Environmental Economics
David B. Goldstein, co-director of NRDC’s energy program and author of the 2009 book Invisible Energy: Strategies to Rescue the Economy and Save the Planet, has worked on energy efficiency and policy since the early 1970s. He has been instrumental in the development of energy efficiency standards for new buildings and appliances in the United States and Russia. He negotiated the agreement that led to the National Appliance Energy Conservation Act of 1987 and created the location efficient mortgage, a program designed to reduce urban sprawl and car use. A physicist, he is a fellow of the American Physical Society and a recipient of its Leo Szilard Award for Physics in the Public Interest. In 2002, the MacArthur Foundation honored Goldstein with a prestigious five-year fellowship commonly known as the "Genius Award." As part of NRDC’s Visionary Speaker Series, Goldstein will argue that environmentalists are the true advocates of free markets.
In the general culture, we are used to looking at environmentalism as a "cost." Is that an accurate perception?
Many in the business community argue that environmental regulations interfere with market forces -- that if the government didn’t intervene in the market at all, we would have more growth. I call this business advocacy position "economic fundamentalism" because it treats economics like revealed truth rather than as scientific hypothesis that needs to be examined and validated by data. Actually, both data and theory show this position to be wrong. Yet nobody has written about it in a popular way, in a way that you would understand without an advanced degree in economics. So this is an opportunity to take this topic, which seems pretty obscure, and say, no, this is actually a tool that is used in politics to create freedom for companies to pollute and cause trouble.
Our economic engine insists corporations must make as much money as possible.
I don’t think environmentalists need to challenge that value. The question is, does environmental regulation get in the way of that? That is a scientific question that is susceptible to being proven or disproven by evidence. Our opponents have never tried to gather evidence on the subject. To the extent that there has been serious study, the evidence goes the other way, that states or countries with stronger environmental regulations have more jobs and stronger growth.
The economy does not automatically generate competition and innovation. If you have an industry that is dominated by a limited number of players, it is very easy for them to keep doing the same thing year after year, unless there’s a regulation that demands that they develop new technology or makes old technology more expensive. That regulation creates competition in an area where there wasn’t any before. That competition, first of all, drives prices down, and second of all, produces innovation that drives them down even further and produces new business opportunities and jobs.
That’s how competitive markets are supposed to work and in some cases they do. Let’s take other markets, say, water heaters. Water heaters were using the same technology in 1972 that they were using before World War II. There was no improvement at all. In fact, if anything, they cut some corners and the efficiencies got worse. But standards for energy efficiency and air emissions have led to innovation that cuts costs for consumers, and compliant water heaters don’t even cost more despite their greater value.
How do environmentalists foster more innovation and a better free market?
An environmental regulation requires people to do something different. It says, here’s a product or production process that pollutes too much. We’re going to require you to pollute, say, half as much. Now, they’ve got to do something new. It also creates markets for people who can sell them the supplies or the parts to do that something new. You’ve heard stories over the years of people who had technologies to improve fuel economy in cars. But if none of the manufacturers was interested in fuel economy well, they couldn’t sell any products.
You recognize that this proposition, in our society, is a hard sell, right?
That’s because people who profit from the status quo -- or think they do -- have put a lot of lobbying and PR money into creating mythologies about economic growth and the environment and have developed a persuasive sounding rationale (economic fundamentalism) that they and others use as an advocacy tool. The point for NRDC is, since we, by and large, are not responding systematically to these false claims, the only folks people hear from are the polluters.
Some leaders in the new Congress have vowed to study whether global warming is a hoax...
A lot of the current faction that calls itself right wing is trying to overthrow the Enlightenment. They are basically saying things are the way we convince people they are, and the facts don’t matter. NRDC’s whole philosophy is based on the Enlightenment ideals that underlie the founding of America, which say that truth is not revealed; truth is discovered. And it is discovered by people debating each other with open minds and trying to get to the right answers. That’s the principle behind parliamentary democracy, and it’s the principle behind science. If we lose out on that principle, this nation is cooked. If we can bring the debate back to the question of what are the evidence and arguments for certain points of view, we’re going to be more successful.
On climate, one of the reasons we’re making so little progress on the science is that the other side has convinced themselves and some of their allies that this is really a battle between free enterprise and Communism. And if environmentalism is the sheep’s clothing on the wolf of Communism, then nobody really cares about what color the sheep’s clothing is, or whether it’s a real sheep or an artificial sheep. They’re worried about the wolf underneath. I do suggest in the end that we confront the wolf, that we say: "These guys are accusing us of being Communists. This is the most ridiculous thing that you could imagine. How could they even say that? How could they be so dumb as to believe that?"
Is this something that you believed starting out some 30 years ago, something that grew on you gradually, or was there a "eureka!" moment?
Well, there certainly weren’t any "eureka!" moments. The ideas I’m presenting have certainly evolved over 30 years. The issue of economic fundamentalism was something that I wished, in discussions with my friends over beer in 1982, that someone had written about. After waiting futilely 20 years for someone to write about this, I decided to do it myself. In the process of writing and of teaching a graduate seminar that would help to get other people’s thinking incorporated, I came across issues of how trade associations operate in the economy, which is a fairly new concept. And then in trying to refute some of the more subtle arguments in economic fundamentalism, I ran across some very original thoughts on what the role of regulation really is in a free market economy. That’s relatively new.
The way these arguments are written up in Saving Energy Growing Jobs (Goldstein’s previous book), the intent is to appeal to the business community to make them see that environmentalism is an opportunity for them to increase their business and make more money, and certainly not a threat. And it is to show business that one of the best ways to profit from the growing trend toward green products is to partner with environmental advocates to develop policies that make green production more profitable and overcome the current failures of the market that obstruct their business’s profitability and our environmental goals.
