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a better place — unwanted carbon emis- Much Ado about Pigou sions go down and gdp goes up. Identifying a true social problem and BY BRUCE YANDLE designing an efficient Pigouvian to Clemson University address it are challenging exercises. But it is even more challenging to get politi- conomists, policy analysts, and ing the George W. Bush administration, cians to adopt such a tax and bureau- politicians often rattle the has become so dedicated to the idea of crats to implement it correctly. That is bones of brilliant imposing a tax on gasoline for social something Pigou understood, but the E long passed when making a purposes that he has organized a Pigou people who use his name today may not. case for a favorite policy or legislative Society that scores of economists and action. has again others have joined. As Mankiw and oth- Bank Tax Consider President Obama’s become a popular icon for justifying ers see it, a properly designed gasoline newly proposed tax on banks. Last Jan- deficit spending in the face of severe reces- sion. There are other days when Joseph Schumpeter’s name and “creative destruc- tion” surface to justify marketplace tough love. We hear references to Friedrich von Hayek and his notions about property rights, common law, and spontaneous order when the process is being defended. And of course, Milton Fried- man is brought forth when education and are discussed. The latest long-dead to enthrall bloggers, policy wonks, and entrepreneurial analysts is Arthur Cecil Pigou, whose authority is now being used to justify a blizzard of and other actions proposed to serve the pub- lic . It is Pigou who suggested that a tax be placed on activities that generate negative in order to make beneficiaries of the activity con- sider its full cost. In November 2009, John Cassidy had this to say in a Wall Street Journal essay: Today Mr. Pigou’s intellectual legacy is being rediscovered, and, unlike those of Messrs. Keynes and Friedman, it enjoys KEVINTUMA bipartisan appeal. Leading Republican- tax can compensate for social costs asso- uary 14, the president announced that a leaning economists such as Greg ciated with driving automobiles. Those Financial Crisis Responsibility Fee Mankiw and Gary Becker have joined costs relate to traffic congestion, pollu- should be imposed on non-deposit lia- Democrats such as and tion, climate change, and secure delivery bilities held by U.S. banks with $50 bil- in recommending a Pigov- of crude oil and refined product. lion or more in assets. The fee would take ian approach to policy. Much of Presi- dent Barack Obama’s agenda — finan- When adopted in its ideal form, a effect June 30, 2010, and operate for 12 cial regulation, cap and trade, health Pigouvian tax that brings beneficial years, during which time analysts calcu- care reform — is an application of Mr. adjustments to unaccounted-for harms late it would generate $117 billion in rev- Pigou’s principles. Whether the presi- can also bring a collateral benefit: in a enues, equal to the expected shortfall of dent knows it or not, he is a Pigovian. perfect policy world, other burdensome payments from all tarp recipients. Greg Mankiw, who was chairman of taxes can be reduced. For example, prop- In announcing the plan, Obama put the Council of Economic Advisers dur- erly calibrated taxes on carbon emissions populist red meat on the table when he can become a substitute for taxes on said: Bruce Yandle is Professor of Emeritus at labor that yield a shortfall of gross Clemson University, Distinguished Adjunct Professor My commitment is to recover every at the Mercatus Center at George Mason University, domestic product. When taken together, single dime the American people are and senior fellow at PERC. the two actions happily make the world owed. And my determination to

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achieve this goal is only heightened The bag tax was justified as an environ- ing rooms, expenses for the provision of when I see reports of massive profits mental tax, one that would reduce the artificial light, and in many other ways.” and obscene bonuses at the very firms careless use and disposal of bags and pro- Air pollution was just one example. who owe their continued existence to vide funding to clean up the Anacostia Pigou saw problems every- the American people — who have not River. Patrick Gleason of Americans for where, or so it seems. There were too been made whole, and who continue to face real hardship in this . Tax Reform described the matter thus: many cars forming traffic congestion, That’s why I’m proposing a Financial “Washingtonians heading out in search excessive alcohol that Crisis Responsibility Fee to be of VitaminWater and bacon to cure their damaged innocent people, too many imposed on major financial firms New Year’s morning hangovers will be vehicles wearing out highways, and too until the American people are fully greeted by a new Pigouvian tax at the much work done by women in factories, compensated for the extraordinary checkout.” In his extended comments, which, in his view, imposed unrecog- assistance they provided to Wall Street. Gleason suggested that the revenue would nized costs on their children. In a radio address after the announce- just be used to form another slush fund On the other side of the coin, Pigou ment, the president suggested another for political purposes, that it was more called for subsidies, or what he called reason for the fee, a reason that should about revenue than the environment. bounties, to expand activities that pro- make modern-day Pigouvians duced dispersed benefits that very happy: did not generate in the Thebankfeeexplanationtransformed Only the largest financial till of the producer. These firms with more than $50 fromataxtoraiserevenue,toataxonsin, included planting forests that billion in assets will be improved the environment, affected, not community toaPigouviantax. operating lighthouses that banks. And the bigger the guided nonpaying shippers, firm — and the more debt it and providing street lights holds — the larger the fee. Because we Today, there is much ado about that reduced crime. Based on strictly the- are not only going to recover our Pigou. To cite a few more instances of oretical grounds, which is to say without money and help close our deficits; we are going to attack some of the bank- this, there are non-returnable bottle the benefit of field work or data analysis, ing practices that led to the crisis. taxes to fight litter, snack and soda taxes Pigou found a host of situations where to fight obesity, carbon and nitrogen markets simply led to faulty outcomes. Taking in all this, the Economist maga- oxide taxes in Scandinavia to fight glob- He concluded: zine commented: “But politics is not the al warming, and petrol taxes across No “invisible hand” can be relied on to only motive. Hitting the giants address- Europe and the United Kingdom. All are produce a good arrangement of the es a genuine concern about banks whose justified in part as Pigouvian taxes that whole from a combination of separate size poses systemic dangers.” Chiming happily and harmlessly nudge human treatments of the parts. It is therefore in and hitting the nail on the head, Seek- behavior in the right direction. necessary that an authority of wider ing Alpha writer Kindred Winecoff heard reach should intervene to tackle the collective problems of beauty, of air and the rattle of Pigou’s bones and said: Pigouvian Solution Pigou was a Cam- light, as those other collective problems bridge University don who had studied This is essentially a tax on risk, of gas and water have been tackled. because it targets leverage ratios. In under the great economist Alfred Mar- terms of economic theory, or even shall, held the university’s leading eco- He then proposed: social justice, this makes some sense. nomics chair, and strongly supported It is, however, possible for the State, if Think of it as a Pigouvian tax: moral John Maynard Keynes. Pigou was a it so chooses, to remove the divergence hazard exists for firms with an explicit prodigious writer and contributed to in any field by “extraordinary encour- government guarantee, so this tax multiple strands of economic thought, agements” or “extraordinary restraints” could help bring private and social but his reputation was earned for pro- upon in that field. The costs in line. In other words, it could most obvious forms which these help banks internalize the social costs posing the use of taxes to reduce activi- encouragements and restraints may of their actions. ties that impose externalities — costs not assume are, of course, those of boun- taken into account by those who earn ties and taxes. In a matter of a few days, the bank fee their profits from the cost-generating explanation transformed from a tax for activities. In short, government taxes and sub- generating revenue, to a tax for reducing Writing in 1920, Pigou offered air sidies are a required constraint on mar- sin, to a Pigouvian tax that would make pollution as an example of unaccount- kets to bring balance between costs and the world better off. ed-for costs and spoke in terms of diver- benefits when there are spillovers not Interestingly enough, the proposed gences between private and social prod- accounted for by private actors. But the bank tax arrived just a few weeks after uct: “Smoke in large cities imposes a taxes have to be carefully calibrated so shoppers in Washington, DC were hit heavy uncharged loss on the communi- that the tax paid at the margin is just with a new five-cent tax on paper and plas- ty, in injury to buildings, vegetation, equal to the cost imposed. A similar cal- tic bags provided by grocers and retailers. expenses for washing clothes and clean- culus is required for subsidies. What is

REGULATION S P R I N G 2 0 1 0 3 BRIEFLYNOTED done with any resulting revenues is for favored interest groups and finding tion and tested competing hypotheses another matter. ways to generate ever more revenue. regarding political behavior. For exam- And there we have the Pigouvian In 1932, after describing the theoret- ple, we included variables that adjusted solution. To correct problems of sys- ically ideal outcome that could be for human health, reasoning that, all temic risk generated by large banks, achieved by his much-discussed mecha- else equal, emission tax revenues would caloric drinks that lead to obesity, too nisms, Pigou confronted the politics of be higher where human health is lower. much carbon emissions that may con- the problem and wrote: (We found that revenues were lower tribute to climate change, or too many [W]e cannot expect that any public where human health suffered most.) We grocery bags that ultimately foul the authority will attain, or will even also examined the role played by green environment, a wise government can wholeheartedly seek, that ideal. Such tax exemptions provided to special design just the right tax or subsidy and authorities are liable alike to interest groups. Did revenues go up or gently adjust the economic mechanism ignorance, to sectional pressure and down with exemptions? If up, we would so that it runs more perfectly. to personal corruption by private infer that the politicians were taking This proposal ultimately generated a interest. A loud-voice part of their action to maximize revenues. (It turned constituents, if organized for votes, massive academic debate. Chief among out that revenue went up with exemp- may easily outweigh the whole. the debaters was Ronald H. tions.) We then tested the Coase, who would later receive shape of the revenue func- a Nobel prize in part for his Pigoudidnotbelievethat tion, which enabled us to contribution. Coase pointed infer if the authorities set out that markets failed to governmentcouldimprovehumanwellbeing taxes to maximize revenue or operate effectively only when byfine-tuningbehaviorwithtaxes. maximize emission reduc- property rights and rules of tions. Our robust findings liability are not well defined, did not support the classic or when transaction costs restrict It would seem that Pigou was not much Pigouvian goal, but rather supported exchange. He noted that lighthouse oper- of a Pigouvian. Pigou’s later concern. The end result ators long ago solved the problem of col- Applied today, his warning suggests seemed to be more about generating lecting fees from ships that benefited that instead of offsetting the cost of sys- money for government than about pro- from their light. This response exempli- temic risk, the purpose of the bank tax tecting human health. fied the institutional vacuum in which likely is to punish high-paid bankers (or Pigou had conducted his analysis. Coase’s at least make the public believe the Conclusion Today there is much ado classic 1960 article “The Problem of bankers are being punished), or just sim- about Arthur Cecil Pigou. But much of Social Cost,” explaining all this, became ply to raise revenue for a deficit-plagued it is unjustified, at least in the view the most cited academic paper in both government. expressed by Pigou himself. Clearly, . However, while Coase But what about more traditional politicians and pundits need intellectu- easily won the academic debate, at least as forms of Pigouvian taxes, such as those al justification for their actions and measured by citations, conferences, and supposedly intended to reduce pollution opinions, but it is inappropriate to hang books built around his ideas, Pigou seems and improve human well being? Are taxes and regulations that are claimed to to have won the policy debate. such taxes truly intended to reduce make things better around the neck of harms efficiently, or are they about Pigou. It is not that taxes, regulation, Pigou’s Warning As strange as it may something else, like raising government and subsidies are ineffective in chang- seem, Pigou did not believe that govern- revenue? In an effort to answer this ques- ing behavior. Indeed, we all know that ment could improve human well being tion for environmental taxes, in 2003 incentives matter. Nudges work. But the by fine-tuning behavior with taxes, sub- Elizabethtown College professor Cristi- real question is, do those political instru- sidies, and regulation. His concern was na Ciocirlan and I analyzed tax revenues ments make things better? That remains grounded in what we today call Public generated by all of the green taxes used an open question. R Choice. He did not accept the notion that by countries, presumably to R e a d i n g s politicians, given constitutional con- improve environmental quality. These straints, would be capable of implement- include taxes on electricity and cement I “Coase, Pigou and Environmental Rights,” ing an efficient and effective set of taxes production, coal, petroleum, natural gas, by Bruce Yandle. In Who Owns the Environment? edited by Peter J. Hill and Roger and subsidies. Put simply, he did not waste, and packaging materials. E. Meiners. Rowman and Littlefield, 1998. believe the politicians could get the cal- Ciocirlan’s statistical estimates I “The End of the Revolution,” by culations right. Instead of making things enabled us to test hypotheses about the A. H. Barnett and Bruce Yandle. Social better, the chances were just as good that underlying purpose of the tax system: Philosophy and Policy, Vol. 26 (Summer 2009). things would be made worse. Instead of was the purpose to protect human I “The Political of Green Taxation keeping faith with implementing a well- health or just to raise government rev- in OECD Countries,” by Cristina E. Ciocirlan designed tax, the politicians’ interest enue? To this end, we examined a sta- and Bruce Yandle. European Journal of Law would be deflected to writing loopholes tistically derived green tax revenue func- and Economics, Vol. 15 (2003).

4 REGULATION S P R I N G 2 0 1 0 priate agency to send search and rescue Before the advent of helicopter rescues Yuppie 911 personnel. on Alaska’s Mount McKinley in the 1970s, few people attempted to climb BY SHAWN REGAN Moral Hazard The devices have often North America’s highest peak, and those Berry College led to timely and heroic rescues of back- who did knew they were completely on country hikers in emergency situations. their own. Prior to 1970 there were only ast September, four inexperi- In 2008, a hiker with sudden abdominal 35 rescues on the mountain, but in the enced hikers found themselves pain was evacuated from the backcountry 1976 season alone there were 33 rescues. without water during a strenu- of Sequoia National Park and received This moral hazard effect on the deci- L ous hike in Grand Canyon emergency surgery. Last year, a hiker who sion calculus of climbers can be fatal. National Park. When they pressed sustained head and back injuries from a Last year, a beacon-bearing climber on “HELP” on their emergency satellite loca- fall in a remote area of Olympic National McKinley attempted the mountain solo. tor beacon, rangers were dispatched by Park was airlifted to a Seattle hospital for He was last seen carrying minimal sur- helicopter to their location in a remote immediate treatment. In both instances, vival gear and no stove for melting snow, section of the park. But when rescuers personal locator beacons alerted search but he had his beacon. Whether he arrived, the hikers had located a water and rescue officials of an emergency and would have exercised more caution with- source and declined help. out the beacon — which That evening, the hik- was never activated — is ers activated their beacon unknown, but it is rea- again. The Park sonable to assume he called in another heli- would have taken more copter to locate the hik- survival gear with him. ers in the middle of the The moral hazard night, only to discover problem that results as a that, again, no real emer- consequence of guaran- gency existed — the water teed safety is well estab- they had found simply lished in the economics “tasted salty,” the hikers literature. In the 1970s, said. The next morning, Sam Peltzman’s seminal after the group sent a research on the effects of third dubious alert, a res- automobile safety regula- cue team removed them tion found that seat belt from the canyon. When laws induce people to asked what they would drive less safely. In effect, have done without the seat belts lower the cost emergency locator bea- of riskier driving because KEVINTUMA con, the leader stated, the probability of harm to “We would have never attempted this likely saved lives. the driver in a crash is significantly hike.” However, some are beginning to ask if reduced. Peltzman found that any bene- Since becoming available for public these devices are encouraging people to fits provided by the safety regulation were use in 2003, the of personal loca- be more careless in the wilderness and offset by risky driving behavior. Similarly, tor beacons has fallen significantly and causing them to take on more risk than a recent study by economists Russell they are now standard fare for outdoor they would otherwise. While data are Sobel and Todd Nesbit found that adventurers wanting the peace of mind sparse, anecdotal evidence and standard nascar drivers drove more recklessly in that rescuers are just one button away. economic theory suggest that these response to increased safety measures in Accordingly, hikers and mountain devices do create moral hazard. Because their automobiles. This offsetting climbers are increasingly relying upon individuals engage in more risky behav- response to safety regulation, now known the high tech gadgets for rescues in ior when rescue is either explicitly or as the “Peltzman effect,” is crucial for national parks and forests when cir- implicitly guaranteed, the head of Cali- understanding how hikers and climbers cumstances go awry. When activated, fornia’s search and rescue operations, might respond to regulations mandating the locator device, which is slightly larg- Matt Scharper, has nicknamed the bea- the use of personal locator beacons, er than a cell phone, transmits GPS cons “Yuppie 911.” which some states have proposed. coordinates to a 24-hour emergency Moral hazard does not only affect service, which then notifies the appro- inexperienced yuppies. Seasoned moun- Externalities Making mountain tain climbers are also known to take on climbing ostensibly less dangerous Shawn Regan is a Charles G. Koch Scholar at Berry extra risk when they are insulated from induces more offsetting behavior, which College in Mount Berry, GA and a former backcountry ranger for the National Park Service in Forks, WA. the full cost of having to self-rescue. can dissipate any benefits received from

REGULATION S P R I N G 2 0 1 0 5 BRIEFLYNOTED the safety device, as seen in the case of lite technology to meet our modern-age 150 rescues each year, 60 percent of seat belts. However, the costs and bene- demand for safety in the wilderness. It is which are for hikers. Charges are only fits of beacon use do not only fall on at the intersection of helpful safety inno- applied in circumstances in which neg- the hikers and climbers who use them, vation and misplaced regulation where ligent or imprudent behavior is demon- but also on search and rescue person- unintended consequences emerge. strated, and those charges are capped nel. Just as Peltzman found that the safe- The federal government’s long-stand- at certain amounts. The fees defray a ty effect of seat belts was partially offset ing policy not to charge negligent hikers portion of the search and rescue costs, by more fatalities to non-occupants such and climbers for rescues exacerbates the and more importantly, minimize the as pedestrians, bicyclists, and motorcy- moral hazard problem. Outdoor adven- offsetting behavior that results in more clists, the increase in rescues can result in turers, often taking undue risks, are res- overall rescues. more fatalities to rescue personnel. cued free of charge, enticing even more Despite the compounding moral haz- Rescue efforts require the use of risk taking. Indeed, economists Dwight ard effect of both personal locator bea- tremendous amounts of limited emer- Lee and J. R. Clark’s examination of res- cons and no-charge rescue policies, some gency resources. Most public land agen- cue policy concludes that lives in are proposing to require the use of the cies contract with the U.S. Coast Guard the short run by offering free rescues devices. In the aftermath of the tragic and other agencies for emergency heli- encourages more rescue-creating activi- deaths of three climbers on Mount copters, which cost upwards Hood in Oregon this winter of $4,000 per hour. But per- — the second such event in sonal locator beacons often The costs of beacon use three years — officials are cause officials to over-respond donotfallonthehikersandclimbers mulling whether to mandate with helicopters to minor or that all climbers carry emer- nonexistent emergencies. In whousethem. gency beacons. However, not September, a rescue helicopter everyone is in favor of the responded to a beacon alert requirement. Portland Moun- in the Grand Canyon that proved to be ties, which result in more lives lost in tain Rescue, a local volunteer rescue trivial. Rescuers arrived to find three the long run. With personal locator bea- group, strongly opposes efforts to people asleep in their tents and in no cons becoming increasingly common, require beacons because of the unin- danger. One of the hikers had become the problem has only worsened. It is sim- tended consequences, claiming that alarmed during the night when she ply too easy to get rescued for free. “mandating beacons actually increases heard “odd noises emanating from the Because of escalating rescue costs, risks for both climbers and rescuers.” leader of the group as he slept,” stated some states and counties are beginning the park report. She activated the emer- to experiment with charging for rescues. Rescue Market Doing away with free gency locator and went back to sleep. Altogether, eight states have laws that rescues may do more to decrease fatali- Since the beacons only tell authorities enable them to charge for rescues, ties and scale back excessive rescue costs that an emergency exists and provide no although they are seldom enforced and than requiring beacons. Alternatively, further information, it forces rescuers often weak. Oregon law permits the state requiring climbers on particularly dan- to always prepare for the worst. to collect up to a paltry $500 when “rea- gerous mountains such as Mount Hood Over the past 15 years, the Park Serv- sonable care” is not exercised, but only or McKinley to purchase climber rescue ice has performed, on average, 11 search one fine has been assessed in the 15 years plans or to post a climbers’ bond would and rescue operations per day. The costs the law has been in place. New Hamp- force them to consider the financial of those rescues add up. In 2008, the shire is perhaps the most aggressive, costs of their decision to climb and alle- National Park Service spent nearly $5 billing up to $10,000 for rescues where viate the problem of moral hazard. million on search and rescues, mostly in negligence is demonstrated. Since the In the United States, free rescues have Yosemite National Park, a haven for rock law began in 1999, the state has largely crowded out opportunities for climbers. Denali National Park, home recouped $47,000 to offset its expenses. markets to address this issue of risk in of Mount McKinley, averaged $18,000 To protect its taxpayers, Utah’s Grand the wilderness setting. However, in areas per rescue in 2005. County began charging the extreme where there are no free rescues, such as sport tourists that frequent the local most international hiking destinations, “Free” Resources It is misleading, deserts for rescues. such markets exist. Global Rescue, a cri- however, to view personal locator bea- Many search and rescue groups find sis response company out of Boston, cons as the sole culprit in many of these the notion of charging for rescues objec- provides medical and security evacua- costly and dangerous rescues. Just as the tionable, contending that hikers will be tions throughout the world and is a innovation of seat belts came about as wary to seek help out of fear of being common provider of emergency services rising income levels increased the charged a hefty rescue bill. But in areas to adventurers who hike and climb inter- demand for safety, personal locator bea- where officials charge for rescues, the nationally. Global Rescue coordinates cons are a high tech (and now afford- calls still come in. New Hampshire’s emergency services for its members in able) electronic device that utilizes satel- Fish and Game Department conducts almost all activities, including climbing,

6 REGULATION S P R I N G 2 0 1 0 skiing, kayaking, and mountain biking. tors of charging for rescues argue that R e a d i n g s

Full membership, which is a little over firefighters do not put out flames and I “Automobile Safety Regulation and the $300 a year, covers any emergency from then bill the homeowner, they ignore Incentive to Drive Recklessly: Evidence from the point of injury or illness to a hospi- the fact that homeowners have fire NASCAR,” by Russell S. Sobel and Todd M. tal of choice and covers $500,000 of res- insurance to cover such a disastrous Nesbit. Southern Economic Journal, Vol. 74, No. 1 (2007). cue services. Less expensive short-term event. Likewise, climber rescue programs memberships are also available. such as Global Rescue act as adventure I “The Effects of Automobile Safety Regulation,” by Sam Peltzman. Journal of Recently, the American Alpine Club insurance and force hikers and climbers , Vol. 83, No. 4 (1975). (aac), a prominent rock climbing to face the costs of their actions. Adopt- I “Too Safe to be Safe: Some Implications of organization, partnered with Global ing such measures would reduce moral Short- and Long-run Rescue Laffer Curves,” Rescue to offer its members a limited, hazard, Yuppie 911 calls, and save both by Dwight Lee and J.R. Clark. Eastern $5,000 coverage for rescues coordinated taxpayer dollars and human lives. R Economic Journal, Vol. 23, No. 2 (1997). through Global Rescue. In 2008, the company handled 22 incidents from aac members in locations ranging from the United States to Nepal and Bolivia, Feds Freeze Out and in many cases the members’ expens- es were fully covered. In addition, climbers of Mount Everest are often Frost Antidote required by their guides to purchase independent travel insurance plans that BY HENRY I.MILLER cover “extreme sports” or “hazardous Hoover Institution risk” before attempting the world’s highest peak. n January, the American Southeast High Tech Solutions Technology can But in the United States, why would was hit with one of the worst mitigate much of the damage. Or, more hikers and climbers avail themselves of killing frosts in recent decades. accurately, it could have, had not gov- such coverage when they know that IBlasts of arctic air brought pro- ernment regulation placed obstacles in they will be rescued at taxpayer longed record-breaking low tempera- the way of innovative solutions. Those expense? Some recent efforts by the tures. In Florida, tropical fish froze in obstacles illustrate what innovators are National Park Service have attempted their hatcheries and citrus, strawberries, up against, and how flawed, unscientif- to address the high cost of free rescues. tomatoes, beans, sweet corn, squash, and ic public policy prevents science and Mount McKinley now charges a $200 other crops were damaged. Food technology from spurring a robust climbing fee to those daring enough to shot up immediately, in anticipation of recovery from the recession. attempt its summit. This extra cost compromised supplies. Currently, farmers attempt to prevent funds wilderness ranger positions, Frost damage to crops is not frost damage with pathetically low tech which provide information and orien- unusual; losses to American farmers methods. These include burning tation to climbers to mitigate potential average in the billions of dollars annu- smudge pots to produce warm smoke, rescues. Similarly, climbers on Mount ally. Peaches, plums, citrus, and other running wind machines to move the Rainier in Washington must purchase a crops are regularly threatened by frost frigid air, and spraying water on the $30 annual climber pass to travel on in the Southeast. California is also plants to form an insulating coat of ice. the mountain. Those small efforts rep- susceptible: a January 2007 freeze The only high-tech solution, a clever resent only a fraction of the cost of res- there cost farmers more than $1 bil- application of biotechnology, has been cues and likely deter only a few mar- lion in losses of citrus, avocados, and frozen out by federal regulators. ginal climbers. Further, the fees fall strawberries, and a 1990 freeze that In the early 1980s, scientists at the Uni- equally on safety-conscious climbers, caused about $800 million in damage versity of California and in industry who seldom need assistance, and novice to agriculture resulted in the layoff of devised an ingenious new approach to climbers, who are more likely to require 12,000 citrus industry workers, includ- limiting frost damage. They knew that a rescue services. Regardless, fees are a ing pickers, packers, harvesters, and harmless bacterium that normally lives step in the right direction toward strik- salespeople. In 2002, lettuce prices on many plants contains an “ice nucle- ing a balance between risk taking and around the country went through the ation” protein that promotes frost dam- the cost of mishaps. roof after an unseasonable frost struck age. They sought to produce a variant of growing regions in the Arizona and the bacterium that lacked the ice-nucle- Conclusion If regulators truly want California deserts. ation protein, reasoning that spraying this to reduce climbing deaths on mountains variant bacterium (dubbed “ice-minus”) such as Mount Hood, charging for res- Henry I. Miller, a physician and fellow at the Hoover on plants might prevent frost damage by Institution, headed the FDA’s Office of Biotechnology cues, rather than requiring locator bea- from 1989 to 1993. He is co-author with Gregory displacing the common, ice-promoting cons, would be prudent. While detrac- Conko of The Frankenfood Myth (Praeger, 2004). kind. Using very precise “gene splicing,” or

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BRIEFLYNOTED genetic engineering, biotechnology tech- frost damage in field trials, further from the 1980s, are ancient history, but niques, the researchers removed the gene research and commercialization were there is a modern-day angle. Lynn Gold- for the ice nucleation protein and planned discouraged by the combination of oner- man, the EPA’s chief pesticide regulator field tests with ice-minus bacteria. ous government regulation, the inflated during the Clinton administration, Then the government stepped in, and expense of doing the experiments, and defended and publicly misrepresented her that was the beginning of the end. the prospect of huge downstream costs agency’s policies toward biotechnology. The Environmental Protection Agency of pesticide registration. As a result, the Responding to an article, she wrote in a classified the innocuous ice-minus bac- product was never commercialized, and letter to the journal Science that it was terium as a pesticide, reasoning that plants cultivated for food and fiber inaccurate to contend that the epa “reg- because the naturally occurring, ubiqui- throughout much of the nation remain ulates or singles out for special treatment tous “ice-plus” bacterium is a “pest,” a vulnerable to frost damage. We have the products because they are created using” bacterium intended to fight it must be a epa to thank for jeopardizing agricul- genetic engineering; she remonstrated pesticide. This absurd, sophis- that the “epa’s activities reas- tic reasoning, which by exten- sure the public concerning sion would mean that outdoor biotechnology products.” trash can lids are also a pesti- Goldman was wrong on cide because they deter or mit- both counts. As noted above, igate pesky raccoons, threw a the use of genetic engineering wrench into plans to test ice- techniques for anything that minus on small, fenced-off falls within the regulatory def- plots of potatoes and straw- inition of a “pesticide” — even berries in northern California. when that definition is tor- At the time, scientists tured to claim jurisdiction — inside and outside the epa triggers case-by-case review, were unanimous that the test which is not necessary for posed negligible risk. (I wrote small-scale field trials for the analysis submitted by the other pesticides, regardless of Food and Drug Administra- risk. As to reassuring the pub- tion.) No new genetic materi- lic, a more defensible view of al had been added to the bac- biotechnology regulation was terium; only a single gene expressed by the president of whose function was well the consumer-advocacy group known had been removed, Consumer Alert: “For obvious and the organism was obvi- reasons, the consumer views

ously harmless. Nonetheless, the technologies that are most KEVINTUMA the field trial was subjected regulated to be the least safe to an extraordinarily long and ones. Heavy involvement by burdensome review — by both WehavetheEPAtothankfor government, no matter how the National Institutes of well intended, inevitably sends Health and the epa — only jeopardizingagriculturaljobs the wrong signals. Rather because the organism was andinflatingfoodprices. than ensuring confidence, it genetically engineered. raises suspicion and doubt.” It is noteworthy that exper- Well, Goldman is back in iments using bacteria with identical tural jobs and inflating produce prices. government as an Obama political traits but constructed with older, cruder appointee, this time as a senior science techniques require no governmental Anti-Biotech That last point illus- adviser at the fda — yet another example review of any kind. When tested on less trates the ripple effect — in this case the of the Washington tradition that no bad than 10 acres, non-engineered bacteria public health impact — of such govern- deed goes unrewarded. and chemical pesticides are completely ment actions. The demand for fresh The epa’s discouragement of devel- exempt from regulation. Moreover, there fruits and vegetables is elastic, which opment of a product that can prevent is no government regulation of the use means that higher prices result in or mitigate frost damage is yet another of vast quantities of the ice-plus organ- reduced consumption. As a result, con- example of the actions of regulators isms (which contain the ice-nucleation sumers get less of the anti-oxidant, vita- creating a situation in which everyone protein) commonly blown into the air min, and high-fiber benefits that these loses. When will they re-think their during snow-making at ski resorts. products afford. policies and let their decisions be guid- Although the ice-minus bacteria The epa’s flawed approaches to ed by science? Probably not before hell proved safe and effective at preventing biotechnology regulation, which date freezes over. R

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