have large, unforeseen consequences." Preserving "spaceship Earth" therefore requires "an unconditional commitment to a one- dimensional value"--environmental protection--that trumps all other values. Environmentalism thus replaces traditional American interest-group politics, in which multiple values undergo constant balancing, with the unbounded pursuit of a single value. From this perspective, individual rights are an impediment to a more encompassing and transcendent public interest. If everything is connected to everything else, the ideas of property rights and individual autonomy are obsolete. In such a world, virtually any individual action may have catastrophic environmental consequences. "In a world of pervasive externalities," explains Greve, "legal relations and instruments that are modeled on private transactions seem hopelessly dysfunctional...and must therefore be discarded."

Greve demonstrates that for more than two decades U.S. court decisions on environmental matters acquiesced to this view of individual rights and property. The acquiescence eroded property rights and nullified the Fifth Amendment's requirement of compensation for individuals whose property is taken for public use. It also transformed the traditional concepts of "harm" and "standing" that determine when a person may sue. Finally, it turned the courts into virtual rubber stamps for an environmental agenda unconstrained by any countervailing values. Greve takes the reader on a quick journey through a series of court cases that established these trends.

But Greve's main project is not to recount what many already know and lament. Instead, he turns to the present and, with some optimism, sees a return in recent court decisions to American common law traditions. Common law relies on the idea that there are discernible distinctions between mine and thine and that property rights provide "a fence or boundary around a private sphere of autonomy." Greve argues that "central to the traditional idea of property is my right to exclude you (and all others), so long as--and because--what I do within my sphere of autonomy does not affect you." But the "right to exclude loses its meaning if everything I do within my boundaries affects everyone else," as environmentalism implies.

The courts, says Greve, have begun to recognize the slippery slope created by this environmental philosophy. The idea that there are no spheres of autonomy--that there is some generalized entitlement to a sound ecosystem--is "tantamount to legalizing aggression by all against all." Anyone's labor and anyone's property become subject to confiscation without compensation by others. The Supreme Court rejected this premise in the 1992 case Lucas v. South Carolina Coastal Commission. David Lucas contested the state's right to prohibit him from building on his coastal property. In essence, the Supreme Court ruled that a "taking" within the meaning of the Fifth Amendment occurs if a prohibition on the use of property goes further than the state's common law of nuisance would have permitted.

The resurrection of property rights, says Greve, has been accompanied (probably inevitably) by a return to stricter criteria for "harm," requiring plaintiffs to show a "palpable," "direct" injury, as the Supreme Court did in the 1992 Defenders of Wildlife case. Similarly, in the 1990 case Lujan v. National Wildlife Federation, environmental activists said they were adversely affected by Bureau of Land Management decisions on 1,250 tracts of land, but the "Supreme Court found these allegations insufficiently specific to support standing and essentially held environmental groups to the same pleading and evidentiary requirements that would apply to any other plaintiffs."

Common law is fundamentally a discovery process in which the courts sort out where one person's sphere of autonomy ends and another's begins. It was therefore not possible for the courts to resurrect property rights and impose a requirement of discernible harm without also rejecting a view of the courts as guardians of a single "public interest." Under the environmental paradigm, the courts had taken on the role of an executive review board, upholding vague, boundless legislative claims without constitutional scrutiny. By returning to common law principles, the courts reinvigorated a separation of powers in which they examine legislative acts within a constitutional context.

Greve does a good job of summarizing modern environmental philosophy and its impact on the courts. His argument that this philosophy is meeting its demise (at least in the courts) is provocative but less convincing, if only because the cases on which he builds his argument remain scanty. Furthermore, whatever may be unfolding in the courts, the old environmental paradigm continues to shape public sentiment and legislation. Efforts by the 104th Congress to codify requirements for takings compensation ran afoul of charges that such legislation would paralyze environmental protection. Common-sense proposals to put environmental legislation to some sort of cost-benefit test--a direct challenge to the pursuit of environmental values unfettered by tradeoffs with competing values--also could not get through Congress.

What is most interesting (but inadequately explored) in the book is the question of why a philosophy that emphasizes "the interconnectedness of all things"--essentially a restatement of the proposition that the world is complex--necessarily leads to an erosion of property rights. At times, Greve seems to imply that a focus on complexity could have no other outcome but collectivism. Yet he clearly does not believe this. Here and there, he admits that "complexity is an argument for private orderings, not against them." He adds that "decentralized and flexible private arrangements are far more easily tailored to a complex world than centralized, one-size-fits-all schemes: The more thoroughly such schemes attempt to mimic complexity, the harder they will crash on the law of unintended consequences." Greve then suggests that "an interdependent global economy may be especially dependent on clear (if somewhat artificial) boundaries; complexity may be more manageable in private backyards than in a worldwide political commons." He even acknowledges toward the end of the book that "the common law was, in fact, quite attuned to complexities-- externalities, aggregate effects, multiple causation, unquantifiable risks, and indirect but nonetheless real effects....it did deal, as it had to, with complex social systems and ubiquitous and subtle externalities."

If the common law is also premised on complexity, then modern environmentalism's focus on complexity cannot, in itself, explain why that paradigm has moved us toward an annihilation of property rights, lax definitions of harm, and the view that the courts' role is to ratify some transcendent public interest. Greve's response to this point--not found in the book itself but outlined at an American Enterprise Institute seminar--is that the common law view, which sees simple rules that define spheres of autonomy as the solution to the problem of complexity, is difficult to articulate and even counterintuitive. Thus, many people, obsessed with the idea of complexity, will seek to accommodate it through central plans and the imposition of a single public value above all other values.

Greve may be right that the common law's answer to complexity is counterintuitive. But other factors helped bring us to the current regulatory state of affairs. Greve fails to note that many modern environmentalists adhere to Progressive Era elitism and liberal egalitarianism. The elitism is expressed by a willingness to impose one set of values, articulated by an elect few, on everyone else without regard to any competing values that individual citizens might hold. The egalitarianism can be seen in a distrust of wealth creation and a suspicion of consumption beyond "basic needs." Linked with the focus on interconnectedness and complexity, these attitudes produce the legal and political outcomes that Greve describes.

Recognizing these additional components of environmental ideology is important because they help explain why, notwithstanding the trends in the courts cited by Greve, discussions of environmental reform among legislators do not look very much like a reorientation toward classical liberal precepts. On the one hand, takings compensation clearly is rooted in American common law traditions. On the other hand, the focus on cost-benefit analysis and risk assessment, while no doubt preferable to undisciplined goal setting, retains a strong philosopher-king flavor. This approach to reform sees regulatory pathologies as mainly a "people problem" for which the remedy lies in recruiting the right experts. Classical liberal thought, by contrast, emphasizes decision making structures and how well (or poorly) they align personal self-interest with moral action and public well-being. This approach may have begun to surface in some Supreme Court decisions, but it has received much less attention in environmental reform debates generally. And egalitarian precepts appear to be alive and well, especially in discussions about environmental justice and sustainable development.

These remarks, though, should not detract from the excellent exploration of environmental philosophy and its impact on American law that Greve provides. His thesis would be just a bit more compelling if he had not tried to tie so much importance to the single idea of "the interconnectedness of all things."

Smogged Down

lynns@reason.org (Lynn Scarlett) — Sun, 01 Dec 1996 00:00:00 EST

One sign read, "U.S.A. not U.S.S.R." Another got more specific: "First you came for our guns, now you come for our cars!" Responding to a rallying cry from San Francisco radio talk- show hosts, an estimated 3,000 Californians showed up on August 22 in Sacramento to protest the state's new smog check program.

The demonstration was the tip of the iceberg. In August, 12,840 callers had deluged the state's hotline with queries about the program. Some feared their cars would be confiscated and scrapped--a fear provoked by talk-show rumors. Some complained about month-long waits to get mandatory retests of cars that had been deemed "gross polluters" by previous smog tests. Others fussed about the price tag of repairs.

Just months after the rollout of its program, California joined the growing list of states to experience public ire about more stringent smog check procedures crafted to satisfy federal Clean Air Act requirements. Some of the brouhaha over the program resulted from simple misunderstanding--the state was not, for example, seizing people's vehicles. Some of it came from the inevitable resentment of any program--however wisely planned and implemented--that would hit people directly in their own pocketbooks. And some of it resulted from procedural problems that left motorists on hold, in lines, or on waiting lists to get their cars tested. Frustrating though these problems may be for motorists, the program is no mere "boondoggle" or further testament to government excess. It is what happens when the public gets what it says it wants. In poll after poll, Americans say they put a high value on environmental cleanup. A CNN/USA Today/Gallup poll finds, for instance, that 62 percent of Americans agree that "protection of the environment should be given priority even at the risk of curbing economic growth." Such sentiments run particularly strong in California, where even conservative politicians take care to cultivate a pro-environment image.

But if people really want further improvements in air quality, automobiles--their automobiles- -are going to be affected. Cars are among the last targets from which significant additional reductions in air emissions can be wrung. There are, of course, better and worse ways to accomplish this end. But just about no way to accomplish these reductions comes without some pain to someone. There just ain't no free lunch.

Automobiles in general now account for as much as half of total air-pollution emissions in many U.S. cities. But these aggregate figures obscure a critical detail. Only a fraction of cars-- around 10 percent--account for more than half of all vehicle emissions of carbon monoxide and hydrocarbons. It is these so-called gross polluters that California and other states are trying to target with their new smog check programs. The idea is to identify, through vehicle inspections, those cars that are really dirty and then require that they be repaired to reduce their emissions. It's a politically appealing idea since most motorists think the gross polluter is someone else--the neighbor's car with the plume of black smoke.

Targeting gross polluters sounds like a simple and sensible idea. The challenge lies in implementing it. Gross polluters are not just all those smoking old junkers easily identified by make, model, and year. Stephanie Deason of Torrance, California, told the Los Angeles Times that her 1994 Chevy Blazer, with a hitherto undiscovered broken fuel injector, flunked the smog test as a gross polluter. So did Redondo Beach attorney Jason Schlossberg's 1989 Nissan 240SX. As University of Denver researcher Donald Stedman and others have pointed out, older cars are not always gross polluters, and newer cars sometimes are. Moreover, new cars typically are driven more miles. Pollution effects result from how much stuff cars emit and how many miles they are driven. So just targeting all old cars--and leaving newer cars alone--won't suffice. This situation presents regulators with their first big dilemma. How can they identify the gross polluters? One way is to test every single car on the road periodically. That's what many states do already, but testing every car is like trying to find drunk drivers by stopping every car on the road--and with the same results: lots of inconvenience to everyone just to find a few offenders. Next comes the repair dilemma. Old smog check programs managed to identify polluting cars (though fraud sometimes plagued these programs). But achieving emission reductions requires repairing polluting vehicles.

Real-world observations of California's smog check program from 1985 to 1992 suggest that the program fell far short of achieving predicted emission reductions. The old program simply failed to ensure that motorists invested in enduring repairs. Instead, what resulted was a "clean for a day" phenomenon. Motorists paid for just enough repairs to pass the test.

With tests scheduled only every two years, a quick (but temporary) fix was all that mattered. The average price tag for repairs under the old program was a modest $65. And state law even set repair-cost limits. Any car that could not be fixed--even temporarily--for below the limit got a special waiver.

The new program has no waivers for "gross polluters." Moreover, under the new program, repairs can be costly and, sometimes, even impossible. It cost Schlossberg $420 to fix his Nissan. Cindy Weidner of Folsom, California, told the Sacramento Bee it cost her $1,100 to fix her company truck. A pilot project conducted by California officials showed repair costs averaging $350 per vehicle.

Schlossberg generously conceded to the Los Angeles Times that "it doesn't bother me to pay to help with smog." Others are less sanguine about the tab. Even state officials have conceded that, for some people, the program might create hardships.

This is no minor matter. The city of Los Angeles evaluated car ownership and found that 32 percent of those driving gross polluters had family incomes of less than $10,000 per year. A senior attorney with the Natural Resources Defense Council tried to sweep this issue under the rug by telling one reporter that repair costs would be minimal. The numbers belie this claim-- and underscore that tradeoffs are real. Just how willing are people to pursue cleaner air at the expense of other values--for example, a desire by rich and poor alike for personal mobility?

California legislators have acknowledged the cost--and its potentially devastating impact on low-income families--by creating an "economic hardship extension." A poor person with a gross- polluting vehicle can, under this program, register the vehicle immediately without passing a smog check inspection. The owner then has up to 12 months to bring the car into compliance with state and federal emission standards. Motorists can also get a special one-time, two-year smog certificate waiver, after making certain repairs up to certain cost limit that vary by location. The waiver, according to the Bureau of Automotive Repairs, "may not be used for two consecutive Smog Check inspections." Both of these programs provide some flexibility and temporary "cost" relief to motorists. Unlike the old program, however, gross polluters cannot obtain repeated waivers.

The real test of Californians' commitment to cleaner air will come as more and more motorists--especially low-income motorists--find themselves shelling out hundreds of dollars to get repairs, sometimes for cars barely worth the cost of those repairs. Reestablishing repair cost limits and permanent waivers can overcome potential financial distress; such measures also weaken the potential effectiveness of the program.

Beyond this central tradeoff, most of the current problems with the smog check program involve more tractable--though politically charged--implementation details. Already, for example, California has reduced from 30 days to just five days the time it takes to get an appointment for a retest of a gross polluter at special test-only centers. And the wait at these centers has been substantially shortened.

But these quick fixes don't alter some program fundamentals. The new program still requires most cars to undergo periodic scheduled emission testing. New car buyers can opt out of the program for a couple of years--for a fee. Everyone else must spend time and money for a test that most cars will end up passing. Clean cars are punished along with the dirty few.

This is where remote sensing, now more popularly christened the "smog dog," comes in (See "Breathing Room," June 1994). The smog dog measures vehicle emissions using an infrared device set up along the roadside.

Its champions see the smog dog as an easy way to identify gross polluters without putting everyone through some kind of test. They also see the smog dog as an answer to the "clean for a day" problem. If people know they might be nabbed by the smog dog, they may be more mindful of keeping their cars in better working order to avoid a fix-it ticket or other penalties. But the U.S. Environmental Protection Agency won't allow California (or other states) to rely just on the smog dog. In part, this is because current remote sensing technology does a poor job of measuring nitrogen oxide emissions, which make up a key smog-forming gas. A smog dog to measure NOX is already under way, however, and measuring NOX may not be that important anyway. Many gross polluters fail for all major emission gases.

The bigger dispute is more fundamental. EPA officials seem to think that all cars, not just gross emitters, need to be tested no matter what--and fixed to manufacturer operating standards--if smog check programs are to bring about substantial emission reductions. The smog dog, they say, is not up to the task of testing every car on the highway.

This raises a philosophical more than a technical issue. Just how clean is clean? Is targeting and cleaning up the dirtiest 10 percent of vehicles enough? Air-quality research scientist Douglas Lawson, a former consultant to California's Inspection and Maintenance Committee, argues that getting the really dirty cars is a big enough challenge in itself--and, he argues, that's where the smog check ought to focus. That's where large emission reductions per dollar spent are possible. Out at the margin--where cars are just a little bit dirty--test and repair costs often remain just as high as for gross polluters. But dollars spent on these cars produce few, if any, emission reductions. Often, tinkering with these more marginal polluters actually results in no emission reductions. Sometimes, as Lawson found when reviewing a California Air Resources Board pilot project, these cars produce even more emissions after so-called repairs than before.

When presented with these arguments by California's Inspection and Maintenance Review Committee, EPA officials were unconvinced. And their opinion matters. It's the EPA that doles out emission-reduction credits to states. States that don't get enough credits (which have nothing to do with real-world, measurable emission reductions) for their clean air programs face all kinds of potential penalties. Some California motorists may resent the new smog check program. But it's the least-intrusive plan the state could implement and still meet EPA requirements. Without a rigorous smog check program, drivers could face odd-even driving day regulations. And the state could face restrictions on operations at the Port of Los Angeles and Los Angeles International Airport, or other similarly draconian measures.

The final irony of the smog check uproar is that lots of dollars and effort are being spent to establish a program that may be irrelevant in the relatively near future. As more and more cars are equipped with on-board diagnostics that monitor vehicle emissions, special testing facilities may not be necessary at all.

This longer time horizon should influence the design of current programs--indicating the importance of flexible programs that do not rely on massive near-term investments that may soon be obsolete. The prospect of pouring money into soon-to-be-obsolete equipment worries current operators of smog check stations. After all, it was just a few years back that they were asked to invest in tailpipe test equipment called BAR-90. Now California's new smog check program calls for tests to be done using dynamometers carrying a price tag of $35,000 or more to buy and install (a lot more if facility changes to accommodate installation are necessary).

With some foresight, California battled the EPA's insistence on an even more expensive type of dynamometer. And the state resisted implementing a program that would send all 20 million automobiles in the state to a handful of centralized testing stations that would have required lots of new investment.

Unlike California, Texas opted to stick with a modified BAR-90 type test, there-by avoiding any requirement that smog check stations invest in yet another new technology. Their choice was not simply the result of political acquiescence to repair shop lobbyists. Lawson and others, evaluating the relative performance of the new-fangled dynamometer and the old-fashioned BAR- 90, found that the BAR-90 performed about as well as dynamometers in identifying the real gross polluters. The BAR-90 could not, though, measure NOX. And it didn't do as well testing the more marginally emitting vehicles.

So which equipment test type is better? Ultimately, the answer depends on whether we insist on failing--and repairing--just the really dirty cars, or whether we think most cars that operate above the standard for their make and model should be nabbed through smog checks. And that debate lies at the heart of just about all environmental cleanup programs. How much effort (and money and inconvenience) do people want to spend to achieve each additional bit of cleanup?

Evolutionary Ecology

lynns@reason.org (Lynn Scarlett) — Wed, 01 May 1996 00:00:00 EDT

The 25th anniversary of Earth Day came and went last year, with little fanfare and no public demand for more environmental laws. The new Republican Congress tried, and mostly failed, to enact reforms designed to lessen the burden of environmental regulation. Behind the scenes and in public forums, various schools of environmental reform debated and discussed. They talked cost-benefit analysis and "takings" compensation, emissions trading and "win-win" environmentalism. They disagreed about many things, including basic principles. But there was general consensus about two ideas: that environmental goals are important, and that the current structure of regulation isn't that great.

Environmental policy is finally growing up. But to make genuine improvements, rather than merely tinker around the edges, we first need to understand where the demand for environmental regulation comes from, and where it went wrong. And we need a vision of how environmental policy might be set right--of the general principles and concepts that might guide a new environmentalism.

Environmentalism is not, as its critics sometimes portray it, simply a New Age ideology foisted upon an unwilling public. The environmental movement has important ideological components, but the demand for cleaner air and water or for wilderness and species preservation is not that different from the demand for any other good. As living standards rise, people want to buy more environmental "goods." Pollution is as old as human activity, but only recently have we been rich enough to worry about it.

Looking across countries, University of Chicago economist Don Coursey finds a clear correlation between increased wealth, measured by per capita GDP, and increased allegiance to environmental protection. As incomes rise, per capita expenditures on pollution control increase--a phenomenon Coursey observes in most advanced industrialized nations. The amount of land set aside for protection also rises with GDP. Green groups may decry economic growth, but it is growth itself that makes environmental protection possible and popular.

Coursey's work also points up a fact often forgotten in public discussions: "The environment" is not an all-or-nothing good, but a bundle of different goods. In surveys, he asks people to indicate how much they'd be willing to spend to preserve different species. The results are wildly varied. Animals like the bald eagle and grizzly bear consistently rank high, while spiders, beetles, snakes, and snails are barely valued. The varied costs of real-world regulations reflect this distinction: Coursey calculates the amount spent to preserve a single Florida panther at $4.8 million, compared to a mere $1.17 to preserve a single Painted Snake Coil Forest Snail.

Political maneuvering may produce such disparate results, but the law does not actually recognize such distinctions, or the implicit tradeoffs they express. It declares species protection, like many other environmental goods, an absolute. Early environmentalist thinking--influential to this day--did not recognize environmental values as some goods among many but rather proclaimed them preeminent: Earth First! A California regulator describes his state's water policy this way: "If Mother Nature didn't put it in, you had to take it out--everything--that was the goal. This drove us to rigid, grossly exuberant attempts at clean up."

This absolutism suggests one way that environmental policy went wrong. It did not recognize that quality of life resides in pursuit of multiple values. People seek shelter, nourishment, health, security, learning, fairness, companionship, freedom, and personal comfort together with environmental protection. They even seek many, sometimes competing, environmental goals. They don't agree on how to marshal their resources (and time) in pursuit of these many goals. And it is often difficult for outsiders--or even individuals themselves--to know in advance how they would prefer to trade off among different values.

Competing values are not unique to the environmental arena. In fact, people make such tradeoffs every day. They also deal with another conundrum of environmental policy: the "knowledge problem."

On the one hand, environmental problems involve matters of "general" knowledge, scientific knowledge of facts that are constant across time and space. In some cases, the general knowledge is a matter of settled understanding: the boiling point of water, for instance, or the bonding patterns of chemicals. In others, it is a matter of ongoing research and scientific contention. General knowledge includes such still-controversial issues as the health hazards of various substances or the effects of CFCs on the ozone layer. Much environmental debate takes place over issues of general knowledge, and these questions are important. But they aren't the whole story.

Environmental problems and problem solving also often involve "specific" knowledge--the knowledge of time, place, and experience described by Nobel laureate F.A. Hayek in "The Use of Knowledge in Society." This information varies by circumstance and location and may change over time. Specific knowledge is decentralized--it resides on the factory floor, at a particular Superfund site, or on a specific farm.

The impacts of a landfill in a desert will differ from those near the Florida Everglades. Emitting effluent into a fast-moving stream is different from emitting waste into a pond. Using two coats of paint will have different effects than using just one coat. Resource use and emissions associated with cloth and disposable diapers will depend on how many are used each day, what kinds of disposal systems are available, and where those systems are located. Nor are environmental effects the only important specific knowledge relevant to environmental issues--tradeoffs between environmental goods and other goods may vary from situation to situation. These kinds of details do not reside in the minds of bureaucrats in Washington. Yet it is this kind of knowledge that is often most relevant to understanding environmental problems and possible remedies.

Again, there is nothing unique to environmental issues about the knowledge problem. It is a fundamental aspect of human life, something people cope with all the time.

If, for instance, an environment-loving outdoorsman wishes to equip himself for mountain climbing, he may need to buy a special jacket (among much other gear). Deciding what to buy requires tradeoffs: First, he's devoting his financial resources to a jacket, rather than to something else, and his free time to mountain climbing. Then he must decide what characteristics he wants: how much insulation, how much durability, what sort of pockets or hood, and so on--all keeping in mind the continuing tradeoff between money he spends on the jacket and money he could spend on something else. He looks at brand names and reputations. He finds out what sort of return policies and customer service the jacket maker has.

The outdoorsman has specific knowledge. He knows what mountains he wishes to climb, and at what time of year. He knows whether he's an occasional climber, or a devotee. He knows whether he wants a lot of help from a sales clerk, or simply the best price. He knows his size and his favorite color. The jacket maker, too, has specific knowledge: of supplies, of tradeoffs between design features and costs, of distribution channels, of changing patterns of demand. No one centrally decides a single jacket policy for all U.S. mountain climbers.

But behind all these considerations lie a host of social and business institutions, from the Uniform Commercial Code and product liability law to standard sizes, specialty magazines, and outdoor-equipment shops. Overcoming the knowledge and values problems is not easy or cost-free, even in well-developed markets. Companies spend millions of dollars on marketing in an attempt to better understand and address consumer values. They draw on general knowledge--on, for instance, scientific research on physiology or the properties of jacket materials. They wear-test products and adjust to ever-changing information about suppliers. They respond to the unexpected: a cold snap that sends jacket demand up, a supplier's zipper redesign, a sudden change of fashion. Throughout all these processes, they receive constant feedback, direct and indirect, from customers and suppliers.

For "ordinary" goods like jackets, we have hundreds of years of institutional evolution to make markets work, to address the problems of values and knowledge. Some of those institutions involve government policy. Many do not.

Environmental goods present special challenges because of the characteristics of these goods. But meeting those challenges has been unnecessarily difficult. For too long environmental policy has been shaped by people who demanded that environmental values trump all other considerations and who assumed that a regulatory elite possessed all necessary knowledge. Rather than figuring out how to perfect or create institutions that would allow a market for environmental goods to develop and flourish, they have been bent on opposing and destroying markets. They have seen markets not as processes for addressing values and conveying knowledge but as symbols of base commercialism and greed. This moralistic approach is finally fading. We can now begin to examine what sorts of institutions different environmental goods require--to explore a new environmental vision.

For 20 years, some of the most effective proponents of "free market environmentalism" have come out of the New Resource Economics school of thought. These economists, mostly based in the Western United States, focus on the environmental goods most easily incorporated into traditional institutions of property rights--and, perhaps not coincidentally, the oldest areas of U.S. environmental policy, dating back to the Progressive Era. Their starting premise is that individuals are predominantly self-interested. New Resource Economics then explores how different ownership settings and decision-making institutions shape incentives for stewardship.

"Actual or potential owners have incentives to use their resources efficiently," write economists Richard Stroup and John Baden, neatly summing up their thesis. Owners enjoy the fruits of efficient resource use and land stewardship through enhanced returns on their investment and maintenance of their property's value over time.

Environmental problems arise, in this model, when resources are unowned. This is the famous "tragedy of the commons," in which resources are "owned" by everyone and thus effectively by no one, because they can be used indiscriminately by everyone. Each person has an incentive to consume as much as possible, as fast as possible, rather than to preserve and protect resources for future use. According to this view, institutions, not perverse people, are the genesis of environmental problems.

"The same people who nearly destroyed the buffalo population," write Stroup and Baden, "posed no threat to the more valuable beef cattle raised on the western range. In that instance more clearly defined property rights resulted in the proliferation of beef cattle while the imperfect, if not altogether absent, property rights to the buffalo led to its near elimination."

Translated into policy, the insights of these economists encourage experiments in market creation. Environmental writer Tom Wolf describes a "Ranching for Wildlife" program in Colorado that borrows from the ideas of New Resource Economists. In the Sangre de Cristo Mountains, elk on public and private lands compete with cattle for forage. The challenge, suggests Wolf, is "to figure out how ranchers can capture value from the elk."

Hunters will pay as much as $8,000 for a license to hunt a trophy elk. But until Colorado passed its Ranching for Wildlife program, landowners were unable to take part in potential revenue from sale of hunting licenses. To cattle ranchers, then, elk were merely pests. Under Ranching for Wildlife, the state still "owns" the wildlife, but owners of large ranches can auction off, at whatever price the market will bear, a designated number of hunting licenses that guarantee trophy elk. The program, in effect, has partially privatized elk-hunting rights. Participating ranch owners now manage their lands to provide suitable habitat for elk. They also guard vigilantly against poaching of young bull elk.

One of the advantages of "privatizing" resource and land-use decisions through various property rights arrangements is that these arrangements reduce the need for consensus. Goals, such as wilderness preservation, can be pursued through private land purchases that, unlike public preservation activities, do not require majority voter approval.

Wedding their work to the pioneering work of Nobel laureate economist James Buchanan and Gordon Tullock on "public choice theory," the New Resource Economists are also able to explain some of the perversities that keep surfacing in public lands management. The U.S. Forest Service, for instance, has incentives enshrined in law that encourage it to allow large-scale timber cutting even when the logging costs more than the Forest Service takes in. Because bureaucrats have no rights to the resources they manage, Stroup and Baden argue, "Even when [they] are highly trained, competent, and well intended, the information and incentives they face do not encourage either sensitive or efficient resource management."

Most environmental issues are not, however, quite that simple. Incentives and self-interest are always present, but they are not the whole story.

Markets work for jackets and, with a little work, for elk because these goods have certain characteristics that make transactions relatively simple. It's possible to clearly specify who owns what, to identify buyers and sellers, and to convey all the necessary information for trades to take place. As a result, the market operates as a discovery process to address the knowledge and value problems--and to encourage improvements over time, such as better jacket brands or improved elk forage.

In other cases, however, things aren't so clearly defined. There are frictions: hard-to-divide goods, parties too numerous or scattered to be identified, vital information that isn't easily shared or easily known, blurry property lines. Institutions must evolve to deal with these hard cases.

One such institution is the common law. The common-law approach asks, "What happens when one person's sphere of activity conflicts with another person's?" The result is a focus on the concepts of liability, nuisance, and trespass; the role of courts in evaluating harms and benefits; and their role in resolving conflicts by clarifying the scope of different intersecting rights.

This blurry realm is not confined to a few difficult air pollution problems (and, in fact, common law may not work well for air pollution). Anywhere people congregate, conflicts emerge over sights, smells, and physical invasions that include everything from factory smoke to ugly houses to one neighbor's leaves falling on another's yard. They also include potentially big nuisances such as toxic air emissions or discharges of waste into water bodies.

The common-law framework offers a means of further clarifying rights and refining just what "enjoyment and use" of one's property means. It is thus both a mechanism for conflict resolution and a means of discovering the scope and limit of rights.

Consider an apartment building with a noisy air-conditioning unit that disturbs a neighbor. Asked for injunctive relief, one tool of common law, the court may emphasize the neighbor's rights, requiring the apartment owner to eliminate the air conditioner noise--unless the neighbor agrees to some other arrangement. Or it may assign the owner the rights, declaring that the neighbor must put up with the noise unless he can make a deal with the owner. In actual conflicts, injunctive relief usually balances the two interests. "The law of nuisance," says Chicago economist Coursey, "actually would tend to use a rule that looked like a combination...: the apartment owner may make noise with impunity up to some critical level, and, if the apartment owner makes more than the critical level of noise, the single family may obtain an order of the court directing the apartment owner to reduce the noise down to the critical level."

In his famous "Coase theorem," Nobel laureate Ronald Coase developed the theoretical underpinnings of this sort of institution. In a friction-free world, where there are no "transaction costs," he argued, it doesn't matter which side is given the rights, because the two parties can always make a deal. (This calculation covers only the question of whether activities will occur, not issues of fairness, where distribution of rights does matter.) If your air conditioner is making noise you have every right to make, I can pay you to stop; if, on the other hand, you have no right to a noisy air conditioner without my permission, you can pay me to grant that permission. Problems arise in the real world, however, because transactions aren't free and the way rights are defined affects the cost of reaching agreement. So social institutions, such as courts, step in and assign rights to minimize conflict and maximize wealth, at least in theory.

Common-law tradition embodies a discovery process that clarifies and refines rights boundaries and obligations in those blurry realms where different sets of rights intersect. Common law tends to follow precedent, and precedent can only be disturbed by private parties bringing new cases with slightly different circumstances or new arguments. As the law gets better and better at maximizing the welfare of the parties in a particular kind of case, fewer and fewer such cases will be brought. As a result, the common law tends to settle on fairly efficient rules--those that make the value pie larger. Private parties then bargain "in the shadow" of settled law, dividing a larger pie than they would under rules not tested over time.

Common law, write economists Bruce Yandle and Roger Meiners, "continues to evolve. Changing preferences and improved understanding of pollution problems continuously enter the arena of law." And, unlike statutes, common law takes into account the particular circumstances of specific situations.

The common law can work to mediate disputes between discrete, identifiable parties. But, concede Yandle and Meiners, "It is hard to imagine how common law could address urban auto emission control, ozone layer problems, and global warming, to the extent that the science of those problems becomes more settled." In such cases, it is much too difficult to identify a clear-cut "polluter" and a clear-cut "plaintiff." Either most people fall simultaneously into both categories or the cost of dividing the environmental good--clean air, an undisturbed ozone layer, etc.--is much too high (sometimes approaching infinity).

Yet the problems of knowledge and values remain, and so does the demand for environmental goods. The trick for environmental reformers is to develop a vision of evolving institutions that permits different sorts of institutions to address different kinds of issues, and to do so at the appropriate decision-making level. It helps to think of this challenge as a sequence of interrelated questions, a decision tree based on the characteristics of the particular environmental goods involved.

In some cases, what is needed is not political rule making but business institutions, analogous to standard sizes and outdoor-equipment trade shows. In these cases, environmental goods are divisible, rights are assignable, and we are in the ordinary realm of markets, where entrepreneurs are rewarded for finding ways to address the knowledge and value problems effectively. Here the only issue is allowing time for institutions to evolve on their own.

Markets for some recyclables, for instance, are hampered because buyers and sellers sometimes lack information about available supplies and demand, and uniform quality is not guaranteed. These problems resemble those of many farm commodities in the 1800s. One remedy is to mimic the experience of corn farmers a century ago: Establish a coordinated process for trading in recyclables. The recent creation of electronic listing of some recyclables with the Chicago Board of Trade is a first step in this direction.

This approach differs markedly from political activists' calls to mandate recycled content in products. Those proposed mandates simply override the specific knowledge of circumstances so critical to efficient resource use. For example, mandating high levels of recycled content in certain paperboard products can require adding extra virgin (nonwaste) fiber to maintain adequate strength of the paperboard. The result is a heavier product that uses more total fiber.

Often, however, environmental goods are indivisible and present challenges to ordinary markets. Faced with these "market failures," the traditional response from the green movement has been to substitute government coercion for individual choice. Yet absolutist regulation that suppresses knowledge and imposes a single value hierarchy is not the only way to achieve such goals as clean air. It is possible to create evolvable institutions that, while they are not as simple or politically neutral as traditional markets, capture much relevant information about knowledge and values.

Traditional regulations, such as technology prescriptions and resource-use mandates, ignore the location-specific and ever-changing information critical to all production and consumption decisions. Performance standards, by contrast, allow individuals and firms to figure out how best to achieve the stated standards: to lower overall air pollution to a certain level, for instance. This is the central insight of economists who have articulated the case for market-oriented regulations like the tradeable permits scheme set forth in the 1990 Clean Air Act Amendments. (See "Selling Air Pollution," page 32.)

Tradeable permit schemes and pollution charges provide flexibility to producers (and consumers, in the case of vehicle emission charges) that should, in the long run, result in more efficient responses to air pollution problems. These approaches still require top-down goal-setting, and they are still therefore subject to political pressures that don't affect the market for jackets. In setting such standards, general scientific knowledge is critical, and often a matter of dispute.

But the problem of indivisibility--especially in the case of air pollution--makes some sort of collective goal-setting inevitable. The number of affected parties makes common-law approaches or voluntary bargaining cumbersome, given today's technologies. What is attractive about tradeable permit schemes is their potential to prepare the groundwork for creating enforceable "clean air rights" over time. For this to happen, however, legislators need to eliminate all the current language that insists these pollution credits are not rights--language that renders investment in such credits uncertain.

Tradeable permits and pollution charges are promising mechanisms. But even if we decide they are the right mechanisms to address a certain environmental problem, we still must ask who the affected parties are--who is breathing the air in question--and where, then, the goal-setting ought to be done. For three decades, we've taken for granted the idea that there should be one single environmental standard for the whole nation. But understanding the roles of knowledge and values in defining and pricing environmental goods suggests that that may not be the case. For some problems, impacts are strictly local and narrowly circumscribed. Other environmental problems may impose regional, or even global, impacts. The locus of impact should help determine where decision-making authority resides.

If most relevant knowledge is location-specific and dynamic, decisions about "how clean is clean" and what remedies to use should take place closest to where the problem occurs. For air-emission problems, that might mean a local air basin. For decisions about siting a hazardous waste facility, that might mean bargaining between landowners adjacent to the site and the site owner.

The rationale for using decentralized bargaining approaches to address environmental problems lies not with any mystical faith that small is always beautiful, nor with the now-faddish notion that all that is good must come from communities. The rationale for these approaches builds, instead, on two premises. One is the importance of decentralized information in understanding and remedying environmental problems. The other is the importance of finding ways for real people affected by real conflicts of social space to undertake their own balancing act among competing values.

Several years ago, when the Mobro garbage barge out of Islip, New York, roamed the high seas in search of a place to unload its unappetizing cargo, nightly newscasters regaled viewers with tales of the NIMBY (not-in-my-backyard) problem. People increasingly don't want landfills--or any other "nuisance" facility--sited in their communities. But people do want to be able to throw out their waste, and the trash must go somewhere.

Political edicts directing communities to site landfills are one possible remedy. But such edicts simply override the concerns and preferences of affected individuals. Bargaining between would-be landfill operators and local communities offers another option--one already used by waste management companies. Sometimes called YIMBY-FAP (yes, in my backyard, for a price), these arrangements involve negotiations in which landfill operators offer a package of protections and benefits, including compensation, to affected landowners--or sometimes entire communities--in exchange for permission to site a landfill. The costs of the landfill are thus borne by all its customers, rather than only the property owners in the surrounding area. (The same principle applies in legal reforms aimed at requiring government "takings" compensation to landowners who bear the cost of such policies as wetlands protection. Society as a whole is buying an environmental good, and all the "purchasers" should bear the cost.)

These bargaining processes have shed light on several important decision-making conundrums.

First, surveys of New York citizens showed that acceptance of benefit packages depends on how the package is offered. Early direct involvement in the bargaining process is important to participants.

Second, perceptions matter. Just as people may "irrationally" want to buy cars with tail fins, so too they may "irrationally" dislike living next to a landfill, even if it poses no health hazards. In our study, "Too Little, Too Late? Host-Community Benefits and Siting Solid Waste Facilities," economist Rodney Fort and I note that "perception costs might be portrayed as distortions of reality, or as the inability of lay people correctly to assess the problem, but individuals will react according to their perceptions....The [perception] costs are real regardless of whether public perception is viewed as correct or rational by policy makers, scientists, and technical experts."

Technocratically minded environmental reformers fear that public perceptions will yield irrational demands, driving up costs to solve environmental problems--whether those problems involve building landfills or cleaning up Superfund sites. Those fears do not appear to be justified in circumstances where citizens face both the risks associated with a facility and enjoy directly the benefits--in the form of lower costs or higher compensation--associated with a particular remedy. Bargaining itself may serve as a discovery process, revealing more accurate information about both risks and benefits.

Unbounded fears may, in fact, be more likely to drive decisions toward "zero risk" in centralized decision processes. There, the costs of decisions are spread over an entire population, while the benefits from pursuing pristine clean-ups are enjoyed by those few near a particular site. The few then have an incentive to invest heavily in lobbying, while the many do not--with obvious results. Experience with many EPA regulations, and the very high cost per year of life saved associated with those regulations, confirms this observation.

The contrast between costly Superfund site clean-ups, which have occurred in a top-down, regulatory framework directed by the EPA, and more recent local remediation of abandoned industrial sites through negotiated settlements offers further testament to this point. Processes that create closer links between those who pay for clean-up costs and those who enjoy the benefits of clean-up offer a discipline missing from traditional top-down approaches. The locally negotiated clean-ups have, in general, been achieved at a fraction of the cost for Superfund sites.

Not all indivisible environmental problems will be well-suited to collective-negotiation processes, however. In a very imperfect world, sometimes national, state, or local restrictions may be the best we can do.

What distinguishes these circumstances? They involve a high degree of public consensus--even among the regulated parties--that limits or "injunctions" against the activity are appropriate. These are those very rare cases in which everyone would be better off if an environmentally damaging practice were ended, but where there will always be incentives to "cheat" unless a restriction can be enforced by law.

Most environmental problems do not share these characteristics, but some problems may come close--as in the use and discharge of acute, well-understood toxins into the air or water. Consider two examples: the case of the "mad hatter" and the problem of cadmium discharges into water in Japan. The term "mad hatter" came from the severe effects of using mercury in the hatter's trade to make felt hats. And in 1950s Japan, mining operations discharged cadmium into water that eventually found its way into the food supply, causing Itai-Itai ("ouch-ouch") disease that results in demineralization of bones. When the source of the disease was pinpointed in 1968, the Japanese government set strict effluent standards for cadmium and prohibited consumption of rice with cadmium concentrations above a specific standard.

In each of these cases, uniform standards on the handling, use, or disposal of these materials might reduce harm, coincide with broad-based public values, and lessen transaction costs associated with case-by-case bargaining or court remedies. In effect, a legal ban enforces a cartel, in which everyone in the industry is able to stop using the dangerous chemicals because they know their competitors will have to stop, too.

Such standards need not always emerge through government actions. When acute problems of this kind become known, the marketplace itself sometimes moves to eliminate use of the offending toxins. For example, after it became clear that vapors from chromium-plating processes resulted in serious health problems for workers, the costs from worker compensation claims drove industries to find ways of safely containing the vapors.

The same kind of evolution occurred among dentists in their use of mercury amalgams. The government did not ban the use of such amalgams. However, dentists found ways of minimizing exposures to the mercury vapors created during the preparation of amalgams, and some dentists turned to substitutes. Trade associations, trade unions, professional organizations, and consumer groups often promote these kinds of changes by monitoring safety issues relevant to their members.

Whether uniform standards ought to be considered will be a function of the level of consensus regarding whether some action should be taken; the clarity of knowledge about the causation of a problem; and the level of risk associated with the problem. Where problems are indivisible, risks posed by the problem are extremely high, and causes of those risks are well-understood, public rules offer a plausible solution.

Clearly, an environmental vision based on evolving institutions will not please everyone. It acknowledges tradeoffs among values, and it admits both the necessity and the limits of political decision making--positions guaranteed to upset both traditional environmentalists and free market absolutists. It does not promise a perfect world, merely a slowly improving one. And it faces squarely the underlying problem with current environmental regulations: Centralized, top-down rule making is ill-suited to addressing environmental problems in a complex, dynamic world in which most relevant information is location-specific and different people have very different priorities.

Applying such a vision cannot be a matter of waving a single legislative wand. Three decades of statutes have created layer upon layer of regulations. But Congress could start with a few basic reforms. The National Environmental Policy Institute is exploring ways to craft a single statute that would phase in devolution of most environmental decisions to states. The concept is worth pursuing. Devolution to states does not really go far enough, since, ultimately, what is needed is further decentralization to local communities and, where feasible, privatization of environmental decisions. But devolution to the states is a good place to start in any reform agenda.

Similarly, Congress needs to get the EPA out of the business of prospectively approving state and local environmental protection programs. Under the Clean Air Act, for example, Congress sets air-emission standards and states are delegated responsibility for developing State Implementation Plans. Using computer models and other criteria, the EPA assesses those plans to determine whether they comply with federal law. States get full emission-reduction "credits" when the EPA's computer models show a state program achieving over time some estimated pollution reduction. But this means the EPA's assumptions about everything from population growth to commuting patterns, not actual pollution levels, determine the outcome. The process prevents experimentation. It locks states into using technologies or programs that the EPA thinks--but has not necessarily demonstrated--will work. Eliminating the prospective approval process would give states the latitude to design programs they believe will achieve emission reductions, and to evaluate and adjust those programs based on real-world data.

Above all, what is needed is a fundamental shift away from an approach that is primarily regulatory and punitive to one that emphasizes bargaining, improvement in information flows, and incentives for stewardship. The 1995 House proposals regarding takings compensation are essential to realigning the incentive equation.

Turning environmental policy in the direction of more bargaining is likely to require experimentation and many varied measures. But a place to start is in revising approaches to environmental enforcement. Current approaches have blurred any distinctions between intent and accident; the line between civil and criminal cases is not always clear; sentencing guidelines bear little logical relationship to the scope of alleged crimes.

In recent soul-searching, business leaders and legislators who led the 1995 regulatory reform effort of the 104th Congress opined that their reform vision was the right one. It was, they concluded, only their message that was inadequate. This self-appraisal is too generous.

Their message was inadequate because their vision was not well thought out. Pieces of that vision--such as the need to realign private incentives through takings compensation--were on target. But bills to require cost-benefit analysis and risk assessment really targeted only a symptom--high costs and skewed goals--without looking at the more fundamental problem. Would-be reformers adopted a mirror image of their opponents' technocratic, top-down approach without thinking seriously about how to ensure environmental protection in a world in which environmental goods are widely valued.

The movement toward environmental reform will not, however, disappear. And, in the long run, the past year's setbacks may provide an important opportunity: an occasion to reflect seriously not only on the politics of environmental regulation but on the alternatives to traditional methods. We have a chance to get it right this time, but only if we are willing to invest in developing a dynamic vision.

In Memoriam: Karl Hess

lynns@reason.org (Lynn Scarlett) — Fri, 01 Jul 1994 00:00:00 EDT

Karl Hess, dubbed an "unconventional intellectual" by The Washington Post, died on April 22 at age 70, two years after receiving a heart transplant.

Unconventional Hess was, but never inconsistent. Over the more than 30 years of his quasi-public life as a writer and political activist, a single theme--pursuit of liberty-- dominated both his writings and his deeds.

"Everyone who speaks well of liberty and, more importantly, acts to enjoy it or extend it," Hess wrote as the editor of the Libertarian Party newsletter, "is welcome in my view ... My community is the community of all who love liberty."

Hess' s pursuit of liberty as he understood it sometimes made for strange bedfellows. At one time, he served as 1964 Republican presidential candidate Barry Goldwater's speechwriter. Later, he plunged into grass-roots community organizing, interacting with such groups as the Black Panther Party.

For Hess, liberty was a lifestyle, not simply a philosophical concept. In the 1970s, he strived to build an economically independent community. He brought to that effort ideas reminiscent of British writer E. F. Schumacher's "small is beautiful," experimenting with small-scale, "backyard" technologies, including solar ovens and windmills.

In many ways, this experiment embodied Hess's concept of liberty. Like other libertarian philosophers, he championed individualism. But Hess saw decentralized institutions as pivotal to nurturing freedom. And he seemed especially drawn to struggles for justice by "the little guy."

Though he wrote for numerous publications, including REASON, Hess penned his most famous lines as Goldwater's speechwriter. At the 1964 Republican convention, Goldwater proclaimed, "Extremism in the defense of liberty is no vice; moderation in the pursuit of justice is no virtue." Written 30 years ago, these words offer a concise summation of Hess's lifelong fervor for liberty.

Capital Punishment: No

lynns@reason.org (Lynn Scarlett) — Fri, 01 Jun 1990 00:00:00 EDT

In 1976, the U.S. Supreme Court reestablished that capital punishment was constitutional. Since that date, 13 states have put to death 123 criminals. California will execute its first death-row inmate in 23 years if convicted killer Robert Alton Harris fails in his final legal battle. Some 2,400 people now await their day of reckoning on death row.

By all accounts, we are entering a new era of executions. In contrast to results of opinion polls two decades ago, a majority of the public now apparently supports the death penalty. And political candidates are scrambling to announce their credentials in favor of capital punishment.

Public attitudes favoring the death penalty reflect a growing frustration with our failure to stanch criminal violence. And the public justifiably is outraged by well-publicized cases in which violent criminals walk free after a few years behind bars. But public sentiment and political expediency are unreliable guides to morality or public policy.

Nor does emotion offer a cogent basis for rejecting capital punishment. Some opponents of the death penalty rely on a distorted sympathy for the accused. Yet these accused are often savage and ruthless. Ted Bundy, executed in Florida last year, deserved no compassion or mercy. He committed multiple murders, all of them with cold-blooded calculation.

Not misplaced sympathy, but moral argumentation—about standards of right and wrong, about justice and the role of the state—can best sustain the case against capital punishment. That case begins with the assumption that a free society must recognize at least two fundamental principles. First, individuals have a right to pursue their own ends provided that they do not harm others. And second, individuals must be held responsible for their actions.

In this context, criminal action poses a particularly troublesome problem for architects of our political institutions. If criminals are not to roam freely among us, we must find some way of removing them from our midst—a task that involves some harm to the offender.

What, then, is the appropriate dose of harm to dispense? Ancient Roman law endorsed the notion of retaliation—"an eye for an eye," or, more extremely, "a death for a death."

The more utilitarian approach looks to punishment as a deterrent. It should be meted out, the argument goes, with sufficient clout to deter others from following down the path of iniquity.

Neither of these theories of justice is compatible with a free society. Retaliating for murder by executing the murderer may satisfy the desire of some for vengeance, but it does not create a more just society. French sociologist Emile Durkheim rightly noted that "there is a real and irremediable contradiction in avenging the human dignity offended in the person of the victim by violating it in the person of the criminal."

To make this argument is not to diminish the criminal's responsibility for his actions. Rather, it is to acknowledge that criminals, whatever they might have done, are still humans. If their crime requires that they lose certain rights as citizens to interact freely in a community, they do not, by their actions, lose their fundamental right to be treated as human beings.

By most ethical standards, the premeditated killing of one individual by another is immoral. The state, in implementing a system of criminal justice, ought not to be exempted from this moral standard. The state is not above the law, but is the guarantor of the law. State executions thus jeopardize the very principles that make peaceful society possible.

Arguing for capital punishment on the basis of its usefulness as a deterrent is also problematic. The empirical evidence that capital punishment does restrain would-be murderers is inconclusive.

And there is another matter raised by making deterrence a centerpiece for constructing systems of criminal justice. Certainly we want to diminish crime. But appealing to the "safety of the community" can become a convenient catchall to justify the death penalty as a deterrent to all sorts of actions. Indeed, it is just that sort of justification that lay behind the oft-criticized executions so frequently implemented behind the Iron Curtain in years past.

Criminal justice in a free society requires that we abandon retaliation and deterrence as our basis for action. A third approach—the retributivist view— would punish the offender to underscore that wrong actions carry with them adverse consequences. Unlike retaliation, retribution doesn't require the death of murderers to achieve this aim.

The retributivist view meshes well with a fourth view of the role of criminal justice—protecting society. This view concentrates not on the criminal, but on the community.

Here, the criminal is extracted from society (banished in the old days, jailed in modern times) to prevent the criminal from doing further harm to a community's peaceful citizens. Ironically, it is the failure of our criminal justice system to ensure that violent criminals are incarcerated that has fueled support for the death penalty.

Yet the death penalty serves neither justice nor morality. Indeed, because it is so severe and irreversible a punishment, implementation of the death penalty requires procedures that undermine justice—through lengthy delays and technical maneuverings.

However wretched some crimes might be, they do not justify setting aside the fundamental moral premise that individuals ought not to kill other individuals except for self-defense. It is not out of pity for the criminal, but out of respect for our own morality, that we must shun the death penalty.

The Seduction of Planning

lynns@reason.org (Lynn Scarlett) — Tue, 01 Aug 1989 00:00:00 EDT

IN JANUARY 1989, the township of Mt. Lebanon, Pennsylvania, issued a comprehensive plan “to lead Mt. Lebanon into the twenty-first century.” The report intoned: “Goals not stated cannot be achieved.”

Nearly 20 years earlier the same community, under the tutelage of a different set of policymakers, also prepared a comprehensive plan to ensure that the town's housing, transportation, and other needs were met. In the 1970 plan, a proposed mass-transit sky bus system was called the “brightest ray of hope” for the town's transportation needs. By 1988, there was no mention of the skybus. It had not been built, nor were any plans to build it described. And improving transportation remained among the planners' priorities.

Across a continent, in sprawling Los Angeles, with a population 400 times greater than Mt. Lebanon's, a distinguished committee appointed by Mayor Tom Bradley issued its report, Los Angeles 2000, in November 1988. Under preparation for three years, the report resolved that “we can plan wisely and manage the City's growth...or we can allow it to grow by default.”

Urban policymakers—in large metropolises and small towns alike—have planning fever. Few communities have escaped the penchant of policymakers to nudge, prod, and force them along the path to someone's idea of utopia. Even statewide urban management plans are now the rage—in Maine, Vermont, Rhode Island, Delaware, Florida, and New Jersey. Details vary, but the thrust is constant: big urban problems require big urban plans.

The idea of urban planning is not new. In the early l900s, cities began replacing the countryside as the predominant place of employment, and urban populations burgeoned. With growth came problems—crime, pollution, congestion, noise. Today we have vehicle exhaust; in 1900 New York had manure—tons of it. And with these problems has come an understandable urge to mitigate them.

The apparent chaos of cities provided fertile ground for proponents of urban planning. The term itself is seductive, evoking images of order and prospects of perfection. And so, by the '20s, zoning laws—an early planning tool—began to spell out what could be built where. Then came transportation planning and building codes and urban renewal schemes and redevelopment projects and, most recently, growth-management plans.

Yet urban problems persist. Even the keenest minds with the best intentions can't seem to set the urban landscape aright.

How can this be?

With poetic incisiveness, Robert Burns penned in 1785 his often-repeated lines, “The best laid schemes o’ mice and men / Gang aft a gley; / An' lea'e us naught but grief and pain, / For promised joy.” Planners, or more specifically, public planners still miss their mark.

THIS FAILURE IS NEITHER SURPRISING nor cause for despair. Much of the chaos that planners fail to mold into order is precisely the dynamism and diversity that drive economic prosperity. “The real problem is not control, but creativity,” remarked Jane Jacobs, whose Death and Life of Great American Cities upset the discipline of public planning when it appeared in 1961. “Planners' greatest shortcoming…is lack of intellectual curiosity about how cities work. They are taught to see the intricacy of cities as mere disorder. Since most of them believe what they have been taught, they do not inquire about the processes that lie behind the intricacy.” To the degree that planners fail to quell this perceived disorder, the vitality of cities fortuitously continues.

Although the apparent chaos may be an asset, not a plague, other problems are real. Vehicles clog highways. Pollutants foul the air. Solid wastes accumulate and outpace landfill capacity. Buildings and infrastructure decay. Housing costs soar. Such city woes deserve attention, but plans—even the current breed of “comprehensive,” “imaginative,” “regional” public plans—are not the answer (and are sometimes even part of the problem).

Consider a recent megaplan devised by Los Angeles-area legislators. This spring the Southern California Air Quality Management District (AQMD), whose jurisdiction includes all of the greater Los Angeles area, held public hearings on a wide-ranging pollution-abatement plan. The plan includes over 140 sets of regulations, spanning 18 years, that will touch every aspect of life among South Coast residents and businesses. Leaving virtually no stone unturned, the planners would ban trivial sources of pollution—some backyard barbecues, gasoline-powered lawn mowers, and swimming-pool heaters. And it would take on more-prominent pollution sources—vehicle exhaust, oil refinery emissions, and pollution from hundreds of other industrial and commercial processes.

One by one, industry representatives stood before AQMD officials at the March hearings. The proceedings went something like this. A representative of the water-heater manufacturers would stand up, praise the district for its “pathbreaking plan to deal with pollution,” and then add that, unfortunately, the district had its facts all wrong about water heaters. They don't function the way the plan described, commercial heaters differ dramatically from residential ones, and so on. Next came the swimming-pool representative, who also praised the district for its fine work but, alas, lamented that the proposed plan failed utterly to take into account actual swimming-pool heating technology. Then followed the barbecue manufacturers, the furniture makers, the oil companies, the butchers, the bakers, and the candlestick makers.

No doubt each business was attempting to protect its interests and mitigate any regulatory costs the new plan might impose—a point that student demonstrators righteously pointed out with signs denouncing all opponents of the plan as greedy businessmen out to destroy Planet Earth. But the self-interested pleas by representatives of various enterprises also illustrated a fundamental problem of planning: the knowledge problem.

As economist Thomas Sowell observed in Knowledge and Decisions, “ideas are everywhere, but knowledge is rare.” How, Sowell then asks, “does an ignorant world perform intricate functions requiring enormous knowledge?”

Planning is one popular option. In common political parlance, planning refers to the use of centralized, public decisionmaking to define goals and spell out measures to achieve them. As a decisionmaking process, it is necessarily formal. It is about rule making and rule enforcement. As a public process, its prescriptions must be specific and leave little discretion to authorities implementing the plan. This inflexibility provides, as Sowell notes, “insurance against the discriminatory use of the vast powers of government. 'Red tape' is an implicit premium paid for this 'insurance.' “

To spell out specific rules, planners need vast amounts of information. To make the AQMD plan work, for example, regulators must accurately predict demographic trends. They must have up-to-the-minute knowledge of the production processes of hundreds of businesses—and, ideally, be able to foresee what new technology might bring. They must be able to ascertain who is not complying with regulations—whether the violators are families enjoying their backyard barbecues or businesses surreptitiously emitting pollutants.

But public authorities, like the rest of us, are not omniscient. Moreover, the planning process is ill-suited to conveying information. In any centralized and relatively inflexible system, feedback about changing circumstances is slow to enter the decisionmaking loop. And acquiring knowledge about production processes and diverse community needs is expensive and time-consuming. In short, the process is inefficient—a point amply illustrated by the 20th-century performance of massive planning in the Soviet Union.

For seven decades the Soviet Union has tried to plan its economy. Now, Mikhail Gorbachev acknowledges the inefficiencies, persistent shortages, and corruption that once were reported mainly in underground East Bloc jokes. Even on quality-of-life issues, the Soviet experience is unimpressive: life expectancy has declined, mortality rates are up, pollution grays the horizon. So Soviet leaders have ushered in perestroika—a liberalization of the economy that includes more decentralized decisionmaking, some private ownership, more freedom. And the West, with some self-complacence, is cheering on these changes.

But what does the Soviet experience tell us? Forget the big debate—communism versus capitalism—and consider only the issue of planning. The Soviet system is a monumental demonstration of its pitfalls. Complex economic systems require the rapid conveyance of vast bits of information about the ever-changing supply of and demand for different resources.

The very complexity so often cited by city authorities to justify master plans in fact warrants just the opposite— decentralized decisionmaking coordinated by the actions of millions of individuals, each privy to information unavailable on a grand scale. Cities are but microcosms of the larger economy. What failed in the Soviet Union for its entire economy is bound to fail also in our cities—and for the same reasons.

SOME OF THE IMPETUS BEHIND planning stems from a very simple fallacy: that only governments plan grandly and only grand plans can bring order. In fact, of course, we all make plans and follow through on them. Many of us even achieve the goals we set out to accomplish. Food gets produced. Buildings get built. Cars get bought. No grand designer spells out a five-year plan for the millions of goods and services we produce and consume. Instead, we rely on that often-neglected process whereby prices reflect the demand for goods in relationship to their supply' informing myriad individual decisions.

Although the overall outcome subscribes to no one individual's particular vision of an ideal community, this is not for lack of planning. And this points up the real function of public plans. They do not establish plans where none exist; they instead replace the plans of individual citizens with those of government officials and the elite that curry their favor.

A telling demonstration of this is found in planners going so far as to instruct builders about the required appearance of their creations. Santa Barbara, California, for example, has decided that only red tile roofs, adobe-colored siding, and earth-colored signage will do for its commercial establishments. Baltimore's planners dictated that its transit facility must have “a cascade of steps,” a clock tower, a cafe with umbrella tables, brick walkways, structures of no more than three stories, and so on. Creativity on the part of the developer was, of course, certainly encouraged.

Even as Frank Lloyd Wright was creating his most magnificent buildings, planners had already begun gingerly to impose their visions of grandeur on city development. In New York, one of his buildings had to be constructed behind a wall so that its unconventional concrete-block walls would not mar the view from the street. Today, the structure no doubt couldn't be built at all.

Many planners and citizens deem this issue a spurious one. We cannot concern ourselves with a little loss of freedom of choice when the order and aesthetic appeal of our cities is at stake, they assert. We have to make sacrifices, perhaps even of our freedom, to attain the clean air, pure water, and uncongested roads we all desire.

In fact, however, this loss of freedom will not achieve the intended results. The reasons why are well summarized by Sowell: “The Godlike approach to social policy ignores both the diversity of values and the cost of agreement among human beings.” And, he adds, public planning “distorts the communication of knowledge.”

Planning involves prescriptions, and prescriptions inevitably raise costs. Developers haggle with city planners to come to some compromise; polluters litigate until they find a technology that will achieve a mandated reduction in emissions; employees demand higher wages in order to keep their employers in compliance with mandated “alternative work schedule” plans. These are all costs of reaching agreements among parties affected by public plans and their accompanying regulations.

Planning also distorts costs by obscuring some costs and increasing others. Banning multifamily dwellings, for example, cuts the supply of housing, and overall housing costs increase. Separating residential from commercial areas drives people into their cars as they commute outside their communities to work. Even as planners may resolve some particular perceived problem, their plans set in motion a series of unintended consequences and unacknowledged costs.

IF PUBLIC PLANNING WON'T WORK very well, are we destined to breathe foul air and creep along on congested highways? During the AQMD hearings, its proponents repeatedly charged that a vote against the plan was a vote for pollution. The contention is simplistic in its narrow presentation of the options.

The key to successfully resolving urban problems that seem to require master-planning is to understand existing decision processes. Some of the “chaos” that planners and established residents seem so eager to suppress is actually the tangible reflection of diverse preferences among different people. And some, as Jacobs observed, flows from the change that inevitably accompanies a dynamic economy. Efforts to eliminate this chaos cannot be accomplished without suppressing freedom and squelching economic prosperity. Such chaos is the sign of an economy that is working.

But other urban characteristics, like air pollution and traffic congestion, result from decisionmaking processes in which important knowledge is not being conveyed. People are, for example, choosing to drive to work at rush hour all alone in their automobiles without recognizing that highway space is limited. Or factories are emitting pollutants into the air as if the atmosphere could, without loss of air quality, absorb the emissions in unlimited quantities. Or low-cost housing is not being built. Here the key issue is how best to convey the missing pieces of information so that people alter their behavior.

All decisions, public and private, are shaped by individual preferences combined with external incentives. To change the outcome of decisions, policymakers can either hope to change people's preferences or alter the incentives they face or ignore both preferences and incentives and legislate behavior. The latter course—the planning approach—erodes freedom and entails high information costs. And changing people's preferences is akin to the ill-fated efforts of various Communist regimes to fashion a “new man.” Such efforts have failed even when governments resorted to Draconian “reeducation.”

It is possible, however, to alter the incentives people face in their daily decisions. At the root of many urban problems, especially air pollution and traffic congestion, is the simple fact that air and roads are “free goods”—treated as if they are available in unlimited supply. Commuters pay nothing to use the roadways. Polluters pay nothing to dump byproducts into the atmosphere, and most of us capriciously toss out trash as if landfill were limitless. This means that vital information about the relative scarcity of air and roads and landfill is left out of the decisionmaking process.

Public planning focuses on the ill-effects of this imperfect process and imposes regulations designed to achieve some different outcome. The result: In the case of pollution, an AQMD-style compendium of edicts mandating how Los Angeles residents and businesses are to conduct their affairs and to combat the trash problem, we get mandated recycling programs. But such regulations still convey to commuters and polluters no information about the costs of their behavior.

Or, in the case of housing, planners “downzone” urban areas to reduce crowding and congestion. But by ruling out low-cost, high-density housing, they block the ability of the market to respond to people's needs.

Public planning, espoused in the name of harmony and rationality, actually provokes discord. It interrupts the flow of information from consumer to producer and back. And it does nothing to improve the flow of information about scarcities where the marketplace, with its price-coordinated transmission of knowledge, is not working.

Where price signals are absent, as in the use of air and roads, the most effective approach is to introduce price signals rather than presume to plan away the ill-effects of their absence. Create institutions—like air rights or toll roads—that get individuals to take into account the costs of their behavior. Faced with higher costs of driving alone down the freeway at rush hour, for example, some people will switch to public transit. Others will carpool. Still others may move closer to work.

And rather than overcoming the “out of sight, out of mind” mentality toward garbage with mandates and city-financed recycling plans, the more effective solution is to introduce pricing that varies depending on how much garbage people produce. City officials in Seattle did just that. Seattle citizens now have choices. They can buy more recyclable goods and produce less garbage to keep their trash bill low. Or they can maintain their old habits, but pay higher costs for the volumes of waste they generate.

Unlike planned solutions to traffic congestion and landfill scarcity, using price signals lets individuals make their own trade-offs, their own choices, about how to respond to changing circumstances. As Sowell neatly summarizes, “more options generally mean better results when the larger number of options includes all the smaller number of options.” Planning excludes options. As a result, we are all made worse off.