Quiz 10: Replenishable but Depletable Resources: Water

Business

Critics correctly argue that the imposition of fees on new commercial or residential development is inefficient and misguided. The reason is the presence of externality. The theory suggests that the creator of the externality should be held responsible and should be charged. In that sense, those who are responsible for creating pollution should face the cost of their action. What happens with this fees is that people who buy homes and companies who sign the leasing agreements are not the only ones responsible for the air pollution. Instead, if they are paying fees, they are more likely to create pollution rather than reducing it. The logic is that the buyers and the companies are paying pollution fees in advance so the incentive they receive encourages them to create pollution.

Urban sprawl implies expansion of the city in a disorganized manner. When city expands in an unplanned manner, the construction around the city happens without effective planning. This means necessary infrastructure in terms of proper roads, water system, sanitation facilities etc. is not properly planned. Also, related with problem of sprawl is problem of leapfrogging. Leapfrogging implies a situation in which instead of developing sites within or on the edge of the city, sites farther out of the city are developed. Sometimes land very far away from the centre of economic activity is developed even if land within or at the edge of city is available. Sprawl and leapfrogging both tends to intensify the environmental problem especially problem of air pollution. Haphazard development in case of sprawl leads to inefficient road planning. This means that due to disorganized expansion enough roads do not get constructed. In many areas, required passages that connect important roads do not get constructed due to space crunch - an effect of disorganized expansion of city. This compels the people to take long detours to reach their destination. Moreover, construction of new developments farther away from the city also results in longer trip in relation to work, shop or any other work that requires a person to visit the city. These longer trips both due to sprawl and leapfrogging result in more energy being consumed. Also, longer trips induce the commuters to use heavy polluting modes of transport such as car, motorcycles, buses etc. Increased use of these modes results in higher air pollution emission levels. This increase in air pollution emission levels could be avoided if effective town planning is undertaken. This implies a check on sprawl and leapfrogging. While undertaking new development outside the city or even within city (without efficient town planning), developers does not internalize external cost such as cost of increased pollution etc. If these costs are internalized then this will definitely affect the location choices and would result in organized expansion of city as well as development of contagious region rather than farther region from the centre of economic activity. As the fees imposed by the San Joaquin Valley Air Pollution Control District in California on new residential and commercial development internalize the external cost (Air Pollution), it is a good idea. Also, people would like to live near their area of work so that they could save time on commuting and thus have more time for leisure. It is true that this will result in increase in prices of housing units but accompanying benefits in terms of reduced transportation costs, reduced fuel cost and decreased pollution will balance the increase and may accrue net benefits as well. Moreover, government can subsidize the housing for poor to negate the increase in price due to levying of such fees.

In our views, scope of "public use" should not include large - scale private development. It is true that large - scale private development face many of the same market power obstacles (such as "holdouts") as faced by public sector but these private projects are meant to earn private profit which will enrich the particular individual or set of individuals whereas public projects are meant to earn public profit which will enrich the whole society. Secondly, if government acquires property or land in name of "public use" then actual market value of land does not get ascertained leading to discontent among landowners whose land is being taken. This fuels social unrest as seen in many developing countries where acquisition of land by government for private developers has led to many agitations against such practice and some are really violent ones leading to many casualties. Moreover, since private project will earn profit they should be ready to incur substantial cost as well and thus government should remain separate and let market does it own work that is private developers should negotiate directly with landowners to ascertain true value of land so that people selling their land believe that they have got fair price. Furthermore to say that since these large private projects provide societal benefits such as jobs and increased taxes to the community therefore these should be considered under scope of "public use" and government should use of eminent domain to acquire parcel of land to be given to the private landowners is also a wrong statement because if these projects accrue these benefits then instead of using eminent domain and forcing current landowners to part with their land government can induce the private landowners to acquire property under free market norms and can aid the private projects through tax incentives or credit at concessional rates. These steps will also be more than fair steps to prevent inefficient barriers that inhibit development.