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Today’s Topics

Today’s Topics. Environmental Economics Exporting “Dirty” Industries Bizarre interactions in American Law. What is the Best Method to Ensure Environmental Protection?. Bowie and Ruff--Let markets operate Hoffman and Sagoff--Markets are inadequate to the task.

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Today’s Topics

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  1. Today’s Topics Environmental Economics Exporting “Dirty” Industries Bizarre interactions in American Law

  2. What is the Best Method to Ensure Environmental Protection? • Bowie and Ruff--Let markets operate • Hoffman and Sagoff--Markets are inadequate to the task

  3. Market Approaches to Environmental Protection • Free Markets (Ruff) • Mixed Markets (Bowie) • Regulated (command and control) Markets

  4. The Free Market Approach • Since producers produce only those things that consumers want, it follows that consumers want some pollution.

  5. In fact, the people responsible for pollution are consumers, not producers. They create, as it were, demand for pollution. People who use electricity are responsible for the smoke that comes out of the stacks of generating plants. Friedman

  6. The Free Market Approach • Since producers produce only those things that consumers want, it follows that consumers want some pollution. • How much pollution do consumers want? What is the optimal level of pollution?

  7. How do we determine the optimal level of any good? • Prices in the open market • BUT, a clean environment is a COMMON GOOD and markets are notoriously bad at protecting common goods.

  8. The Free Market Approach • Consumers want some pollution. • What is the optimal level of pollution? • Set prices with a Pollution Control Board, then let the market operate.

  9. “Under such a system, anyone could emit any amount of pollution so long as he pays the price which the PCB sets to approximate the social cost of pollution.” Ruff

  10. Bowie’s Mixed Market Approach • Responsibility for pollution control belongs with government • In cases of market failurelegislation can express consumer preferences

  11. Consumers do not want green products and green businesses behave foolishly.

  12. Bowie’s Mixed Market Approach • Responsibility for pollution control belongs with government • In cases of market failurelegislation can express consumer preferences • The environmental obligation of business is to stay within the law • Business should not lobby in environmental causes

  13. 1) Business satisfies consumer demand. • 2) Markets reveal consumer preferences. • 3) In cases of Market Failure demand is displayed in legislation. • 4) Markets fail to reflect consumer demand for environmental protection. • 5) Law reflects consumer preferences. • 6) Staying within the law satisfies demand. • 7) Therefore, the only environmental obligation of business is to stay within the law.

  14. Silverstein argues that assumptions of both business and environmentalists are mistaken.

  15. Business and Environmentalists both Assume: • The business/environment trade off is ZERO SUM. • This is mistaken. Environmentalism is a NON-ZERO SUM activity. • Being Green is good business, and there is a business for green products and technologies.

  16. Reasons to reject market approaches • Principles of Deep Ecology • Distinguishing roles of consumer, citizen, neighbor

  17. Hoffman’s Deep Ecology • “Good ethics is good business” is NOT a rationale for business ethics (Josephson) • Makes ethics merely and INSTRUMENTAL good, not an INTRINSIC one • When ethics stops being good business, then ethical behavior should stop • Same for “Green is good business.”

  18. Green is Good Business is Homocentric (Anthropocentric) • All value is related to human interests • The last tree p. 439

  19. We Need a BIOCENTRIC Ethic • Recognize the intrinsic value of plant and animal life • See natural objects as being valuable independent of their usefulness • Develop a Deep Ecology of nature that is Panpsychist

  20. When Biocentric Environmentalists use Homocentric Arguments, they Risk Undercutting the Movement

  21. Not all Political Questions are Economic

  22. Value, Power and Awe • The dynamo as a source of unlimited power • The dynamo as a symbol of infinity

  23. What happens when efficiency replaces infinity as the central conception of value? • All the steam in the world could not build Chartres

  24. From an economic point of view, the only values that matter are those on which we can put a market price. • Environmental values, like others, are determined by a consumer’s willingness to pay

  25. What is wrong with willingness to pay? • We are not merely consumers. • We are also citizens, AND • Our desires qua citizens conflict with out desires qua consumers • What is best for me and what is best for the community may differ

  26. Some values are not convertible into market prices, but they are still crucially important. • Do we really want to argue that there is an optimal number of abortions based on the marginal cost of reducing abortions by one and the apparent unwillingness of abortion opponents to bear that cost?

  27. Some political values cannot be reduced to economic values.

  28. The Lawrence Sumers Memo • Group Work • Group Reports and Analysis

  29. Bizarre Interactions in American Law • Bankruptcy Protection vs. Environmental Protection • My research interests

  30. Bankruptcy Protection • Bankruptcy is an Article One power of Congress • Bankruptcy serves important social and economic goals • Risk allocation and management • Clean slate, fresh start • Most debts are discharged

  31. Environmental Obligations • C.E.R.C.L.A, Superfund, R.C.R.A. etc impose financial liability for environmental damage • Whoever makes the mess pays to clean it up

  32. There is a conflict between the goals of a clean slate and a clean site

  33. However, • Bankruptcy law sometimes allows a polluting debtor to discharge the financial obligations for the cleanup. • Bankruptcy law thus undercuts environmental protection • “Dump on it then dump it” as a business strategy

  34. 4 Specific Problem Areas • When does a claim arise? • Are injunctions dischargeable? • Who has to look for a possible claim and when? • Can contaminated property be abandoned?

  35. Abandonment • The Bankruptcy Code allows the trustee to abandon some property • § 554(a)-- After notice and hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate

  36. Can a trustee abandon a hazardous waste site?

  37. The Supreme Court Speaks • Midlantic National Bank v. New Jersey Dept. of Environmental Protection 474 U.S. 494 (1986)

  38. Facts— • Quanta resources sought to abandon property contaminated with waste oil (470,000 gallons at 2 sites) • Bankruptcy Court and Federal District Court allow abandonment • Court of Appeals (3rd Circuit) disallows abandonment • Supreme Court disallows abandonment in 5-4 decision • Rehnquist’s dissent

  39. Rationale in Midlantic • No abandonment contravening state health laws • i. § 554 codifies pre-Code law on abandonment • ii. Other Code sections are subordinate to state health laws • iii. Bankruptcy estate must be operated in compliance with state and federal la • iv. Congress recognizes the importance of environmental protection

  40. A troublesome footnote: • The abandonment power is not to be fettered by laws or regulations not reasonably calculated to protect the public health or safety from imminent and identifiable harm.

  41. Rehnquist’s Dissent • The language of § 554 is absolute • No textual basis for applying pre-Code law • No basis for importing restrictions used elsewhere • A tortured reading of the requirement to comply with state and federal laws • Ignores economic and property rights of secured creditors

  42. Majority Powell Blackmum Marshall Brennan Stevens Dissent Rehnquist Burger White O’Connor Voting Pattern in Midlantic

  43. Majority Powell (Kennedy) Blackmum (Breyer) Marshall (Thomas) Brennan (Souter) Stevens Dissent Rehnquist (Scalia) Burger (Rehnquist) White (Ginzburg) O’Connor Changes since Midlantic

  44. Recent Lower Court Decisions Interpreting Midlantic • Abandonment allowed absent a showing of immanent harm • Abandonment allowed despite apparent immanent harm • Bankruptcy court gets to decide whether there is immanent harm • Weak state laws, or lax enforcement, justify finding of no immanent harm

  45. Cases disallowing abandonment absent a showing of immanent harm • Why these lower court decisions matter

  46. Trends in the Supreme Court • The doctrine of legislative supremacy • i. Legal positivism and legislative supremacy • ii. Article I § 8 clause 4 of the ConstitutionCongress shall have the power to . . . establish an uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States. iii. Article VI, Supremacy Clause issues

  47. The ‘plain meaning’ approach to Code interpretation • The re-emergence of Takings Clause jurisprudence • i. The new importance of property rights • ii. The Lucas decision • Personnel changes and voting patterns

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