Friday, July 30, 2010

Economic Growth and the Environment Redux

Michael Greenstone and I have a friendly disagreement discussed here about whether economic growth and recessions are "friend" or "foe" of "Green Cities".

HERE is the transcript of the Radio Segment

Can there be clean air and economic growth?

Economic growth is often coupled with an increase in pollution. But those two factors may not be mutually inclusive, at least not the way they once were.

Report: Pollution way up in Chinese cities

The downside to China's rapid growth of the past few years: a rise in air pollution. A Chinese government report shows over 100 Chinese cities had the worst pollution levels in five years.


Kai Ryssdal: It's still a point of macroeconomic debate as to when or, in some circles, whether China is going to pass the U.S. and become the biggest economy in the world. But it does look like they've nailed the number two spot. In Beijing today, a senior economic official said China has passed Japan for number two. But all that economic development brings growth of other things as well. In China's case, air pollution. A report over there this week said Chinese cities are seeing the worst air quality they've had in five years.

We asked Marketplace's Krissy Clark to explore the relationship between dirty air and the economy here.


Krissy Clark: Let's begin with the obvious: Whether you're in China or the U.S., the more the economy is buzzing, the more it's spewing. More construction projects are happening...

Michael Greenstone: More people are driving and factories are producing more products. When that happens, there's more pollution. It's pretty simple.

That's MIT economist Michael Greenstone. Air quality data during the current recession isn't out yet, but Greenstone studied how the last recession, in the early 1980s, affected the air we breathe. The numbers were startling. The U.S. cities hit the hardest -- in places like the Rust Belt also saw their air pollution drop. Which raises the question: Can you have good air quality and economic growth? Greenstone says yes. He points to long term trends. Since the 1970s, the American economy has grown dramatically while overall emissions have shrunk.

Greenstone: And the reason is, we now have much stricter regulations than we did in the early 1970s.

And industry has figured out how to make money, in spite of them. And it helped that the country moved from an industrial and manufacturing base, to one with more office work and service jobs.

But, economist Matt Kahn from UCLA says tighter regulations can cut another way.

Matt Kahn: During recessions people are less likely to support environmental regulations as a public policy priority, and if environmental regulations are slowed or not enforced, then that can actually degrade the environment.

And whether you're in the U.S. or China, Kahn says there's one reason we should all breathe easy.

Kahn: Pollution makes urban, productive people sick, and a healthy work force is the key to economic growth.

I'm Krissy Clark, for Marketplace.


I'm Matthew E. Kahn of UCLA. Permit me to be brief;

Jim Morrrison of the Doors would not recognize the 2010 Sunset Strip in Los Angeles.
His 1970 Sunset Strip was covered in ozone smog. Despite a huge growth in income
and miles driven, the smog is gone.

How is this possible? How could the scale of economic activity go up but the city is

The answer is the "quality" of capitalism. A richer nation can afford to enforce stringent regulation that reduces emissions per mile of driving .

In a richer nation, people drive newer cars and new cars are cleaner than older cars (because they were built under a more stringent regulatory regime).

The idea that quality can offset quantity is an under-appreciated point.

I predict that Beijing's future circa 2010 will look a lot like Los Angeles' progress from 1975 until now as older dirty capital is phased out and replaced with low emissions new capital.

For you nerds out there, read my Los Angeles paper.