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Business Ethics MGT610

LESSON 28

THE ETHICS OF POLLUTION CONTROL

Businesses have been ignoring their impact on the natural environment for centuries, largely

because the economic costs and harmful effects of this impact have been unclear. Businesses

have treated air and water as free goods that no one owns. Since the carrying capacity of both is

so large, each individual firm sees its own contribution to pollution as negligible. Combined,

however, the effects are enormous. The harm comes not only from the direct activity of

businesses. Pollution also occurs as a result of consumer use of manufactured items. The

problems of pollution have a variety of origins, and will require a similarly varied set of

solutions. The rest of this chapter concentrates on a single range of problems, the ethical issues

raised by pollution from commercial and industrial enterprises.

Because our environment is so complex and its parts are so interwoven, many theorists believe

that our duty to protect the environment extends beyond the welfare of humans to other

nonhuman parts of the system. This idea, called ecological ethics or deep ecology, maintains

that the environment deserves to be preserved for its own sake, regardless of whether or not this

directly benefits humanity. Because the various parts of an ecological system are interrelated,

the activities of one of its parts will affect all the other parts. Because the various parts are

interdependent, the survival of each part depends on the survival of the other parts. Business

firms (and all other social institutions) are parts of a larger ecological system, "spaceship

earth."

Several supporters of this approach have formulated their views in a platform consisting of the

following statements:

The well-being and flourishing of human and nonhuman life on earth have value in

themselves. These values are independent of the usefulness of the nonhuman world for

human purposes.

ii.

Richness and diversity of life forms contribute to the realization of these values and are

also values in themselves.

iii.

Humans have no right to reduce this richness and diversity except to satisfy vital needs.

iv.

The flourishing of human life and cultures is compatible with a substantial decrease of

the human population. The flourishing of nonhuman life requires such a decrease.

Present human interference with the nonhuman world is excessive, and the situation is

rapidly worsening.

vi.

Policies must therefore be changed. The changes in policies affect basic economic,

technological, and ideological structures. The resulting state of affairs will be deeply

different from the present.

vii.

The ideological change is mainly that of appreciating life quality, rather than adhering

to an increasingly higher standard of living.

viii.

Those who subscribe to the foregoing points have an obligation directly or indirectly to

participate in the attempt to implement the necessary changes.

An ecological ethic, therefore, claims that the welfare of at least some nonhumans is

intrinsically valuable and deserving of respect and protection. Utilitarian and rights arguments

both support such a view. Under either system, for instance, it would be wrong to raise animals

for food in painful conditions.

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Business Ethics MGT610

Though some of the views of deep ecology are unusual and controversial, two traditional views

of ethics can also help us to develop an environmental ethic: utilitarianism and concern for

human rights.

William T. Blackstone has argued that the possession of a livable environment is something to

which every human being has a right. To some extent, U.S. federal law recognizes this concept.

The main difficulty with Blackstone's view, however, is that it fails to provide any nuanced

guidance on several pressing environmental choices. This lack of nuance in the absolute rights

approach is especially problematic when the costs of removing certain amounts of pollution are

high in comparison to the benefits that will be attained.

Utilitarianism can answer some of the difficulties with Blackstone's theory. Utilitarians see

environmental problems as market defects, arguing that pollution should be avoided because it

harms society's welfare.

To make this position clear, it is helpful to distinguish between private costs and social costs.

Private costs are the actual cost; a firm incurs to produce a commodity. Social costs include the

costs that the firm does not paythe costs of pollution and medical care that result from the

manufacture of the commodities. The divergence of private and social costs is problematic

because the divergence means that price no longer accurately reflects all of the costs of a

commodity. This means that resources are not being allocated efficiently, and society's welfare

consequently declines.

When markets do not take all costs into account, more of a commodity will be produced than

society would demand if it could measure what it is actually paying for the commodity. In

addition, producers ignore these costs and do not try to minimize them. Since goods are no

longer efficiently distributed to consumers, pollution violates the utilitarian principles that

underlie the market system.

The remedy for external costs, according to utilitarians, is to internalize them to ensure that the

producer pays all of the real costs of production and uses these costs to determine the price of

the commodity. To internalize the costs of pollution, a firm may be required to pay all those

harmed by pollution. A problem with this way of internalizing the costs of pollution, however,

is that when several polluters are involved, it is not always clear just who is being harmed and

by whom. Alternatively, the firm might install pollution control devices and stop the harm at its

source.

This way of dealing with pollution is consistent with the requirements of distributive justice.

Since pollution's external costs are largely borne by the poor, pollution produces a net flow of

benefits away from the poor and towards the rich. Internalizing these costs can reverse this

flow. However, if a firm makes basic goods, such as food, then internalizing costs may place a

heavier burden on poorer people.

Internalizing external costs is also consistent with retributive and compensatory justice, because

those who are responsible for pollution bear the burden of rectifying it and compensating those

who have been harmed. Taken together, these requirements imply that (a) the costs of pollution

control should be borne by those who cause pollution and who have benefited from pollution

activities, whereas (b) the benefits of pollution control should flow to those who have had to

bear the external costs of pollution. Internalizing external costs seems to meet these two

requirements: (a) The costs of pollution control are borne by stockholders and customers, both

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Business Ethics MGT610

of whom benefit from the polluting activities of the firm; and (b) the benefits of pollution

control flow to those neighbors who once had to put up with the firm's pollution.

Since the effects of pollution are so harmful, it might seem that no action to remedy pollution

could be too drastic. However, if a firm spends a greater amount on a pollution control device

than the amount of damage the pollution would cause, then the firm should not install it; the

economic utility of society will be damaged if they do. The amount a firm should invest in

pollution control, then, must rest on a cost-benefit analysis: a precise calculation of what the

device or practice would cost and what its expected benefits would be. Thomas Klein

summarized the procedures for cost-benefit analysis as follows:

Identify costs and benefits of the proposed program and the person or sectors incurring

or receiving them. Trace transfers.

ii.

Evaluate the costs and benefits in terms of their value to beneficiaries and donors. The

standard of measure is the value of each marginal unit to demanders and suppliers

ideally captured in competitive prices. Useful refinements involve:

a. Incorporating time values through the use of a discount rate.

b. Recognizing risk by factoring possible outcomes according to probabilities and,

where dependent, probability trees.

iii.

Add up costs and benefits to determine the net social benefit of a project or program.

The problems involved in getting accurate measurements of the benefits and costs of pollution

control are also illustrated by the difficulties businesses have encountered in trying to construct

a social audit (a report of the social costs and social benefits of the firm's activities). This can

be difficult, however. How do we measure the costs and benefits of pollution control when they

involve damages to human life or health? Measurement itself is also difficult when the effects

of pollution are uncertain and therefore hard to predict. In fact, getting accurate pollution

measurements is sometimes nearly impossible, and the problem only is multiplied when there

are a number of polluters in a single area. Measuring benefits is likewise difficult, which poses

significant technical problems for utilitarian approaches to pollution.

Even where measurement is not a problem, another problem remains for the utilitarian

approach. Is it morally permissible to impose costs on unwilling or unknowing citizens? Can

some unilaterally impose costs on others without their consent? Even getting consent is tricky,

because many pollution problems involve information and risks that are extremely technical

and difficult to understand. It is perhaps impossible in principle to get informed consent from a

segment of the public on some complicated issues.