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Wednesday, January 20, 2016

'A Different Kind of Ash-Hole Problem: Does the Distribution of Costs Matter to Economists?'

Tim Haab:

A different kind of ash-hole problem: Does the distribution of costs matter to economists?. Environmental Economics: ... Coal-ash is a by-product of coals fired electricity production. The ash from burning coal is stored in big lagoon-like ponds called ash-impoundments, or as I like to call them, ash-holes. ...

Beyond the obvious yuck factor and potential standard externality problems associated with leakage and breeches of the lagoons, location of these ash-holes near low-income populations creates concerns over environmental justice.

A federal civil rights commission is holding a hearing this week about whether coal ash disproportionately affects low-income and minority populations.

Lenore Ostrowsky, a lawyer for the U.S. Commission on Civil Rights, said federal data already show that some of those populations bear the highest burden...

Ohio's coal-ash containment areas are mainly in rural, low-income areas, and most are along the Ohio River...

Economists are often bad at considering the distributional impacts of policies: To the point that we often ignore issues of equity in favor of the more objective measure of efficiency. If two policies were to result in the same net benefits to society, but different distribution of those benefits within society, the efficiency-oriented economist would have trouble distinguishing between the policies.

But what if one distribution of benefits (or costs) is socially preferred to another. Or put a different way, what if society were willing to forego resources (willing to pay?) to ensure a different distribution of benefits (or costs)? In that case, the distribution of resources might fit within the realm of the efficiency paradigm as now society can be viewed as better or worse off depending on the distribution of resources.

Of course this raises all kinds of questions about morals, ethics, social welfare, interdependent utility...but it is at least a recognition that the distribution of resources has real and tangible benefits and costs and might be considered within the neoclassical economic framework.

Just a thought.

    Posted by on Wednesday, January 20, 2016 at 10:58 AM Permalink  Comments (49)


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