Gov. Mark Dayton has done a great favor to all microeconomics teachers with his call for a requirement that landowners maintain 50-foot-wide filter strips along streams and other bodies of water to reduce pollution.
This is not because the measure called for by the governor is an ideal policy, but because the whole question of reducing nonpoint source pollution of surface water highlights the practical difficulties of nearly any remedy, regardless of how well regarded by economists in theory.
Pollution is an example of what economists call an “external cost,” which occurs when someone engaged in something, such as farming, gets the monetary benefits of the activity but does not bear all the costs. The producer pays for seed, fuel, fertilizer, etc., but not for damage caused by sediment, chemical residues or other pollutants that flow off the land.
The problem with external costs is that when they are not controlled, an economy uses resources inefficiently. For any given use of resources, an economy meets fewer of the needs and wants of its members than if externalities were controlled. We are effectively and collectively poorer.
There also is a fairness issue. Most people agree with the argument that people should be free to use their property as they want, as long as such use does not hurt someone else. In addition to being inefficient, it is unfair to allow one person’s benefit to harm another’s well-being.
There has to be some reasonableness, however. My grilling pork chops in the back yard last night created airborne particulates that, summed with others, makes the life of people with COPD or asthma worse. Mowing the lawn is noisy. We have not yet invented a completely emissions-free car. Every dog eventually yaps at an unfortunate time.
We have to adopt practical rules. If I use a noisy angle grinder while engaging in hobby welding outside my garage on a Saturday afternoon, it is OK; but if I want to do it at 6:00 on a Sunday morning, it is not. An occasional small fire in an outdoor fireplace is acceptable, but huge smoky leaf fires are not.
It is very hard to farm without affecting the environment in some way. Virtually any individual farm inflicts at least some harm on someone else in another location. Hog houses have always smelled, although the odor of 50 hogs doesn’t carry as far as that of 5,000. Erosive movement of soil has harmed streams for centuries, and the levels of erosion were far higher in the 1930s than now.
In most areas, sedimentation from farming has decreased. But the increased use of farm chemicals means that nitrates, phosphorus, herbicide residues and other chemical pollutants are far greater in runoff than 50 years ago. Some of these are attached to soil particles, so if you keep these out of the stream, you reduce the chemical pollution as well. Hence permanent-vegetation filter strips along streams and lakes are one useful solution.
Are they the most useful solution, however?
Limiting pollution is one topic on which there is little disagreement among economists, regardless of where they stand, liberal or conservative, in their politics and their views within their discipline.
For 94 years, the idea has dominated that taxing harmful emissions is economically the most efficient way of limiting external costs, one that achieves the greatest improvement in the well being of society at the lowest cost of resources. Auctioning off permits to emit has similar advantages and administratively works better in many situations.
Both, however, depend on being able to measure pollution levels cheaply and accurately. Putting sensors on the smokestack of an 800 megawatt power plant is doable. Measuring actual levels of sediment and chemicals along every reach of thousands of miles of Minnesota streams is not. So the economists’ fallback solution, which they understand is ideal only when “transaction costs” are low, gets tossed quickly.
So does the solution preferred by most libertarians. Ronald Coase, of the University of Chicago, argued persuasively that we can get an economically efficient solutions to external cost problems if we clearly define property rights and then let affected parties bargain. Give farmers the legal right to let pollutants flow into streams and those harmed can offer them payments to stop. Or give those downstream the right to clean water and let the farmers pay them for the right of an exemption from this. Obviously again, this only works in some dream world of perfect information and zero bargaining costs, including those to get millions of affected people together to bargain with tens of thousands of farmers.
So we are left with some sort of direct regulation — the approach that, in theory, is less efficient. And even the best designed rules inherently are arbitrary. What is magic about 50 feet? Some reaches of creeks might be well-protected with 20 feet and others still susceptible with 200. Why should the adjacent landowner have to bear the cost, in the form of fewer tillable acres, when most of the pollution in that particular area washes off the fields of neighbors up the hill? What about the dairy farmer whose fields beyond the specified 50 feet often are nonpolluting alfalfa while his neighbor is a biculture corn-soy operator?
What about the fact that while crop farming has caused soil loss for centuries, we are only cracking down on it now? In common law, when a landowner permits others to follow a trail across his land for years, he eventually cannot close it. Long-suffered practices become property rights.
Residential fireplaces and wood stoves do contribute to urban air pollution, but historically this was acceptable, and governments are loathe to offend voters by banning such use. If farmers could till all their land as they wanted for years, is it a “taking” of a property right to sharply limit it now?
Finally, are there more effective alternatives? Anyone familiar with filter strips knows they are a useful but very imperfect measure. (I have filter strips along all the creeks on our farm, paid for by the federal government through its Conservation Reserve Program.) What about sedimentation reservoirs for runoff from upland areas? What about stream bank stabilization? What about taxes on toxic crop inputs?
Don’t interpret this as a criticism of the governor’s initiative, but rather as an exposition of the difficulties in finding a fair and economically efficient response to a significant real-world problem. Economists can provide some insights, but practical muddling through still predominates.