Academic journal article Contemporary Economic Policy

Environmental Problems of Pacific Rim Development

Academic journal article Contemporary Economic Policy

Environmental Problems of Pacific Rim Development

Article excerpt

Hall: This panel will focus on the environmental, natural resource, and ecosystem issues that are arising as the Asian countries of the Pacific Rim develop, some at extraordinary rates of economic growth, There are a number of unique challenges, and each speaker will touch on them in different ways. The rate and scale of economic development, industrialization and urbanization are unprecedented, as are the related mobilization of natural resources and use of environmental sinks to absorb pollution, At the same time, concern is growing and efforts are underway to understand the nature of the problems and to develop effective environmental management schemes to deal with them.

Close proximity and interconnected ecosystems throughout the region increase the urgency of addressing the effects of scale and the rate of change, Effective solutions will require integrated perspectives and perhaps new institutions among countries and regions that often are not accustomed to making effective joint decisions. Absent rapid action and cooperation, the standard economic notion that summing local optima results in optimization for the entire system is likely to lead to degradation rather than to system optimization. Attempting to manage the environment piecemeal is analogous to thinking that partial equilibrium analysis is sufficient to understand and manage a complex exchange economy. As economists, we need to be more mindful of the interconnectedness of the natural systems and the consequent special complications while we simultaneously try to understand and prescribe solutions.

Rapid economic growth in Asia holds both the promise of steadily rising incomes and the threat of a rapidly deteriorating environment in terms of pollution and loss of natural areas. The World Bank and other institutions view the long term favorably, assuming that rising per capita incomes will lead to environmental protection. We cannot be confident, however, that this protection will come soon enough--if it comes at all--to ameliorate the harm that may have been done, especially regarding international impacts and biodiversity.

The first speaker is Duane Chapman, who is Professor of Resource and Environmental Economics at Cornell University, Ithaca, N.Y. He also is Coordinator of the Climate Change Research Program at Cornell and leader of a U.S. Agency for International Development team on Energy, Industry, and the Urban Environment. He serves on the Editorial Board of Contemporary Economic Policy, one of WEA International's two journals.

Each speaker will have 20 minutes. After all have spoken, they each will have five minutes to respond to the other speakers and to make additional comments. The remaining time will be used for questions.

Chapman: I want to discuss the proposition that solving major pollution problems will require finding new institutional arrangements. I am increasingly concerned that as the global economy becomes unified in terms of marketing and production, environmental protection is not being dealt with in a satisfactory way. I will outline my basis for believing that we need to develop new mechanisms for dealing with environmental problems.

Two coauthors and I (Agras, Suri, and Chapman, 1994) reviewed existing research on environment and trade as it relates to the General Agreement on Tariffs and Trade (GATT) or the North American Free Trade Agreement (NAFTA). Nearly all economists whose research we reviewed believe environmental protection costs are low. Another prevailing belief, particularly as exemplified by Grossman and Krueger's widely discussed article, is that industrialization reduces pollution. A third, related belief is that neither trade nor trade agreements affect global pollution.

Of the 40 publications we reviewed, only two come to qualitatively different conclusions. Gray and Shadbegian (1993), two economists associated with the U.S. Bureau of the Census, undertook a total cost and productivity analysis of three major pollution intensive industries. …

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