Stigma: the Psychology and Economics of Superfund
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1 * STIGMA: THE PSYCHOLOGY AND ECONOMICS OF SUPERFUND Prepared by: William Schulze, Project Director Kent Messer, Katherine Hackett Department of Applied Economics and Management Cornell University Ithaca, New York 14853 Trudy Cameron, Graham Crawford University of Oregon Eugene, Oregon 97403 Gary McClelland University of Colorado Boulder, Colorado 80309 Prepared for: U.S. ENVIRONMENTAL PROTECTION AGENCY CR 824393-01-0 July 2004 Project Officer Dr. Alan Carlin National Center for Environmental Economics Office of Policy, Economics and Innovation U.S. Environmental Protection Agency Washington, DC 20460 * This research was supported by the USEPA under cooperative agreement CR 824393-01-0. We do wish to thank Alan Carlin for his patience and support and Kip Viscusi for his thoughtful comments. We also would like to thank Christian Coerds, Rachel Deming, Brian Hurd, Eleanor Smith, and Matt Todaro for their support on this project and the participants of the Risk Perception, Valuation and Policy conference at the University of Central Florida and the 2004 AERE Workshop in Estes Park, Colorado for their helpful feedback. 2 DISCLAIMER Although prepared with partial EPA funding, this report has neither been reviewed nor approved by the U.S. Environmental Protection Agency for publication as an EPA report. The contents do not necessarily reflect the views or policies of the U.S. Environmental Protection Agency, nor does mention of trade names or commercial products constitute endorsement or recommendation for use. 3 TABLE OF CONTENTS ABSTRACT ..................................................................................................................7 CHAPTER 1 OVERVIEW AND EXECUTIVE SUMMARY ...........................................8 1.1 Introduction..................................................................................................................... 8 1.2 Case Studies.................................................................................................................... 9 1.3 Expert Error.................................................................................................................. 18 1.4 Events, Perceptual Cues, Risk Perception, and Stigma ................................................ 21 1.5 Stigma and Property Values.......................................................................................... 24 1.6 Policy Implications ....................................................................................................... 40 CHAPTER 2 HISTORY OF CURRENT SUPERFUND LEGISLATION ........................44 2.1 Overview of Superfund Legislation.............................................................................. 44 2.2 Legislative Background................................................................................................ 45 2.3 Comprehensive Environmental Response, Compensation, and Liability Act.............. 47 2.4 Implementation of Superfund: 1980-1985.................................................................... 48 2.5 1985: The Expiration of Superfund .............................................................................. 50 2.6 Superfund Amendments and Reauthorizations............................................................. 51 2.7 Superfund Reforms and Successes ............................................................................... 53 2.8 Conclusion .................................................................................................................... 55 CHAPTER 3 OPERATING INDUSTRIES, INC. LANDFILL.......................................56 3.1 Overview....................................................................................................................... 56 3.2 History of the Landfill .................................................................................................. 59 CHAPTER 4 WOBURN, MASSACHUSETTS............................................................69 4.1 Overview....................................................................................................................... 69 4.2 History of Woburn and its Superfund Sites .................................................................. 72 CHAPTER 5 MONTCLAIR, NEW JERSEY..............................................................91 5.1 Overview....................................................................................................................... 91 5.2 Timeline and History .................................................................................................... 92 CHAPTER 6 EAGLE MINE, COLORADO.............................................................105 6.1 Overview..................................................................................................................... 105 6.2 History and Timeline .................................................................................................. 107 CHAPTER 7 EXPERT ERROR AND THE PSYCHOLOGY OF RISK AND STIGMA...120 7.1 Expert Error................................................................................................................ 120 7.1.1 Love Canal, Niagara, New York......................................................................... 121 7.1.2 Times Beach, Missouri ....................................................................................... 125 7.1.3 The Defective Dalkon Shield.............................................................................. 128 7.1.4 The Discovery of Cold Fusion............................................................................ 131 7.1.5 The Failure of Biosphere 2 ................................................................................. 132 7.1.6 The Three Mile Island Accident ......................................................................... 134 7.1.7 Union Carbide Accident in Bhopal, India........................................................... 137 7.2 Contradictory Information in the News ...................................................................... 140 7.3 Events, Perceptual Cues, Risk Perception, and Stigma .............................................. 142 4 CHAPTER 8 PROPERTY VALUE, APPROACH, AND DATA ..................................145 8.1 Introduction................................................................................................................. 145 8.1.1 Objective versus Subjective Risk........................................................................ 147 8.1.2 Distance Effects over Time................................................................................. 147 8.1.3 Endogenous Socio-demographics....................................................................... 149 8.1.4 Endogenous Housing Stock Attributes ............................................................... 150 8.1.5 Environmental Justice/Equity ............................................................................. 151 8.2 The Sample ................................................................................................................. 152 8.2.1 Descriptive Statistics, Exclusions ....................................................................... 154 8.2.2 Extent of the Market ........................................................................................... 155 8.3 Hedonic Property Value Models................................................................................. 156 8.4 Control Variables........................................................................................................ 158 8.4.1 Annual Dummy Variables.................................................................................. 158 8.4.2 Distance to the Superfund Site............................................................................ 159 8.4.3 Housing Characteristics...................................................................................... 160 8.4.4 Neighborhood Characteristics............................................................................. 163 8.4.5 Other Local Amenities and Disamenities ........................................................... 166 CHAPTER 9 PROPERTY VALUE RESULTS .........................................................173 9.1 Classes of Hedonic Property Value Models ............................................................... 173 9.2 Auxiliary Models Time-Varying Demographic Patterns............................................ 174 9.2.1 Montclair............................................................................................................. 180 9.2.2 OII....................................................................................................................... 182 9.2.3 Woburn ............................................................................................................... 183 9.2.4 Eagle Mine.......................................................................................................... 184 9.2.5 Synthesis ............................................................................................................. 184 9.3 Auxiliary Models: Time-Varying Housing Attributes................................................ 185 9.3.1 Montclair............................................................................................................. 186 9.3.2 OII....................................................................................................................... 187 9.3.3 Woburn ..............................................................................................................