December 17, 2007
Economic/Environomental Costs Differ in the Long Run From the Short Run
What works in the short run often times costs society infinitely more in the long run. This is true with numerous environmental policies most notably the handling of forests/logging and fisheries in the past 100 years. It also is true with the use of certain toxins, such as Pesticides (DDT) and such chemicals as PCBs. A solid case study to understand the economic costs of using certain toxics is to look at the use of Pesticides: Pesticides are used to kill predators to crops thus allowing the crops to have a greater yield. Using Pesticides therefore makes the farmer more money in the short term and provide a stimulus to the economy in the short run by generating a greater yield. However, the importance of economic/ecological considerations arises when one looks into the long term impacts on the environment and, what is becoming obvious, is that certain things that make economic sense in the short run do exponentially larger damage economically and ecologically in the long run. For instance, say the Pesticides caused a gain of $100 for the farmer for the first year and $50 for the second (this will be decreasing because pests build up immunity to pesticides in the long term). But, if the Pesticides, as is common, run off into water sources and contaminate the water or cause an algal bloom (also common) and kill all the fish and make the river/lake useless, that $150 that the farmer and economy gained in the short would pale in comparison to the damage the Pesticides have done to the economy and environment.

This is becoming an increasingly popular discussion in environmental management across the board. Even the Chinese government in 1998 realized that increased logging around rivers was not econmically sound. As rampant erosion led to dirty rivers and tree-less banks led to increased flooding, the government halted logging because they realized that the trees were worth much more money standing than they were being logged. A similar line of argument is arising in the wake of Hurricane Katrina. The development of the coastal communities has wiped out the natural barriers - marshes and wetlands - to hurricane that have protected the inland communities for centuries. The developed coastline, no matter how expensive the property, is no where near the estimated $200 billion cost that Katrina will cost. That cost, though it would not be zero, would be substantially less if Katrina had landed as a substantially weaker storm, possibly a category one or two - as it would have with natural barriers - rather than a category five as it traveled through the newly developed coastline. The short term prospects of certain policies are not reflective of the true costs to society.
Sean Foley