The Skeptical Environmentalist visits The Fraser Institute · Ezra Levant is founder and publisher...

The Skeptical Environmentalist visitsThe Fraser Institute

by Darcy Wintonyk

�n January 24, 2005, controver-sial statistician Bj�rn Lomborg spokeat a luncheon organized by The Fra-ser Institute. During his talk,Lomborg reasserted his anti-Kyotoposition, saying that global problemshave been “overhyped” by environ-mentalists.

The controversy surroundingLomborg began in 2001 with thepublication of his first book, The

Skeptical Environmentalist. In it,Lomborg puts forward the bold as-sertion that environmental harm isnot getting any worse. Using datafrom the world’s most credible envi-ronmental agencies, the former envi-ronmentalist concluded that manyglobal environmental threats hadbeen overestimated.

Praised by some, Lomborg’s bookfurther polarized political views

about environmental policy. He wasalso harshly criticized by the scientificcommunity—the Skeptical Environ-mentalist was accused of everythingfrom misrepresenting science, to beingsuperficial, selective, sneaky, and justplain wrong.

continued on page 3

Inside...

The Skeptical Environmentalistvisits The Fraser Institute . . . . . 3

New Deal for Cities aRaw Deal for Citizens. . . . . . . . 4

Why Should Latin AmericaDefend Classical Liberalism? . . 6

Student Programs AlumniInterview with Ezra Levant . . . 7

Crichton’s State of Fear... . . . . 8

Things Folks Know thatJust ain’t So . . . . . . . . . . . . . . . . 10

Welcome!

Welcome! This spring edition of the CSR is filled with articles written by stu-

dents like you. Are you interested in having your writing published and distrib-

uted to thousands of students across Canada? Send me your articles for

consideration.

In this issue, you will find articles on the “new deal” for cities, economic

growth and environmental quality, and economic freedom for Latin America.

We would like to thank our sponsors who generously provide the funding for

this publication: the Lotte and John Hecht Memorial Foundation.

—Vanessa Schneider, Editor

Vol. 14, No. 1Spring 2005

2 Canadian Student Review Spring 2005

Canadian Student Review is publishedby The Fraser Institute. The views con-tained within are strictly those of theauthors.

Editor . . . . . . Vanessa Schneider

Contributing EditorsKenneth Green

Fred McMahon

Production . . . . Kristin McCahon

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Copyright © 2005; The Fraser Institute.Date of Issue: Spring 2005.Printed in Canada.ISSN 1192–490X (print edition)ISSN 1707-116X (online edition)

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About the authors

Jeremy Brown is the manager of the CANSTATS project and aPolicy Analyst in the Centre for Studies in Risk, Regulation, andEnvironment at The Fraser Institute. He received his M.Sc. inNatural Resource and Environmental Economics from the Uni-versity of Guelph and a M.A. in Economics from the Universityof Arizona.

Kenneth Green is Chief Scientist and Director of the Risk andEnvironment Centre at The Fraser Institute. Ken’s research hasbeen published broadly in both Canada and the US by thinktanks, newspapers, and book and magazine publishers. Ken re-ceived a Doctorate in Environmental Science and Engineeringfrom the University of California at Los Angeles (UCLA).

Ezra Levant is founder and publisher of the Western Standardmagazine. He is also an author and commentator. He was aFraser Institute student intern in 1995.

Milagros Palacios is a student intern in the Fiscal Studies De-partment at the Fraser Institute. She holds a B.Sc. in IndustrialEngineering from the Pontifical Catholic University of Peruand Master’s degree in Economics from the University ofConcepcion, Chile. She plans to pursue a Ph.D. in Economics,with a focus on Environmental Economics.

Carl Shulman is an undergraduate student at Harvard University, concentrat-ing on Philosophy, where he is the editor of the Harvard Review of Philoso-phy. He spent last summer in Washington, D.C. where he received afellowship at the Centre For Individual Rights, a libertarian public interest lawfirm. This summer he will be working as a student intern in the Fraser Insti-tute’s Toronto office, working with Claudia Hepburn on education policy.

Darcy Wintonyk is a Masters of Journalism student at the University of Brit-ish Columbia. She comes to Vancouver from Ottawa, where she received adegree in Communication. She writes locally for the Thunderbird Media Reviewand Xtra West.

The Skeptical Environmentalist visits The Fraser Institutecontinued from page 1

Now Lomborg is back in the spot-light, this time promoting his newestpublication, The Copenhagen Consensus.

The consensus assembled whatLomborg calls the “Real Madrid ofEconomists”—eight world-class econ-omists who were asked to identifyand prioritize the ten biggest globalchallenges.

Building on the economic conceptintroduced in The Skeptical Environ-mentalist—namely, that a dollar canonly be spent once—The CopenhagenConsensus asserts that certaintrade-offs must be made in interna-tional policy to make any real prog-ress. Using a basic cost-benefitanalysis, Lomborg’s team of econo-mists rationalized the best ways tospend $50 billion to improve theworld’s problems.

Lomborg says attempting to ratifyslow, costly, multi-lateral initiativeslike the Kyoto Protocol is ineffective.Instead, he suggests the global com-munity should first tackle problemswhere the most good can be accom-plished in the shortest time.

According to this logic, the con-sensus found that the best “bang foryour policy buck” is to spend $21billion helping prevent AIDS. Theteam found that the benefits far out-weigh the costs—preventing 28 millioncases of the disease by the year 2010.

Using a scale of “bad” to “great”to rank the world’s problemsmonetarily, The Copenhagen Consensusranks climate change as a waste ofmoney. Lomborg explains, “It’s notuseless; you just get a lot less back oninvestment.”

The Copenhagen Consensus is gettinga chilly reception from the academic

community. Its critics say it is overlysimplistic and blind to the long termeffects of the costs used in the eco-

nomic model. Others question howthe economists can prioritize prob-

lems so fundamentally different asclimate change and clean water.

However, to Lomborg, these com-parisons make complete sense. Hismessage to the luncheon crowd isthat global problems need to be pri-oritized. These prioritizations are notlimited to economic analysis—theyhappen every day, in every family,for every individual, and in govern-ment. “This is why people buy jeansinstead of spending $72 a year tosave the life of someone in Africa,”he said.

Bjorn Lomborg portrays himselfas an optimistic realist—instead ofdwelling on problems that can’t besolved; he would rather do what isachievable. “If we can’t do every-thing, where should we start?” asksLomborg. �

Canadian Student Review Spring 2005 3

Controversial author and environmentalist Bj�rn Lomborg and CSR editor Vanessa Schneider at aFraser Institute Round Table luncheon in Vancouver, January 24, 2005.

The CopenhagenConsensus asserts

that certaintrade-offs must

be made ininternational policy

to make any realprogress.

New Deal for Cities a Raw Deal for Citizens

by Carl Shulman

“Taxes are commonly a calamity forthe people and a nightmare for thegovernment. For the former they arealways excessive; for the latter theyare never enough, never too much.”—Juan de Mariana (1535–1624)

�t the time of this writing it seemslikely that Paul Martin’s “New Dealfor Cities and Communities” will berealized in its entirety: GST rebatesfor municipalities of $7 billion over10 years; $5 billion in gas tax reve-nues transferred over five years; and$5 billion disbursed through Infra-structure Funds (Infrastructure Can-ada, 2005). Unsurprisingly, Toronto’s“special ambassador on the citiesagenda” has suggested that federalcash will help turn cities into “en-gines of growth” (Honderich, 2005).On closer inspection, this phrasehints of a perpetual motion machine.After all, the federal government hasno money of its own to give to thecities, so what it gives to municipali-ties with one hand must be takenfrom their residents with the other.How do Canadians (as opposed toCanadian mayors) benefit from rout-ing their tax dollars through a federalmiddleman on the way to those citiesand communities?

Supporters of transfers to citiesclaim that higher government spend-ing will improve economic growth.The TD Bank’s Economic Report ar-gues that matching American eco-nomic performance will requiremore funding for city governments,

since “two-thirds of Canada’s popula-tion, employment, and real outputare located in 27 Census Metropoli-tan Areas” (TD Bank FinancialGroup, 2002). And in theory, munic-ipal governments can create eco-nomic value by spending on publicgoods that would be under-producedby markets and private philanthropy,or by limiting monopolies. Ofcourse, in reality, an enormousamount of municipal spending sim-ply displaces private alternatives fordelivery of services with lower qual-ity and higher cost (both directly andthrough deadweight losses of taxa-tion) as explained below.

Consider the allocation of tax rev-enue in Toronto’s $6.4 billion bud-get, the largest in Canada: 9.6percent is spend on fire protection, 8percent on public transit, and 4 percenton solid waste disposal (Toronto CityCouncil, 2003). Each of these servicescould be completely privatized.

Private companies can provide fireservice on a subscription basis. Astudy of private and public fire de-partments in Arizona found that pri-

vate provision reduced per capita ex-penditures by 50 percent while im-proving response time and fireprevention (Guardiano et al, 1992).

Public transit is typically justifiedby referring to the adverse effects ofautomobiles, such as global warmingand road congestion. But there is noneed for a publicly-owned transitsystem to reduce these effects. Citiescould force drivers to bear the fullcosts themselves of automobiles bylevying taxes on parking or chargingan entry toll modeled after London’s“congestion tax” (Gardiner, 2003).Private transit companies could thencompete to meet demand while thecity would acquire more revenue.

Garbage collection has been con-sidered a natural monopoly becauseof economies of scale, necessitatinggovernment intervention to protectconsumers. But the cost of entryfor private garbage collection is ex-tremely low, so that even where a lo-cal monopoly exists, any attempt toraise prices beyond competitive levelswill allow a new entrant to rapidly cap-ture market share (VanDoren, 1999).

So Canada’s largest city expendsat least a fifth of its budget to reduceeconomic performance by hundredsof millions of dollars. That is a pow-erful argument against providing cashto Canadian mayors for which theyare unaccountable, but despite thefederal government’s talk of account-ability, the New Deal would activelyreward and encourage such waste.

Consider that gas tax revenueshave been earmarked for public

4 Canadian Student Review Spring 2005

... an enormousamount of municipal

spending simplydisplaces privatealternatives for

delivery of services ...

transit and waste disposal (Infrastruc-ture Canada, 2005). If a municipalgovernment spends less than theamount of the transfer on the ear-marked area, then it loses the federaldollars. Thus, functions that econom-ics suggest should be eliminated en-tirely would be preserved solely inorder to attract federal funds. TheGST rebate, while not subsidizingany specific activity, subsidizes gov-ernment spending in general, distort-ing the relative prices of private andgovernment provision. For instance,a city may be a less efficient collectorof garbage than a private service, butif its increased costs are less than theamount of the GST rebate on pur-chases from materials suppliers andcontractors, then its citizens will ben-efit from government control. Theseincentives create a tragedy of thecommons, as each community dam-ages the economy as a whole in or-der to gain at the expense of others,ultimately leaving everyone worseoff. Should we really be setting up a

municipal funding structure alongthe lines of the late, great cod fishery?

If increasing the role of transfers inmunicipal budgets from their alreadyhigh 40 percent could be so econom-ically damaging, why is this happen-ing at all? (McMillan, 2002). Forcities, the New Deal levies taxes na-tionally and prevents taxpayers fromescaping oppressive rates. For theLiberals, the move buys off publicemployees’ unions on the left and in-creases dependency on governmentfor jobs and services, weakening theConservatives on the right. And sowe find a New Deal that seems de-signed to benefit governments at theexpense of the “Cities and Commu-nities” they claim to serve.

ReferencesGardiner, Beth (2003). “London Toll

Paying Off.” news24.com (February17) . Avai lable at http: / /www.news24.com/.

Guardiano, John, David Haarmeyer, andRobert Poole (1992). “Fire ProtectionPrivatization: A Cost-Effective Ap-

proach to Public Safety.” Reason Pub-lic Policy Institute Policy Studies, No.152.

Honderich, John (2005). “The Town HallReinvented.” The Toronto Star (Jan.26): A21.

Infrastructure Canada (2005). “Govern-ment on Track to Deliver New Dealfor Cities and Communities.” PressRelease (February 1). Available atht tp : / /www.in f ras t ruc ture . g c . ca /ndcc/publication/newsreleases/2005/20050201ottawa_e.shtml.

McMillan, Melville (2002). Municipal/Lo-cal Government: The Big Picture of Inter-national Experience. Federation ofCanadian Municipalities (May 9).Available at http://www.fcm.ca/newfcm/Java/frame.htm.

TD Bank Financial Group. (2002) A ChoiceBetween Investing in Our Cities orDisinvesting in Canada’s Future. Avail-able at http://www.canadascities.ca/background.htm

Toronto City Council (2003). Operatingand Capital Budget Summary 2003.

VanDoren, Peter (1999). Time to TrashGovernment Intervention in Garbage Ser-vice. Cato Policy Analysis no. 331(Jan.). Available at http://www.cato.org/pubs/pas/pa331.pdf. �

Canadian Student Review Spring 2005 5

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Why Should Latin AmericaDefend Classical Liberalism?

by Milagros Palacios

�iberalism is one of those termsthat means different things to differ-ent people. Essentially, “classical lib-eralism” is a model based onproperty rights. It considers thatprices are the only optimal tool forallocating resources efficiently; underthis model, individuals and compa-nies have the right to make their owndecisions independently. For its de-tractors, liberalism refers to policiesthat they believe enrich multina-tional corporations at the expense ofthe environment and the weakestand poorest countries. This term isalso linked with “western expansion-ism,” consumerism, and individual-ism. That said, I consider, and manymay agree with me, that liberalism isthe more viable way to promote de-velopment among countries and isthe only social system in which indi-viduals are free to pursue their ratio-nal self-interest. Furthermore, theeconomic freedom of liberalism al-lows for building, creating, innovat-ing, and advancing society. But if weknow the advantages of liberalism,why do Latin American countries(and many other countries aroundthe world) not enjoy its benefits?

Unfortunately, for historical rea-sons, liberalism, democracy, andmarkets came late to many LatinAmerican nations. Before that, therewas a strong belief that sovereigntyresides in the state, and only strongleaders can impose order. Indeed,most Latin American countries strug-gled with dictatorships during the

1970s. In the 1980s, a wave ofdemocratization and preliminarymarket reforms swept through the re-gion. But the fiscal collapse in Argen-tina, attempts at military coups inEcuador, and dictatorial policies inVenezuela during the late 1990sseem to provide proof that liberalism

won’t work in Latin America. Eventhough most Latin American coun-tries have institutionalized demo-cratic elections, opened internalmarkets to foreign trade, and privat-ized incompetent state enterprises,there are still some frameworks thatcurtail freedom. Because of them, itseems apparent that liberalism doesnot work in Latin America. To beginwith, many of these countries still

have powerful, centralized nationalinstitutions that generate bottlenecksin bureaucracy. Second, complicatedbusiness laws, overprotected indus-tries, and limited access to credit re-strict competition. Third,governments impose subsidies andprice controls that consume a consid-erable portion of the national bud-get. Fourth, property rights areinadequately protected, so poor peo-ple cannot sell their property, or useit as collateral for credit (Johnson,2003). If Latin American countriesdo not implement reforms to elimi-nate these problems, democracy andmarkets will not be feasible.

Latin America would do well tobe aware of how the developedcountries have progressed culturallyand economically. They are richerand more prosperous because theirproperty rights are well defined;there is little or no government pro-tectionism, and competition is lessrestricted. In essence, we must en-able freedom to flourish in order toenjoy the full benefits of liberalism.

ReferencesJohnson, Stephen (2003) . “Is

Neoliberalism Dead in Latin Amer-ica?” Web Memo # 332. The Heri-tage Foundation. Available athttp://www.heritage.org/Research/LatinAmerica/wm332.cfm.

Valin, Jorge (2004). “Capitalismo ySocialismo.” Instituto de Libre Empresa.Available at http://www.ileperu.org/contenido/Articulos/ capitalismosocial-ismo_jvalin.htm. �

6 Canadian Student Review Spring 2005

... liberalism isthe more viableway to promote

development amongcountries and is theonly social system inwhich individualsare free to pursue

their rationalself-interest.

Student Programs Alumni Interviewwith Ezra Levant, Publisher, Western Standard

� started attending Fraser InstituteStudent Seminars, not just in my owncity, but I’d even travel to go to oth-ers in nearby cities. I then attendedthe Student Leaders Colloquium,and then became an FI summer in-tern, where I wrote a book calledYouthquake.

I was a Koch Foundation SummerFellow in Washington, DC, and haveattended various Institute for Hu-mane Studies (HIS) and LibertyFund events over the years.

I’m a lawyer by profession; rightafter articling I worked for severalyears on Parliament Hill for PrestonManning and later for StockwellDay. I joined the National Post’s edi-torial board for two years. After try-ing my own hand in politics, I wrotea book called Fight Kyoto and prac-ticed law. Last January, with severalother Fraser Institute alumni, Ifounded the Western Standard maga-zine, which publishes every twoweeks in a classical liberal vein. Sev-eral of our writers are FI alum, too,including Peter Jaworski, who justwon the prestigious Felix Morleyprize for journalism for work donefor our magazine.

CSR: Why do you think it’s importantfor students and youth to be informedabout public policy?

EL: Simple curiosity is one reason;skepticism about the official pabulumtaught in schools and universitiesshould be another.

CSR: How do you think a deeper under-standing of markets and the role they playin society has affected your professionallife?

EL: There are many vanilla ways todo law or media—being aware of themorality of the free market hassteered me towards liberty-orientedlaw and a politically-flavoured maga-zine.

CSR: Have you always believed in mar-kets and freedom, or, like many students,were you more “socialist” when you wereyounger? If your views changed, how andwhy did they do so?

EL: Never socialist, ever.

CSR: If you could make one policychange with the snap of your fingers,what would it be?

EL: I would de-fund the CBC andabolish the CRTC. Maybe that’s twochanges, but I’d get the governmentout of the media business. They useit as a propaganda arm, and itcrowds out entrepreneurial medialike the Western Standard.

CSR: What is your favourite movieabout freedom?

EL: I like Mel Gibson’s Braveheartand The Patriot, and I think the Lordof the Rings had undertones of free-dom, and fighting for it.

CSR: Where do you see your career goingfrom here?

EL: My plan is to continue to buildthe Western Standard, in print, online,radio, and perhaps one day TV.

CSR: How do you think technology hasinfluenced, and will continue to influ-ence, public policy in Canada?

EL: I think technology will liberatepublic policy from the old-line leftistpurveyors of it. Now curious peoplewith Google can hunt for alternative(e.g., classical liberal) news andviews. �

Canadian Student Review Spring 2005 7

Ezra as a Fraser Institute student intern in1995.

Crichton’s State of Fear...

by Kenneth Green

�any people can teach.1 Manypeople can tell great stories. But fewpeople can teach by way of telling agreat story. Dr. Michael Crichton,physician-turned-novelist-turned-screenplay-writer is one of those few.

State of Fear (HarperCollins Pub-lishers, 2004, 603 pages) is actuallythree books in one—a fast-pacedthriller, like Andromeda Strain and Ju-rassic Park; an explication that’s toorarely seen in fiction of scientific ar-guments, complete with 18 pages ofreferences; and, finally, a five-pagepolicy brief of the author’s conclu-sions drawn from the science helearned while writing his novel.

Let’s take a look at the three bookswithin State of Fear one at a time.

Science fictionFirst and foremost, State of Fear is,

like most other Crichton thrillers,more about people than it is abouttechnology. While some sort of tech-nology run amok is often at the heartof a Crichton thriller, it’s rarely (ifever) the technology per se thatcauses or cures whatever disasterCrichton concocts. Rather, it’s theevil or hubris of the people behindthe technology that leads to destruc-tion or salvation. People who misun-derstand this point have occasionallybranded Crichton a Luddite, some-one who fears technology (particu-larly after his portrayal of thedangers of nanotechnology in Prey).

But his faith in science andtechnology is evident in its implaca-ble progression, and especially in thepositive role it plays in the lives ofhis various characters. Far from aLuddite, Crichton is more of a cynic,believing that whatever technology isused, someone is likely to abuseit—an idea that’s hard to disputegiven the sweep of human history.

The basic plotline of State of Fear ispretty straightforward: a globe-span-ning cabal of radical environmental-ists is trying to spur the adoption ofgreenhouse gas emission controls bycreating “natural disasters” that theycan link to manmade climate change.The bad guys have stolen or pur-chased all the coolest toys of the ter-ror trade, from rocket systems thatcan create superstorms, to explosivesand giant “cavitators” that can triggerlandslides, to lightning-bolt projec-tors, and, yes, to poisonous octopiused to kill people they don’t like ina particularly unpleasant manner.This nefarious gang is challenged bythe too-cool-for-school Dr. RichardJohn Kenner who is both the leadagent for a super-secret anti-terroristgroup and also happens to be a bril-liant professor of GeoenvironmentalEngineering at MIT.

Kenner and his assistant, SanjongThapa, follow the basic sidekick ar-chetypes: one suave and debonair,the other reliable, adaptable, andcombat-ready. Not surprisingly, they

regularly kick butt. Other good guycharacters in State of Fear includeGeorge Morton, a philanthropic en-vironmentalist who comes to realizethat his donations have been redi-rected toward violent mayhem, andPeter Evans, the somewhat naïvelawyer-cum-stalking horse used tosmoke out the baddies. Heading upthe bad-guy side is Nicholas Drake,the Machiavellian head of NERF(National Environmental ResourceFund), showing once again that youcan’t have a global cabal of bad guyswithout a proper acronym. Drake isaided by an actor, Ted Bradley, whocombines the most annoying ele-ments of Martin Sheen’s presidentialportrayal in The West Wing with envi-ronmentalist/actor Ed Begley Jr.’sperformance playing, well, EdBegley Jr. One of the few downsidesof the fictional element of State ofFear is that the bad guys aren’t ex-actly the brightest bulbs in the chan-delier; they have more wallet andweaponry than wit. Still, if you wantto see who wins, who loses, and whogets eaten by cannibals, you’ll haveto read the book.

Science fictionsThe second book interwoven with

State of Fear is the one that has gener-ated the most controversy, sparkingboth trenchant attacks and staunchsupport for Crichton. Using numer-ous charts and graphs, Crichton

8 Canadian Student Review Spring 2005

1 This review was previously published on January 19, 2005 by Tech Central Station.

(through the slightly pedantic lec-tures of Dr. Kenner and company)reveals the limitations in theso-called science of climate change,which has up to now convincedmany people that human beings aregoing to destroy the world by usingtheir SUVs to take their kids tohockey practice.

Among the lessons taught byKenner and company: temperaturerecords from around the world aren’tparticularly reliable; that global aver-age temperature has changed inde-pendent of the level of greenhousegases throughout history; regionaltemperature trends vary widely, fromstability, to pronounced cooling, topronounced heating. Crichton’scharacters also explain that most ofthe world’s ice is not melting, asAntarctica, with some 90 percent ofthe world’s ice, is getting colder—only2 percent of Antarctic area has melt-ing ice, the rest is getting icier.

Crichton also hits other climate-and eco-myths, explaining that theworld’s sea level is not rising fasterthan normal, the world isn’t experi-encing more storms or other extremeweather phenomena; DDT doesn’tcause cancer, and that native peopleweren’t noble savages living in har-mony with nature.

Critics have singled out themini-lectures within State of Fear forparticular scorn, and it’s true, somecan get between the reader and the

primary plot line. But with all due re-spect to my own more-than-capableteachers, I’d have given a lot to havehad professors who could so clearly,efficiently—and entertainingly—con-vey as much complex information asMichael Crichton does in State ofFear.

Science factsFinally, Crichton’s third book

within State of Fear is something thatI’ve never seen from a fiction writerbefore: a policy study explicatedthrough the science revealed withinthe tale, and an Author’s Message,explaining what Crichton thinks weshould do based on what we knowabout climate change. AmongCrichton’s many logical conclusionsthree stand out:

We know astonishingly littleabout every aspect of the envi-ronment, from its past history,to its present state, to how toconserve and protect it. In ev-ery debate, all sides overstatethe extent of existing knowl-edge and its degree of certainty.Nobody knows how muchwarming will occur in the next

century. The computer modelsvary by 400 percent, de factoproof that nobody knows; and

Before making expensive policydecisions on the basis of climatemodels, I think it is reasonableto require that those modelspredict future temperatures ac-curately for a period of tenyears. Twenty would be better.

Great storytelling has been a vehi-cle for education throughout the his-tory of humanity, and, in our timesof increasing scientific illiteracy, Stateof Fear may be a particularly appro-priate way to expose common peo-ple to the scientific problems thatplague the arguments supportinggreenhouse gas regulations. State ofFear is an excellent novel that con-cisely and clearly presents the argu-ments long asserted by those whoare skeptical of claims that we knowthe climate is changing, that weknow what causes the climate tochange, and that we know enough totake control over the global climatethrough the manipulation of green-house gases. �

Canadian Student Review Spring 2005 9

Students participate in a game about trade at aseminar for high school students in Vancouver,April 20, 2005.

Things Folks Know that Just ain’t So

by Jeremy Brown

What they know…Economic growth is destructive to

the environment.

Why it ain’t so…In 1971 Simon Kuznets was

awarded the Nobel prize in econom-ics for what is now known as theKuznets Curve. The original Kuznetscurve was an inverted U-shapedcurve describing the relationship be-tween income inequality and per ca-pita income growth. Basically,Kuznets hypothesized that at lowerlevels of per capita income, incomedistribution is skewed towards higherincome levels, thus increasing in-come inequality, but as per capita in-comes rise, the distribution becomesless skewed, reducing income in-equality.

In 1991, Grossman and Kruegerpublished a seminal article using theconcept of the Kuznets Curve to de-scribe the relationship between envi-ronmental quality and per capitaincome growth. The results in thefirst Grossman and Krueger articlecaught many people by surprise.Grossman and Krueger found that, atlow levels of per capita income, con-centrations of sulfur dioxide and totalsuspended particulate matter in-crease as incomes increase. But, onceper capita incomes reach a particularthreshold, concentrations of thesepollutants actually decrease as in-comes continue to rise. The relation-ship between environmentaldeterioration and per capita incomefollowed the same inverted-U shaped

relationship as Kuznets income in-equality and per capita income.Thus, Grossman and Krueger coinedthe Environmental Kuznets Curve(EKC), as seen in figure 1.

There are several hypotheses as towhy the transition from environmen-tal deterioration to environmentalimprovement occurs as per capita in-comes grow. In 1999, Munasinghedescribed the EKC relationship asfollows. At low levels of per capitaincome most economic activity issubsistence level farming. In theseareas one expects to find a relativelyunpolluted environment, at least withrespect to pollutants associated withindustrial processes. As the economygrows and industrialization begins,people begin to move out of subsis-

tence living, using more natural re-sources to acquire more securesources of basic needs such as food,shelter, and clothing. This results inincreases in emissions of industrialpollutants. But, as economic growthcontinues and incomes grow beyondthat required for basic needs, peoplemake marginal choices about how tospend additional income. Once basicneeds are met, people start choosinglonger life expectancies, cleaner wa-ter, proper sanitation, and improvedair quality. As the economy growseven further, investments may bemade in cleaner technologies and ashift to information- and ser-vice-based activities. These changescombine with an increased abilityand willingness to enact environ-

10 Canadian Student Review Spring 2005

Figure 1: A TypicalEnvironmental Kuznets Curve

Source: Yandle et al., 2004.

mental protection and improve envi-ronmental quality.

Grossman and Krueger used theirEKC hypothesis to argue that aNAFTA-based trade expansionwould protect the environment. Toaddress the hypothesis, they devel-oped a cross-country panel of com-parable measures of air pollution invarious urban areas and explored therelationship between economicgrowth and air quality. They foundEKC patterns for the ambient levelsof both sulfur dioxide and smoke inthe air. The turning point came when

per capita GDP was in the range of$6,700 to $8,450 in 2003 US dollars.

Table 1 shows a range of esti-mated turning points derived from areview article by Yandle et al. (2004).The table includes EKC turningpoints for both air and water pollut-ants from various researchers. Esti-mates vary based on the countriesanalyzed and the data characteristics,such as if the pollutants are measuredsolely in urban areas or a combina-tion of urban and rural areas.

Even though Canada’s per capitaGDP has increased by 78 percent

over the past three decades, sulphurdioxide concentrations have de-creased 72 percent, particulate con-centrations have decreased 51percent, and lead concentrationshave decreased 94 percent. Most ofthese reductions stem from an abilityto pay for cleaner technologies. Forexample, despite the fact that therehas been a 30 percent increase in to-tal vehicle registrations since 1974,ambient levels of carbon monoxidehave fallen by 83 percent (Brown etal., 2004).

The existence of the EKC rela-tionship between indicators of envi-ronmental quality and increasing percapita income does imply that someenvironmental degradation is inevi-table as economies begin to grow.Fortunately, the same relationshipshows that at a particular level of percapita income, further economicgrowth will reverse the trend of deg-radation and will actually lead to en-vironmental improvements.

ReferencesBrown, J., K. Green, L. Fredricksen, S.

Hansen (2004). Environmental Indica-tors (Sixth Edition). Vancouver: TheFraser Institute.

Grossman, Gene M., and Alan B. Krueger(1991). Environmental Impact of a NorthAmerican Free Trade Agreement.Working paper 3914. Cambridge,MA: National Bureau of EconomicResearch.

Munasinghe, Mohan (1999). “Is Environ-mental Degradation an InevitableConsequence of Economic Growth?Tunneling through the Environmen-tal Kuznets Curve.” Ecological Eco-nomics 29(1): 89-109.

Yandle, Bruce, M. Bhattarai , M.Vijayaraghavan (2004). Environmen-tal Kuznets Curves: A Review of Findings,Methods, and Policy Implications. PERCResearch Studies . RS-02-1a.Bozeman, MT: PERC. �

Canadian Student Review Spring 2005 11

Table 1: EKC Turning Points

Pollutant EKC TurningPoint

(2003 US$)

Pollutant EKC TurningPoint

(2003 US$)

Sulfur dioxide (air) $6,200-16,100 Fecal coliform $13,500

Gross particulate (air) $8,450-16,900 Lead $17,700

Fine particulate (air) $12,000-29,600 Total coliform $5,000

Nitrogen oxides (air) $16,900-28,900 Arsenic $8,300

Carbon monoxide (air) $16,300-25,300 Cadmium $8,400

Carbon dioxide (air) $37,000-57,000 Dissolved oxygen $4,500

Biological oxygendemand

$12,800 Nitrates $3,400

Chemical oxygen demand $13,300 Sulfur dioxide $6,900

Source: Compiled from Yandle et al., 2004.

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