Consider these recent news items:
Some dairy farmers in California completed a successful pilot plant to turn manure into much-needed electricity, using a biogas digester and a gas turbine. They are proposing a 15-megawatt plant using the manure from more farms, but the proposal faces determined opposition from residents in Chino Hills, a half-mile away.
The Bush administration announced a new petroleum leasing initiative for the Gulf of Mexico but deletes tracts off the west coast of Florida after a bipartisan clamor from that state.
Natural gas firms with existing wells in Ohio and Michigan propose drilling additional wells under Lake Ontario by directional drilling from rigs located on land. Congress bans this at the behest of Republicans and Democrats from those states.
Here in St. Paul, residents of the Como neighborhood continue to protest the routing of a bus line down their street.
The human desire to have desirable goods and services without experiencing the attendant pollution, noise, ugliness or congestion of producing such goods is not new. The acronym NIMBY (Not In My Back Yard) was not used in ancient Rome or Greece, but I am sure that classical scholars could find incidents similar to the news items just listed.
Reconciling people’s desire to have their needs and wants fulfilled with their desire not to be troubled by noxious activities is a test for any society. Societies that can devise reasonable, efficient and fair means for reconciling such contradictory desires are better off than those that cannot. Economists categorize such means as “property rights.”
In pre-industrial societies, the social norms of the village or tribe prescribed what individuals could and could not do with property. Most noxious activities were internalized. Families butchered their own hog in their own back yard. While the noxious smells of the outhouse or soap kettle might reach the neighbor’s nose, they were even stronger for the owners.
In modern nations, social norms still play a role, but most property rights are defined through the political process and enforced by government. Zoning laws are a common tool to minimize conflicts: This area is for residences and that for industry and that other for commerce. One cannot operate a tannery in a residential district or build an apartment house in an industrial area.
Such regulations minimize conflict but do not eliminate it. Frictions develop near zone boundaries in particular. When the residents of Chino Hills bought their houses, they knew that an agricultural zone was only a half-mile away. They had to accept bellowing cows and piles of manure. But they now can argue that a large methane digester and 20,000 horsepower of gas turbines are not “agriculture.” The issue eventually will be decided by the courts or politics.
Conflict resolution immediately defaults to the political process when publicly owned resources are involved. Should we drill for oil off the coast of Florida or in the Alaskan National Wildlife Refuge or not? Both are federal lands, and the questions ultimately will be decided by political action at the national level.
Economics can say very little about what set of property-use regulation is best for any society. But it is clear that societies meet fewer needs at either end of the spectrum. Too little regulation and external costs – pollution, congestion and nuisance – abound. People are worse off. With too much regulation, producing goods and services becomes inordinately expensive. Both are inefficient in an economist’s sense of the word: For a given level of use of resources, people have less satisfaction of needs and wants than is possible.
The same is true with fairness of outcomes. Too little regulation means that many people will not be compensated for harm done them by others’ activities. Too much regulation or too elaborate a set of adjudication and appeal processes may mean that the desires of a dedicated few consistently trump the interests of a larger majority.
As the population density in our nation has grown and as non-tangible values such as wildlife habitat or other environmental amenities have grown in importance, we have moved in the direction of more regulation and more complicated adjudication processes. In some cases, this clearly improved both efficiency and fairness of our economy. In other cases, these criteria have suffered. Striking the right balance can be achieved only by an informed citizenry that is aware of the dangers toward either pole.
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.