Tuesday, July 10, 2007

Environmental Policy

I was reading the Washington Post a few days ago, which has been running an exposé on Vice President Cheney since Sunday. In one day's feature, they explain his environmental stances.

The situation is thusly explained:

Robert F. Smith had grown desperate by the time he turned to the vice president for help.

The former Republican congressman from Oregon represented farmers in the Klamath basin who had relied on a government-operated complex of dams and canals built almost a century ago along the Oregon-California border to irrigate nearly a quarter-million acres of arid land.

In April 2001, with the region gripped by the worst drought in memory, the spigot was shut off.

Studies by the federal government's scientists concluded unequivocally that diverting water would harm two federally protected species of fish, violating the Endangered Species Act of 1973. The Bureau of Reclamation was forced to declare that farmers must go without in order to maintain higher water levels so that two types of suckerfish in Upper Klamath Lake and the coho salmon that spawn in the Klamath River could survive the dry spell.

Because of Cheney's intervention, the government reversed itself and let the water flow in time to save the 2002 growing season, declaring that there was no threat to the fish. What followed was the largest fish kill the West had ever seen, with tens of thousands of salmon rotting on the banks of the Klamath River.

My stance was always that farm subsidies never help anyone out, except farmers because the subsidies keep food prices artificially high. Not only that, but for the government to help people out when their businesses don't do well completely does away with how the free market is supposed to work.

The obvious counter to that argument is that government intervention in terms of wildlife is just that, intervention. Technically speaking, that is not very free market, although the government does have control over wildlife to the extent that people continuously vote for protection of many endangered species, which is how certain agencies are then formed. That is to say, the public does care about the environment, or at least their local environment.

As an economist, I believe the items that need government support – or intervention if that's what you would prefer to call it – are items that would otherwise create an obvious market failure. A Market failure comes in two general varieties.

First, we can think of non-market institutions that better serve the public as opposed to if they were privately run. Firefighting and policing is a good example where the state usually provides very adequate services in that nature. The other type of market failure is when a market would not produce an outcome that is actually very good for the public in the long run. An example of this I believe is the Department of the Interior, which works with national parks and wildlife refuges. Whether you believe in the effectiveness is another matter as opposed to the fact that if this were not government run, we would see another market failure.

Let's look at part of a response from a friend of mine who works in Entomology and Wildlife Ecology:

From an anthropological standpoint, diversity provides a greater number of ecosystem services to draw upon and depend on, such a medicinal plants and fertile soils. So what if a fish goes extinct, we've got so many others? The problem is, we don't know…we are still learning the relationships different species play in an ecosystem.

It would be difficult to surmise that the free market would show the environment any non-profit courtesy; however government institutions are supposed to be run in the public interest, and in light of the imposing market failure, the department of interior is necessary in my opinion.

Here is however the problem with the two departments in question relating to what we wrote about yesterday. Firstly, the Department of Agriculture, which needless to say I am not a fan of, and the Department of Interior had to each make payments from the decision that Vice President Cheney made.

Last summer, the federal government declared a "commercial fishery failure" on the West Coast after several years of poor chinook returns virtually shut down the industry, opening the way for Congress to approve more than $60 million [MK: that's coming from the department of interior] in disaster aid to help fishermen recover their losses. That came on top of the $15 million [MK: that's coming from the department of agriculture] that the government has paid Klamath farmers since 2002 not to farm, in order to reduce demand.

To put it simply, what came out of this was waste, proving that you really can't have it both ways, and that, proving John Stossel right, the taxpayers end up having to pay for it.

I have a friend whose family lives off of farming, yet I still can't reconcile how farming is sustainable by asking tax payers to artificially support it.

I certainly do not agree with what happened in Oregon, but if the same situation was happening to my friend’s dad how would I feel? I'm not sure if I could tell him, "Well, that's the risk of farming," without fear of getting punched in the face. This is probably why it's easier to be an economist than it is to be a politician.

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