The Management of Water Quality and the Environment: Proceedings of a Conference held by the International Economic Association at Lyngby, Denmark

320 Pages·1974·74.786 MB·English

by  Professor Jerome Rothenberg, Mr Ian G. Heggie (eds.)

INTERNATIONAL ECONOMIC ASSOCIATION
CONFERENCE VOLUMES. Numbers 1-50
NUMBER 36
The Management of Water Quality
and the Environment
The Management of
Water Quality and
the Environment
Proceedings of a Conference held by
the I nternational Economic Association
at Lyngby, Denmark
EDITED BY
J. ROTHENBERG AND IAN G. HEGGIE
M
. .
S
TOCKTON
PRE S S
© International Economic Association 1974
Softcover reprint of the hardcover 1st edition 1974 978-0-333-15692-6
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First published 1974
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DOI 10.1007/978-1-349-02151-2
Contents
List of Participants Vll
Copyright Permissions viii
Introduction J. Rothenberg ix
PART I: AIR AND WATER POLLUTION
1 The Optimum Management of Social Overhead Capital 3
H. Uzawa
Discussion 18
2 Industrial Structure, Growth and Residual Flows 21
Finn R. Fl1rsund and Steinar Strl1m
Discussion 70
3 The Application of Economic Analysis to the Management 73
of Water Quality: Some Case Studies Allen V. Kneese
4 A Linear Decision Model for the Management of Water 104
Quality in the Ruhr Rainer Thoss and Kjell Wiik
Discussion 134
PART II: PROBLEMS OF AND APPROACHES TO
PUBLIC POLICY
5 Qualitative Returns to Scale and the Optimum Financing 151
of Environmental Policies Serge-Christophe Kolm
Discussion 172
6 Effluent Charges versus Effluent Standards 189
Karl-Goran Maler
Discussion 213
7 The Management of the Quality of the Environment 224
o.
Clifford S. Russell, Walter Spofford, Jr., and
Edwin T. Haefele
Discussion 273
PART III: EVALUATION AND CONSOLIDATION PANEL
8 Urbanisation and Environment: Retrospective and Pro- 281
spective Views Ian G. Heggie, Henry Tulkens, Rainer
Thoss, Karl-Goran Maler and Edwin S. Mills
Index 301
List of Participants
Dr G. Albers, Institute of Town and Regional Planning, Technical University,
Munich, F.G.R.
Mrs Bodil Nyboe Andersen, Institute of Economics, University of Copenhagen,
Denmark
Professor Tibor Bakaes, National Institute of Public Health, Budapest, Hungary
Mr Jean-Philippe Barde, Environment Directorate, O.E.C.D., Paris, France
Professor W. Beckerman, Department of Economics, University College,
London, U.K.
Professor Niels G. Bolwig, Institute of Economics, University of Aarhus,
Denmark
*Professor E. von Boventer, Department of Economics, University of Munich,
F.G.R.
Professor C. Cameron, Department of Social and Economic Research, University
of Glasgow, U.K.
Mr Ulf Christiansen, Building Research Institute, Copenhagen, Denmark
Mr Alan W. Evans, Centre for Environmental Studies, London, U.K.
Professor Luc Fauvel, Secretary-General, LE.A., Paris, France
Professor Finn R. Ffllrsund, Institute of Economics, University of Oslo, Norway
Mr C. D. Foster, London School of Economics, London, U.K.
*Mr Edwin T. Haefele, Resources for the Future, Washington, D.C., U.S.A.
Professor Niles M. Hansen, Centre for Economic Development, University of
Texas, Austin, U.S.A.
Mr Ian G. Heggie, Nuffield College, Oxford, U.K.
Professor Sir John Hicks, All Souls College, Oxford, U.K.
Lady Hicks, Linacre College, Oxford, U.K.
Mr Chr. Hjorth-Andersen, Institute of Economics, University of Copenhagen,
Denmark
Dr Irving Hoch, Resources for the Future, Washington, D.C., U.S.A.
Dr Erik Hoffmeyer, Governor, Danish National Bank, Copenhagen, Denmark
Mr N. J. Kavanagh, Department of Industrial Economics and Business Studies,
University of Birmingham, U.K.
Mr A. V. Kneese, Resources for the Future, Washington, D.C., U.S.A.
Professor S.-Ch. Kolm, CEPREMAP, Paris, France
Professor Lester B. Lave, G.S.LA., Carnegie-Mellon University, Pittsburgh,
U.S.A.
Mrs Judith R. Lave, G.S.I.A., Carnegie-Mellon University, Pittsburgh, U.S.A.
*Professor H. Levy-Lambert, Societe Generale, Paris, France
Professor Fritz Machlup, Department of Economics, Princeton arid New York
University, U.S.A.
Mr Karl-Goran Miller, Department of Economics, University of Stockholm,
Sweden
Professor Niels Meyer, Technical University of Denmark, Lyngby, Denmark
Professor Edwin S. Mills, Department of Economics, Princeton University,
U.S.A.
*Professor Robert Mosse, University of Grenoble, France
Mr Anders Miiller, General Planning Directorate, Copenhagen, Denmark
* Presented a paper but did not attend the Conference.
VIII List of Participants
Professor Frank E. Miinnich, University of Dortmund, G.F.R.
Professor Knud 0stergard, Technical University of Denmark, Lyngby, Denmark
Professor Remy Prud'homme, BETURE, Puteaux, France
Professor P. N0rregaard Rasmussen, Institute of Economics, University of
Copenhagen, Denmark
Professor Jerome Rothenberg, Department of Economics, Massachusetts In
stitute of Technology, U.S.A.
Dr Clifford S. Russell, Resources for the Future, Washington, D.C., U.S.A.
Professor Eugene P. Seskin, G.S.I.A., Carnegie-Mellon University, Pittsburgh,
U.S.A.
Mr Alessandro Silj, The Ford Foundation, New York, U.S.A.
Mr Irving Silver, Ministry of Urban Affairs, Ottawa, Canada
*Mr Walter o. Spofford, Resources for the Future, Washington, D.C., U.S.A.
Professor Steinar Stmm, Institute of Economics, University of Oslo, Norway
Professor Dr Rainer Thoss, Department of Economics, University of Miinster,
G.F.R.
Professor Henry Tulkens, Centre for Operations Research and Econometrics,
Catholic University of Louvain, Heverlee, Belgium
Professor H. Uzawa, Faculty of Economics, University of Tokyo, Japan
Mr Kjell Wiik, Department of Economics, University of Miinster, G.F.R.
Secretariat and Editorial Staff
Miss Mary Crook
Mr Ian G. Heggie
Mrs Elizabeth Majid
Mr Karsten Peterson
Programme Committee
Jerome Rothenberg, U.S.A. (Chairman)
Peter Bohm, Sweden
E. von B6venter, G.F.R.
Sir John Hicks, U.K.
Allen V. Kneese, U.S.A.
Shigeto Tsuru, Japan
Copyright Permissions
A number of publishers have kindly allowed us to make use of material for
which they hold the copyright. We are most grateful for their co-operation and
would specifically like to thank the Johns Hopkins University Press for per
mission to reproduce material.
• Presented a paper but did not attend the Conference.
Introduction
J. Rothenberg
1 CONFERENCE OVERVIEW
This is a second volume drawn from the International Economic
Association-sponsored Conference on Urbanisation and the En
vironment, held near Copenhagen on 20-24 June 1972. The first
volume, Transport and the Urban Environment, included the materials
relating primarily to the process of urbanisation, its causes and
environmental consequences, with special attention to urban trans
port. The present volume contains the materials more closely focused
on the environmental quality issue itself. These are of course inter
connected with urban environment questions; but they stand inde
pendently as well, as a provocative set of closely related examinations
in an area becoming important to both academic inquiry and public
policy concern. Seven of the fifteen conference papers are included
here, along with the general discussion they generated, and the whole
is concluded with the proceedings of the summary and evaluation
session for the conference as a whole.
The papers were for the most part given by economists, but a
variety of other disciplines were represented at the conference - bio
logy, sociology, planning and political science. This is entirely
appropriate, because the essential substance of the field involves a
variety of specialised subject-matter from physical science, engin
eering and the several social sciences. Some of the conference's pro
ceedings underscore how strongly progress in the field depends on
the ability to mobilise and co-ordinate contributions from various
disciplines. The materials in this book show chiefly how economists
apply their distinctive analytic and statistical viewpoints to an area
whose subject-matter has stemmed largely from practical experiences
and research outside of economics.
2 ENVIRONMENTAL QUALITY AND ECONOMIC
ANALYSIS
The growing seriousness of economic research on environmental
quality has led to a fundamental question being asked: what is the
environment, or environmental quality, from the point of view of
the kinds of variable and behaviour relations used in economic
x Introduction
analysis? This is not trivial, since we have become sensitised to the
many kinds of role played by the environment in the economy: as
final consumption, as a set of productive inputs, or as an input into
other productive inputs (as, for example, air quality affecting the
health and therefore productivity of workers).
A major direction in formulating how the environment enters into
economic activities is to subsume the relationships under the theory
of public goods. The concept of common property resources has been
elaborated: in his paper, Uzawa develops a related concept of social
overhead capital; Kolm, in his paper, develops further aspects in dis
cussing qualitative returns to scale. The environment presents eco
nomic agents with a variety of aspects: free goods, resources owned
in common, joint production, scale economies, congestion, positive
and negative externalities, among others. Conventional paradigms
are suggestive for some of these, but none so far is consistent with
all. Thus, new efforts towards a complete formulation of this are
welcome, and both Uzawa and Kolm have made contributions in
this volume.
Some of the elements that matter are as follows. The environment
can be considered as a set of resources that render both consumption
and production services to a variety of users. Most environmental
resources render these services in a non-exclusive - but not in prin
ciple non-excludable (think of admission fees to beaches or national
parks or barred entry to a sewage system) - way. Many can 'simul
taneously' share services without anyone thereby obtaining less or of
lower quality than desired. In addition, many such resources are not
subject to private ownership, and so can be shared at zero fee. But
there is a finite assimilative capacity for each kind of resource, short
of which untrammelled sharing of usage is possible, but beyond
which higher usage, or usage by different types of agents, deteriorates
the quality at which various of the users can obtain the services. For
many portions of the environment one can delineate a 'natural'
assimilative capacity which specifies the boundaries 'given by Nature'
(in level, type, time and space of use) within which shared use can
avoid quality deterioration, and the schedule of deteriorations that
occur at various stages beyond these boundaries.
This natural assimilative capacity is not immutable: human inter
vention can change it. There are various forms of investment in
assimilative capacity. They are based on the different respects in
which use of each environmental resource 'pollutes' its ability to
maintain quality and quantity of services for its clients. Probably the
most important - but not the only - mode of 'pollution' is that
economic agents, in carrying on their primary consumption and
production activities, generate various wastes (residuals) as by-
Introduction xi
products and use the environmental resources as inexpensive channels
in which to discharge these wastes for removal. This use interferes
with other types of use of the same resources. Investment in assimila
tive capacity for this mode can take broad forms in which the
environmental resource is itself restructured or augmented (e.g.
lengthening a beach, increasing the rate of water flow in a river),
narrower forms in which a given level of waste discharge is made less
noxious through public (large-scale) treatment of the wastes, to forms
in which individual waste dischargers themselves either denature
their own wastes before discharge or recycle them back into primary
production (or consumption).
All these investments have in common that a given level and com
position of primary consumption and production are made to have
a smaller adverse effect on quality than hitherto. Yet the last of these
is not so much an operation on environmental resources as on the
activities that impinge on them. Research often makes no intrinsic
distinction within the category of treatment: public or private forms
are simply distinguished in terms of scale economies. Indeed, treat
ment activities are often bracketed with substitution of inputs and
even technological change in a very broad 'treatment' category.
Underlying such usage is that the environment and its capacity are
in fact deeply, possibly inextricably, intertwined with the pattern and
level of human activities. The concept of environment as durable,
useful resources that have a quantity capable of being modified, and
thus as a form of capital, can be developed, but their extreme (non
linear) sensitivity to the pattern and level of the human activities
must be heeded in the formulation, both in defining units of measure
ment of capital and in the relations describing its productive pro
perties.
Given the assimilative capacity of environmental resources with
respect to various activities (residuals) at a given time, the actual
quality level of environmental services rendered at that time depends
on the relation between the actual pattern and level of activities and
this assimilative capacity. The basic economic problem is that the
quality of environmental services can be enhanced by increasing the
assimilative capacity of the environment, or changing the composi
tion of primary activities to one with less obtrusive impacts, or
decreasing its overall level. All these involve a social cost: assimila
tive capacity investment uses up resources for treatment or innova
tion, compositional changes use less efficient input combinations or
involve less preferred compositions of output, lower activity levels
directly decrease the rate of final consumption.
This raises two questions: (1) how much improvement in environ
mental quality is it worth while making, considering· that every