A Spot From Which I Make Sense

Posted on January 13, 2010 by Markus Stocker, Recommended 1 | Recommend

Recently, I stumbled across the Summers memo (Wikipedia). It is actually only an excerpt of the original. I think, this doesn’t matter as the excerpt is informative and provocative enough. The memo was written by Lawrence Summers in 1991 while he was Chief Economist of the World Bank.

A few days ago, I forwarded the Wikipedia article to a friend. His comment was just “OMG,” meaning Oh My God (or Oh My goodness, or Oh My Gosh). Perhaps he was in a hurry or perhaps it’s really how he could best express his thoughts. Now, I think it is best to ignore for a second religious dimensions because if you read the Wikipedia article (and what follows here) through a religious lens I argue you are likely not to find any sense.

What one needs to do to perhaps find some sense is to strip off all but one dimension of the personality of a prototype human being. Take off ethics, morality, empathy or just common sense, yes, perhaps even rational self-interest and wear the coat of homo economicus. What follows is an excerpt of the excerpt of Summer’s memo,

The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. (Wikipedia)

If you read the statement only through the lens of economics and from the mentioned point of view, then the conclusion that “the logic to dump toxic waste in the lowest wage country is impeccable” is probably rational. After all, it is a statement of a former Chief Economist of the World Bank. I’m sure, any Chief Economist of the World Bank knows an awful lot more about economics than I do.

I would like to question the validity of the conclusion nevertheless. The first problem I have with the statement is that I need to dump all dimensions of my personality but the one of economics to have a chance to find some sense in it. I argue, this is a flaw in itself. But, as a thought experiment, I’ll give it a go. The second problem I have with Summer’s statement is actually mentioned, namely “from this point of view.” Not only I need to strip myself, but of the remaining dimension I need to consider only one point of view. Provided I’m almost naked and I’m looking at what remains from a single perspective, then, I might see the logic.

While it might be true that the cost of health impairing pollution depends on forgone earnings, I’m confident that forgone earnings are not the only factor affecting the cost of health impairing pollution. Even just through the lens of economics, by internalizing all the costs of health impairing pollution the conclusion is, I think, likely to be different. For instance, proper treatment of human health effects caused by pollution might be specific to and result in higher costs for low wage countries, e.g. due to the lack of proper infrastructure, education, human and capital resources. On a similar line, studies on the exposure assessment as well as preventive measures for workers and the general population, too, might be more demanding with respect to human and capital resources in low wage countries. Sure, Summers may argue low wage countries don’t have such services and we do not intend to provide them; thus, no costs. Right, I suppose at this point one needs to consider a few more dimensions next to economics to conclude that this reasoning most likely lacks at least justice.

I think this pealing off all dimensions, including plain common sense, until one hits a single point of view from which a statement can be argued to be rational is an example of an analytic ability driven to the extremes that, however, I’m afraid is completely “out of touch,” to the point that whatever one may conclude has essentially no value.

On a side note. The author of the memo, Lawrence Henry Summers is, currently, the Director of the U.S. National Economic Council under the Obama administration.

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Category: Economics, Environment, Ethics
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Comments

2 Responses to “A Spot From Which I Make Sense”

  1. Delancey
    January 13th, 2010 @ 9:06 pm

    I think we too often look at things through a western (and may I add, European) lens. Pollution is bad, health is good, so don’t pollute and be healthy. Simple, right? However, if you are living in a country or a community with no other way of supporting yourself economically, turning your land into the world’s toxic waste dump might not be a bad idea if it puts food on the table – after all, food is also important for health. Prostitution of your land for survival – I don’t think its out of the question, and I don’t think it requires a stripping of human sensibilities to come to this conclusion. To me it’s a new case of the world’s oldest profession.

  2. Markus Stocker
    January 13th, 2010 @ 10:41 pm

    No, I don’t think the issue is simple. Ultimately, the balance between pollution and health is, I think, a question of cost-benefit analysis that needs to include science, policy, economics, at the very least. Thus, the question whether pollution is “good or bad” is typically not straightforward. A good example is chlorinated water. While one might argue, chlorinated organic compounds are toxic, chlorination was one of the most important innovations regarding human health. Thus, to stop chlorination would not be a wise decision (at least not without a comparable method for water purification). As you point out, if turning your own land into the world’s toxic waste dump puts food on the table and the overall benefits are greater than the costs (for those who truly bear the costs!) then indeed it might be the rational thing to do. However, this cost-benefit analysis must be done and it is not clear to me Summers had one, as he only points out the argument on wages (admittedly, I didn’t read the entire memo). Perhaps, who struggles for survival has short-term interests at heart, for obvious reasons. If I get to hear this reasoning from who has no other option than to carry out this, what you call, new case of the world’s oldest profession, then I might trust it. If, however, it is an assessment of a Chief Economist of an organization headquartered in the west then I’m skeptical and I expect more convincing arguments.

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