Though Nobel Laureate Robert Solow will vote for Barack Obama on Election Day, he disagrees with the Senator's support for imposing higher international environmental standards on poor countries.
Solow, who is Institute Professor Emeritus at the Massachusetts Institute of Technology delivered the Kenneth V. Santagata Memorial Lecture lecture, titled "Why Using International Trade Restrictions to Enforce Environmental Standards is a Bad Idea?and a Better Approach," to a packed Kresge Auditorium on Tuesday evening. Using a simplified model economy, Solow, who was awarded the Nobel Prize in Economics in 1987, explained how the U.S. currently enforces an ineffective and unfair system of environmental protection in the countries with which it trades.
"There's a rich county and a poor country, or a group of poor countries. Each of these countries produces some characteristic stuff...It produces those goods and services using capital and labor, and whatever natural resources it has at its disposal," he said.
Production of goods, however, can cause pollution, which becomes an expensive problem for countries. Though countries have the option of spending money to abate pollution, whether they choose to do so or not heavily depends on their financial circumstances.
"Abating pollution and protecting the environment is costly to a country," said Solow. "It has to choose between more consumable output and better air quality."
The politics of the situation shift when a rich country demands that the poor country spend more money on the abatement of pollution by threatening to exclude their products from the rich country's markets.
"In the new state of affairs, after the rich country has imposed higher environmental standards on the poor country, real wages in the poor country will be lower," said Solow. "The environmental preferences of the rich country are satisfied at the expense of the workers of the poor country."
According to Solow, countries like the U.S. that claim to be "friends of the earth" are actually "enemies of...the poor."
Solow, however, said he doesn't believe that "well-meaning people want that outcome," and he proposed that wealthy countries list environmental problems "in order of priority and associate a cost with each priority."
While reforesting the Amazon basin or improving the air quality in Mexico City would likely come near the top of the list, certain problems would have a lower priority.
"Improving beaches on the French Rivera might come lower," said Solow. "Improving beaches in Maine might be a different matter."
Though Solow said making a master list of the world's environmental problems would be a difficult task, it would demonstrate the inversely proportionate relationship between wealth of a country and the severity of environmental problems.
"Many of the high priority projects will be in poor countries," said Solow. "The bulk of the costs could be levied on rich countries."
Since environmental standards are usually imposed from external countries, Solow said that it makes sense for those countries to contribute funds, rather than just threats.
"Rich countries could pay to stroke their own environmental preferences, instead of trying to force underpaid workers in countries to pay," he said.
Solow acknowledged that his solution is a difficult one, and that it might not be enacted literally.
"All I mean by this is to drive home the important principle that the location of environmental improvement and the location of the payment for environmental improvement don't have to be the same," he said.
Solow also said that those who support policies that impose higher environmental standards on poor countries may be well-intentioned, but that they are unaware of the unintended consequences of such standards.
"I certainly don't believe that Senator Obama, for whom I will vote for with the greatest of pleasure, understands the consequences," he said.
According to Solow, a close look at the repercussions of these restrictions in poor countries will promote better policies.
"There is really no substitute for trying to understand all the consequences of policy decisions?not just the ones that you have in mind when you invent them," said Solow.