Does one Specious Argument Deserve Another?

The Chesapeake Bay Foundation recently published a study arguing that, rather than destroying jobs, the Chesapeake Bay restoration will create 230,000 additional jobs.  This job creation argument arises in response to an argument made by others (Congressmen Bob Goodlatte (VA), and Tim Holden (PA), the American Farm Bureau Federation, among others), that the new TMDL regulation will impose job-destroying costs on our already weak economy.  As is so often the case when non-economists engage in an economic argument, both sides are using those parts of the story that comport with their own preferences to make it sound as though their position is supported by “economics”.

My old professors at the University of Maryland’s Department of Agricultural and Resource Economics (AREC)) would have approached the economics of restoring the Chesapeake Bay by considering all of the benefits implied under two different existential states.  One state would be an imagined restored Chesapeake Bay with its attendant benefits, and the other would be the current, degraded Chesapeake Bay and its attendant benefits.  They would have considered both monetary and non-market benefits in both states.  The difference between the benefits generated under either state would provide a measure of the “value” of a restored Chesapeake Bay.

With a measure of the benefits of a restored Chesapeake Bay in hand, my old professors would have then turned their attention to the costs of getting from the current state of the Chesapeake Bay to a restored state.  Along the way, they would reference the Pareto improvement aspect  (somebody is made better off, nobody is made worse off), and its weaker but more practical cousin, the Kaldor-Hicks criterion (those who are made better off could – in principle – adequately compensate those who are made worse off and still enjoy a gain) as a basis for their comparisons.  And they would have boiled it all down to eloquent equations that only students of economics could hope to penetrate.

Having tasted that sort of holistic approach to making prudent decisions about protecting the environment, it is frustrating to listen to current arguments about the Chesapeake Bay TMDL.  Of course it will cost somebody something to restore the Chesapeake Bay.  And, since one person’s cost is another person’s gravy train, restoring the Bay will create winners and losers.  Who are winners and who are losers will be determined by who is liable for the costs and what the money gets spent on.

My old professors in the AREC department eschewed positive economics in favor of the normative kind (that is, their economics addressed questions of efficiency, not equity), so they would have likely addressed the question of who pays in abstract terms of who held the property rights for environmental harm (or, benefit).  They might have suggested ways that the winners could compensate the losers in fact, rather than just in principle.  But they would have recognized that the 230,000 new jobs required under the effort had to be balanced against what had to be foregone to pay for those jobs.

Somewhere in this process, my old professors would have cottoned onto the fact that minimizing the short and long-term costs of restoration required getting the pricing right.  That is, that in pursuing restoration we are better off spending less for more restoration rather than paying more for less restoration.  They would have expected innovation to reduce restoration costs over the longer term, but only if there were attendant rewards to innovation.  They would have seen competition as being integral to that process.

Most of my old AREC professors have moved on, one way or another.  In their stead are professors who remain at the forefront of their field but who are practically irrelevant in the discussion of economics surrounding the Chesapeake Bay restoration.  Whether their absence from this discussion is a supply issue or a demand issue is a topic for argument.  And, while such an argument would be much more informative than the current one about whether we will enjoy additional jobs, fewer jobs or just different jobs as a result of trying to restore the Bay, it is less useful than the contributions that they could make if they simply applied their craft to the question of how to improve our performance in pursuing Chesapeake Bay restoration goals.  I often wonder why that is not happening.

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