Blogs & Comment

The right amount of pollution

Innovation should aim at finding the socially efficient level of waste and pollution, which is not zero.

A recent story in the New York Times provides some encouraging anecdotes about companies that are moving to take greater responsibility for recycling. Companies like Starbucks and Coca-Cola, for instance, are finding new—and in some cases, profitable—ways to take responsibility for the waste generated by their products’ packaging. More recycling generally means less waste, less energy used, and less pollution.

Waste and pollution are business-ethics topics about which there is some room for agreement between the moralist and the economist. The moralist points out that it’s unfair to make innocent bystanders suffer the ill effects of your factory’s pollution. The economist points out that market inefficiency can result when costs, financial or otherwise, are not internalized (i.e., when costs are instead imposed on innocent third parties).

But an economically-savvy point of view must also recognize that there is in fact a socially-efficient level of waste and pollution, and that that level is not zero. Waste and pollution could only be driven to zero by shutting down industry (of all kinds) altogether, and that would have disastrous effects. In other words, we would have to sacrifice things we care about, like the ability to raise world-wide standards of living, in order to reduce pollution and waste to zero.

Consider this analogy: economists likewise sometimes argue, rightly I think, that there is an efficient level of crime. The methods by which crime could be driven to zero are both enormously invasive and enormously costly. It is inefficient—not a good use of resources—to drive crime to zero, even if we think it technically possible.

So waste and pollution, we might say, are always bad, but not always wrong. They are features of a system the overall productivity of which is an enormous boon to humankind. It would be crazy to say that gains in productivity must be sought at any cost, but it is likewise crazy to value anything else (e.g., the environment) so highly that it drowns out all considerations of efficiency.

Now none of this tells us about whether particular efforts at waste reduction or pollution abatement are good or bad. But it helps frame the issue. What we’re looking for is the right level of pollution and waste, and that level is not zero. It is also likely to shift over time, as affluence grows and technology evolves, and as companies like Coke and Starbucks and a thousand anonymous start-ups find new ways to make environmental protection efficient, in the broadest, most ethically-significant sense of the word.