The Political Economy of Environmental Justice New Edition

Stanford University Press

Copyright © 2012 Board of Trustees of the Leland Stanford Junior University
All right reserved.
ISBN: 978-0-8047-8061-2

Contents

Acknowledgments……………………………………………………………………………………………………………………………………………….ixContributor Biographies………………………………………………………………………………………………………………………………………..xi1 The Political Economy of Environmental Justice: An Introduction H. Spencer Banzhaf…………………………………………………………………………………1Section I Household Behavior and Land Markets: Theoretical Considerations……………………………………………………………………………………………212 Moving beyond Cleanup: Identifying the Crucibles of Environmental Gentrification H. Spencer Banzhaf and Eleanor McCormick………………………………………………233 Does Environmental Remediation Benefit the Poor? Jacob L. Vigdor…………………………………………………………………………………………………524 Environmental Gentrification and Discrimination H. Spencer Banzhaf, Joshua Sidon, and Randall P. Walsh……………………………………………………………….75Section II Household Behavior and Land Markets: Empirical Explorations………………………………………………………………………………………………1135 Residential Mobility and Ozone Exposure: Challenges for Environmental Justice Policy Brooks Depro and Christopher Timmins………………………………………………1156 Superfund Taint and Neighborhood Change: Ethnicity, Age Distributions, and Household Structure Trudy Ann Cameron, Graham D. Crawford, and Ian T. McConnaha…………………1377 Amenities Tomorrow: A Greenbelt Project’s Impacts over Space and Time Douglas S. Noonan…………………………………………………………………………….170Section III The Behavior of Polluting Firms………………………………………………………………………………………………………………………1978 The Role of Demographic and Cost-Related Factors in Determining Where Plants Locate: A Tale of Two Texas Cities Ann Wolverton…………………………………………..199Section IV Government Regulation and Enforcement………………………………………………………………………………………………………………….2239 Spatial Patterns in Regulatory Enforcement: Local Tests of Environmental Justice Ronald J. Shadbegian and Wayne B. Gray………………………………………………..22510 An Examination of the Correlation between Race and State Hazardous and Solid Waste Taxes Robin R. Jenkins and Kelly B. Maguire…………………………………………249Postscript: Who Owns the Environment? Terry L. Anderson…………………………………………………………………………………………………………..267Index………………………………………………………………………………………………………………………………………………………..275

Chapter One

The Political Economy of Environmental Justice New Edition

An Introduction H. Spencer Banzhaf

Introduction

Since the landmark studies by the US General Accounting Office (GAO; 1983) and the United Church of Christ (1987), the environmental justice literature has consistently shown that poor and minority households systematically live in more polluted neighborhoods. This correlation appears to be quite robust to the type of pollution considered: for example, the poor live closer to hazardous waste facilities, landfills, and other locally undesirable land uses (LULUs); they live closer to large air polluters; and they live in communities with higher concentrations of air pollutants. The correlation is also robust to the statistical methods employed by researchers. In short, the correlation qualifies as a “stylized fact” as much as anything in social science.

This finding of a disproportionate environmental burden borne by the poor and people of color has led to the introduction of several “environmental justice acts” in Congress (although none have passed) and to President Bill Clinton’s Executive Order 12898. Still in force, the order requires nondiscrimination in federal environmental programs and focuses federal resources, such as the Brownfields Program of the US Environmental Protection Agency (EPA), on low-income and minority communities. More recently, the EPA has launched a number of initiatives to incorporate environmental justice considerations into its rule making.

In addition to such top-down initiatives, the environmental justice findings have fed grassroots activist movements. Sometimes with help from national leaders of the environmental justice movement, local stakeholders have sought more involvement in permitting polluting facilities and in making other environmental plans. They also have filed lawsuits against governments for discriminatory environmental enforcement and against polluters for environmental nuisances. For example, in one prominent case, local activists forced California’s South Coast Air Quality Management District to settle a suit over the geographic distribution of trades under its Regional Clean Air Incentives Market (RECLAIM) pollution trading program.

Evaluating claims of discrimination and injustice requires an understanding of the social causes lying behind the correlation between pollution and demographics. So does evaluating the efficacy of any policy remedies. Economic models can provide important insights into these issues. These include economic models of discrimination, of local public goods and real estate markets, of firms’ profit maximization, and of political organization and lobbying. Generally speaking, these models have tended to “push back” the locus of injustice from firms’ individual decisions, such as where to locate and how to operate, to the more fundamental issue of the distribution of income and wealth and the ways in which markets allocate goods—including environmental amenities— to households. This point has been made well both by critics and by participants in the environmental justice movement, and has been discussed fruitfully by such authors as Vicki Been (1993, 1994), Lynn Blais (1996), Sheila Foster (1998), and Laura Pulido (2000), among others.

Despite the importance of the question, we do not really understand which socioeconomic forces lie behind the observed correlations. Moreover, the full implication of these various economic models for the distributional impacts of potential policy remedies for environmental injustice has not been well understood, either. Yet if the ultimate social goal is actually to improve the welfare of disadvantaged groups, as well as to describe social processes, understanding the distributional effects of environmental policies is crucial. These distributional effects will, in turn, depend on the social process generating the observed pattern in the distribution of pollution. Consequently, the social forces driving the poor’s exposure to pollution represent a critical lacuna in our understanding.

The Lone Mountain Forum

For this reason, we felt it was time to revisit environmental justice questions, with a concentrated effort to flesh out the economic and social dynamics lying behind the observed correlation between pollution and demographics. The opportunity to make that effort came with a Lone Mountain Forum, organized by the Property and Environment Research Center (PERC). The forum was made possible with generous support from the Earhart Foundation.

The authors of the chapters included in this volume gathered in Big Sky, Montana, in October 2008. The authors were all economists, but our group also contained a mix of additional economists and legal scholars, who joined us in the dialogue. Additionally, the group included scholars long engaged in the environmental justice literature as well as others who were new to it and brought fresh perspectives.

One thing we did not try to do was to revisit the question of whether there is a correlation between pollution and the presence of poor or minority households. Granting the presence of at least a simple correlation, we came rather to discuss questions about the economic forces lying behind it, seeking to gain insights from both theoretical models and empirical analyses. We also wanted to explore the implications of these insights for public policy.

The chapters in this volume are the fruits of that meeting. While they all come from the perspective of economists, our hope is that they will be of use to all participants in environmental justice conversations, including legal scholars, sociologists, geographers, philosophers, and historians, whether in academia, government, business, or community organizations.

These research questions and their intended audience motivated the title of the collected volume, The Political Economy of Environmental Justice New Edition. The term “political economy” conveys the discipline of economics lying at the heart of the volume, of course, but it has numerous additional shades of meaning beyond simply “economics.” It can mean the economic analysis of politics and public choice, including interest group politics, regulation, and redistribution. It can mean simply wedding economics to public policy. And it has an older, archaic meaning growing out of its roots in moral philosophy, as the more comprehensive study of societies and states in all their economic, political, legal, historical, and moral aspects. All of these meanings are packed into this term, which serves as part of the volume’s title.

Economic Models of Environmental Justice

Economists’ perspective on environmental justice issues was articulated first and best by James Hamilton (1995). Hamilton identified three broad categories of explanations for environmental justice correlations: pure discrimination, economic efficiency, and political action. Promoting some of his subcategories and adding another, I consider these in six categories.

The first category is “pure discrimination.” Following the model of Becker (1957), this notion is that firms may have a differential preference for sheltering whites from pollution or even a perverse desire to harm minorities. Essentially, firms act to achieve a set of objectives, which includes not only profits but also discriminatory preferences for environmental outcomes on different demographic groups. Firms would thus make production decisions that harm minorities even if it is not in their own profit-maximizing interests, paying a price in foregone profits to indulge their discriminatory tastes. Believing firms focus solely on profits, economists tend to be skeptical of this explanation.

A second interpretation, known as “coming to the nuisance,” essentially reverses the causality. Firms site their facilities and make other production decisions for numerous reasons, and local demographics may be a negligible factor. If they do emit pollution in any given location, for whatever reason, however, it will make that location less attractive to residents. Wealthier households, in particular, with more opportunities, will move out, lowering demand for housing in the area. Consequently, local land and housing prices will fall. Poorer households may actually move in, prioritizing the low housing costs despite the disamenity of the pollution. This process was well articulated by Vicki Been in a series of influential articles (1993, 1994, 1997), as well as by Hamilton (1995) and Blais (1996). Banzhaf and Walsh (2008) and Banzhaf, Sidon, and Walsh (see Chapter 4) confirm this intuition in a formal economic model in the style of Tiebout (1956), whereby households choose neighborhoods in which to live based on local amenities and costs (including property prices and tax rates).

In this way, the demographics might follow the spatial distribution of the pollution. As long as there is some pollution, it must have a spatial distribution, and so somebody will be nearest to it. As emphasized by Charles Tiebout himself, these models suggest that ultimately the spatial distribution of pollution is economically efficient. The term “efficient” is a linguistic minefield, which can lead to substantial misunderstanding between economists and others. To economists, it means simply that households with the highest values for a cleaner environment—those with the highest willingness to pay, in economists’ jargon—do, in fact, avoid it in the end. Conversely, those with the lowest willingness to pay for a cleaner environment—those least willing to sacrifice other goods like housing, food, or entertainment—are the ones living nearest the pollution.

If people’s values for avoiding pollution differ because of differences in family makeup (e.g., the presence of children or the elderly), physical sensitivity to pollution (e.g., having asthma), or similarly formed preferences, then the allocation would seem quite sensible indeed. However, these values also proceed from people’s ability to pay, based on their income. This raises additional questions about the nature of injustice but pushes those questions back to the underlying distribution of income itself as the more fundamental issue. That is, the question turns to why particular groups or individuals are poor in the first place and hence unable to acquire some of the good things in life—a clean environment included.

A third, and closely related, interpretation is that the geographic pattern of local environmental nuisances arises from negotiations between firms and local stakeholders, whereby firms compensate communities for hosting unwanted facilities (Hamilton 1993, 1995). As Ronald Coase (1960) famously argued, such negotiations would arise when the right to pollute (or to be free of pollution) is clearly defined and when the costs of negotiation and transacting compensatory payments are low.

Coase (1960) pointed out that when property rights are well defined, they also become tradable. Specifying the right to pollute—or to be free from pollution—allows pollution, too, to be traded. Coase suggested, for example, that negotiations could arise over factory smoke. If factories have a right to pollute, local residents may pay them not to pollute. If local residents have a right to be free from pollution, factories might compensate them to accept some pollution. In the same way as can happen through land markets, environmental quality will again be highest near those who value it most highly, and lowest near those who are prepared—for whatever reason—to sacrifice fewer other goods to obtain it.

In this Coasian world, other things equal, firms would locate in neighborhoods that are willing to accept lower payments as compensation. Like the Tiebout model, the Coasian model implies that the spatial distribution of pollution is economically efficient but again only conditional upon the existing distribution of income. The primary difference between the two models is that Coase’s is a story of firms choosing a location based on their negotiations with local residents, whereas Tiebout’s is a story of households choosing a location based on its existing amenities and prices.

Fourth, firms may seek out areas with weaker political resistance to their polluting activities. If local residents must use costly political action to fend off unwanted pollution, then the level of their political resistance is likely to be proportionate to their willingness to pay to avoid pollution. In this way, political wrangling can be, for all practical purposes, a special form of the pricing mechanism operating through the Coasian process, and so, too, the outcome might be efficient in the same way—again, conditional on the existing income distribution (Becker 1983). Those with the highest willingness to pay to avoid pollution invest the most in pollution-resisting activism; meanwhile, firms seek to avoid paying the political cost of trying to overcome such activism and so avoid those communities.

However, the strength or weakness of a community’s political opposition may not, in fact, be proportionate to its desire to avoid pollution. Some communities may have better access to the halls of power than others. Others may be better organized politically or, in Coasian language, may face lower transaction costs of coming together to negotiate with (or oppose) polluting firms. Hamilton (1993, 1995), for example, found that communities with lower voter turnout were more likely to see local firms expand their processing of hazardous wastes (see also Brooks and Sethi 1997; Arora and Cason 1999). From this perspective, environmental justice activists who provide legal advice and facilitate local capacity building in poor neighborhoods are achieving two ends: they are serving the poor while helping these social processes to function more efficiently, lowering Coasian transaction costs.

A fifth interpretation is that firms, while not reacting so much to local demographics per se, are attracted to other factors that happen to be spatially correlated with the demographic composition of neighborhoods. Examples of such factors might include low wages, low land prices, access to transportation corridors, and proximity to suppliers or to other similar firms (because of so-called agglomeration economies). Wolverton (2009; see also Chapter 8) finds that such factors do appear to be one of the main drivers behind firms’ location decisions. Some of these factors, like low wages, might, in fact, be demographic characteristics. Other factors might be correlated with demographics indirectly through Tiebout-like processes. For example, nearby transportation corridors may be an attractive amenity to firms but a disamenity to households, one that drives away the richer residents. Or the age of a community’s housing stock might well be tied historically to the development of nearby manufacturing, and it may be the life cycle of the housing stock that drives the observed correlations. Research by Rosenthal (2008) and Brueckner and Rosenthal (2009) shows that a community’s population tends to grow poorer over time along with the age of the housing stock, until the community reaches a period of redevelopment and renewal. Further exploration of this so-called filtering model in the environmental justice context would be fruitful.

A sixth and final interpretation focuses attention not so much on firms as on government—and its failure to enforce environmental standards and regulations equitably. Governments might, for example, enforce such provisions more rigorously in areas with higher levels of political support for the current administration. But they need not be intentionally discriminatory for such outcomes to arise. Government enforcement agencies may find it easier or even more efficient to react to complaints from local citizens. But as with the “squeaky wheel that gets the grease,” those agencies would be more likely to respond to better organized, better connected, and otherwise more politically powerful citizens (see McCubbins and Schwartz 1984; Hamilton and Viscusi 1999). If environmental justice communities are more poorly organized or politically connected, this dynamic would give rise to the observed environmental justice correlations. (If so, this might also be a further reason that firms would be attracted to areas with less political power.)

(Continues…)

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