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Journal oJEconomic Per edives-
9
4
Fall 1995
Pales 119-132
Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?
Karen Palmer; Wallace E Oates; Paul R Portney
Michael Porter and Claas van der Linde have written a paper that is interesting and, to us at least, somewhat astonishing. It is a defense of
environmental regulation--indeed, an invitation to more stringent regulation--that makes essentially no reference to the social benefits of such regulation. This approach contrasts starkly with the methods that economists and other policy analysts have traditionally used when assessing environmental or other regulatory programs.
The traditional approach consists of comparing the beneficial effects of regulation with the costs that must be home to secure these benefits. For environmental regulation, the social benefits include the reductions in morbidity or premature mortality that can accompany cleaner air, the enhanced recreational opportunities that can result from water uality improvements, the increased land values that might attend the cleanup of a hazardous waste site, the enhanced vitality of aquatic ecosystems that might follow reductions in agricultural pesticide use or any of the other potentially significant benefits associated with tighter standards. From this benefittost approach emerges the standard tradeoff discussed in virtually every economics textbook.
Porter and van tier Linde deny the validity of this approach to the analysis of environmental regulation, claiming it to be an artifact of what they see as a "static mindset." In their view, economists have failed to appreciate the capacity of Katrn Palmcr is a Fellmu at Resourus Jor tlu Future, Washington, D.C. (e-mail pal>ner r :or . Wallau E. t7atts is linjessor oJEconomics, University oJMaryland, Colltge ParlS Maryland, and University Fellmu, RGSOUrus jot tlu Fueurr' Washington, D.C. (oaks oOn.umd.edu). Paul R Pmtney is flu P sid nt, Resourus for tluFuturS Washing tort, D.C. (pottrtey t, 'ot .
stringent environmental regulations to induce innovation, and this failure has led them to a fundamental misrepresentation of the problem of environmental regulation. There is no tradeoff, Porter and van der Linde suggest; instead, environmental protection, properly pursued, often presents a free or even a paid lunch. As they put it, there are lots of QIO bills lying around waiting to be picked up.
We take strong issue with their view. If this were simply...