Economic Growth: At What Cost?

A brief review in Nature of an excellent article that attempts to value the ecological benefits and costs as a result of the economic activity around the world between 1960 and the year 2000. It speaks to most of the issues that we have been discussing. Read this review in nature and then read the actual study, in order to become familiar with the specific results. Again the combination of the original and review is more demanding than a simple normal blog post and so double credit will be assigned to this post (this means that we will not have a blog post next week)

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Environmental economics: To the rich man the spoils

R. Kerry Turner¹ & Brendan Fisher¹

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Abstract

Global economic growth during the past century has lifted many into lives of unprecedented luxury. The cost has been the degradation of vital ecosystems — a cost borne disproportionately by the world's poor.

Through our rapacious exploitation, ecosystems and the benefits they bring to us are disappearing at an unprecedented and alarming rate. Qualitative evidence suggests that the rich world is profiting from this process, whereas poorer countries are bearing the brunt of the resulting environmental degradation. Srinivasan et al.¹, writing in Proceedings of the National Academy of Sciences, provide a quantitative basis for that claim, calculating the distribution of costs and benefits over a range of indicators of ecosystem change. The results might, in an ideal world, lead to a radical reassessment of who is in debt to whom.

Measured in terms of gross domestic product (GDP), the size of the world's economy has doubled almost three times since 1950. But the proposition that aggregate economic growth alone is the most important and powerful force for human progress and poverty reduction has increasingly been questioned^{2, 3}. Economic growth fuelled by international trade relies on the consumption of heavily advertised and marketed goods and services. Poorer people and the natural world, marginalized by the market economy, lose out.

Besides basic economic needs, a high quality of human life must include satisfactory human relationships, communities, freedoms and opportunities^{4, 5}. Well-functioning ecosystems are even more fundamental. The buzz-word is 'ecosystem services': the favours such as food and fuel; protection from storms, disease and solar radiation; regulation of water and climate; creation of soils; and inspiration for art, literature, religion and culture that the natural world bestows on us. Current economic models undervalue this provision, because many ecosystem services are 'public goods', historically provided for free. This leaves them prone to overexploitation, a trend exacerbated by global population growth: 15 of the 24 ecosystem services identified in the seminal Millennium Ecosystem Assessment initiated by the United Nations in 2001 were found to be in decline at the global scale⁶.

The current political focus on climate change has brought this pressure on our ecological support systems into sharper relief. Sustaining ecosystem processes is all the more difficult because many change abruptly and nonlinearly when pressed beyond a certain threshold. Qualitative or context- and case-specific evidence indicates that poorer countries bear most of this pressure⁷. An example is the widespread conversion of tropical mangrove forests to shrimp aquaculture. These farms supply Europe and North America with cheap shrimp, but nearby residents must pay the costs: the loss of the storm regulation, fish nurseries, and fuel and fibre sources that the mangrove forests provided⁸.

This type of unequal exchange has been termed an 'ecological debt' owed by rich countries to the poor⁷. As raw materials — whether they be shrimp, palm oil, or crude oil and gas — become scarcer, and exploitation of them advances into new territories, this debt will probably increase. The prices at which exports are sold do not include compensation for the goods' local — or sometimes global — environmental costs. That problem is exacerbated by rich countries' disproportionate use of environmental sinks, such as the atmosphere, to take up their higher carbon emissions.

Srinivasan et al.¹ present for the first time a global-scale quantitative analysis of the distribution of major environmental costs across nations in three income groups: low (representing 32% of the world's population), middle (50%) and high (18%). The timescale of the study is 1961–2000, and it covers six categories of environmental change: climate change; stratospheric ozone depletion; agricultural intensification and expansion; deforestation; overfishing; and mangrove conversion. In the case of climate change, the authors calculate that nations in the low, middle and high income groups were responsible for 13%, 45% and 42% of greenhouse-gas emissions, respectively. The resulting climate damages were estimated to be distributed 29%, 45% and 25%. The same pattern of cost transfer to the poorest nations is observed for ozone depletion, overfishing and aquaculture. In the case of agricultural change and deforestation, the authors find that arguably the costs were largely generated and borne within nations.

When the figures for the six categories are aggregated and adjusted for different currency purchasing power, the low-income group of nations bears 20% of the total costs, the middle-income group 60% and the high-income group 20%. Taking into account equity weighting (the fact that a unit of income is not the same to a poor as to a rich person, making costs a heavier burden to shoulder) the percentages are 45%, 52% and 3%. A significant proportion of the cost burden of the low-income group is caused by the activities of the other groups: looking at climate-change damage alone, rich countries might already have imposed costs on poor countries greater than the poor countries' existing foreign debt. The people bearing these costs include the one billion or so who already lack daily access to safe drinking water, electricity, secure food supplies and basic education.

Several caveats are needed to put these striking results into context. First, any study is only as good as the available data. Globally robust data sets on environmental externalities are incomplete, and therefore the results are indicative, not absolute. Some significant environmental changes have been omitted: the destruction of coral reefs, the dispersal of persistent pollutants and the costs of biodiversity loss. The authors are up-front about these limitations. But they justly suggest that the omissions indicate that their estimates of ecological debts are conservative.

Furthermore, the study does not look at the benefits of increased trade to material wealth and human health. But it is unlikely that this would change the balance of the results: the available, albeit partial, evidence indicates that, despite some gains by poorer countries through the liberalization of trade and finance, the number of people living in poverty has increased or stayed the same during the past 25 years, and the gains of economic globalization have been heavily skewed towards wealthy nations² (Fig. 1). One of the most detailed studies on global inequality concludes⁹ that income divergence between rich and poor nations has "at best ... decelerated after 1950, but [has] not reversed". Large areas of Central and South America, and almost all of sub-Saharan Africa, have been left behind.

Figure 1: Inequality in economic growth.

a, Although gross world product and the value of exports throughout the world rose steadily during the period 1981–2001 (values relative to 1990 = 100), the number living below the US$2 per day poverty line has increased slightly¹⁰. b, Whereas in 1820 the difference between the mean incomes of the poorest 60% of countries and of the richest 10% was fourfold, by 1992 the disparity was tenfold (value of mean income of poorest countries in 1820 = 1)⁹.
High resolution image and legend (33K)

Srinivasan and colleagues' work¹ should raise the scientific profile of issues vital to human well-being, including research into ecosystem services and the effects of large-scale ecosystem conversion, and how such changes both create and alleviate poverty. We must better understand the complex interactions between our economic, social and ecological systems, and the biological diversity that supports them. Scientists and society as a whole need to ask of our current economic paradigms in an era of globalization: why do they produce such inequities; who pays the costs; and are they ecologically and socially sustainable?

The original article :   http://www.pnas.org/content/105/5/1768.full.pdf+html?sid=dac4179a-95bf-4803-8637-a3a214fbfe15

Private Property Rights and Recycling

As Earth Day approaches I think that it is important to revisit the concept of private property rights, since it plays a seminal role in determining the type of environmental policy that a society is likely to adopt.
The following was penned 3 years ago but is still vey timely. Obviously the ideas in this article are essentially coloured by a very "conservative" view.


There is an Earth Day poster in the elevator down the hall from my office that says: "Someone Is Killing the Earth."
Underneath this caption, my friend and colleague Mike Hammock wrote, "It was Art Carden!"
This inspired me to think hard about the relationship between economics and the environment, and I wrote a short essay entitled "Economic Calculation in the Environmentalist Commonwealth."
That essay inspired the article you're now reading. I consider myself an "anthropocentric environmentalist," which is a fancy way of saying that I care about environmental issues because I care about human flourishing.
This doesn't come at the expense of economic reasoning, though, and economics leads us to surprising and often counterintuitive conclusions. Economics shows how appearances can be deceiving, and I find a lot of environmental initiatives are like rotten Granny Smith apples: They're green on the outside, but they're brown on the inside. Here's how and why.
Private property is essential to a well-functioning social system because it allows that system to generate prices. Prices provide the crucial information people need to make rational decisions, but prices do not mediate all environmental conflicts because some things are not owned. When resources are not owned and therefore outside the price system, the information we would need to evaluate the costs and benefits of different environmental initiatives literally does not exist.
I stress that it is not just that environmental issues are difficult or complex. The problem is that--given the absence of prices, profits and losses--we do not have the information we need to articulate what responsible environmental stewardship would mean, much less exercise it.
Endless debates about land use illustrate this principle. Development is opposed by people saying that we owe it to our children to conserve our precious natural resources, but University of Rochester economist Steven Landsburg asks the right question. Who are we to say that our children will prefer an old-growth forest to the income produced by a parking lot or high rise?

Without private property rights, the information we would need to make a judgment cannot exist. If it is more profitable to build a high rise, then we can reasonably infer that our children, on net, would prefer the income from a high rise. If virgin wilderness is more profitable, we can reasonably infer that our children would prefer the income from a forest.
Even if we're repulsed by this reasoning, who are we to substitute our judgment for that of our friends and neighbors? I borrow an insight from Sheldon Richman at the Foundation for Economic Education: If we don't think others can be trusted with liberty, on what basis do we expect them to trust us with power?
Land-use restrictions also have unintended consequences that have to be considered. Harvard economist Ed Glaeser cites California as an example. Restrictions on land use in California drive up the price of housing there, causing people to move to less energy-efficient places--Houston's suburbs, for example.
A great irony of land-use restrictions is that they encourage people to take land that is much more wisely used for housing and grow crops on it--and vice versa, inducing people to take land used to grow crops and build housing on it. Ironically, probably the "greenest" thing we could do is totally eliminate building restrictions.
We can also reevaluate what we think about recycling. If there's a problem, it's that something valuable exists but isn't owned or priced. A quick Google ( GOOG - news - people ) search turns up endless debates about the merits and demerits of recycling, and it is an argument that will never be resolved as long as it is outside the price system.
Where recycling is worthwhile, people earn profits doing it. Just because it is unprofitable now does not mean that it is not worthwhile, but the information we would need to evaluate recycling literally does not exist because the act of recycling is mediated by politics rather than prices.
The Energy Information Administration reports that using recycled aluminum uses 95% less energy than mining aluminum from raw bauxite. The fact that firms aren't falling over themselves to use recycled aluminum suggests that something in the accounting is incomplete. After all, what greedy capitalist wouldn't jump at the chance to save 95% on a key input? It may be that using recycled aluminum uses less energy but is more expensive on other margins.
We recycle because we assume we will run out of our finite resources if we don't--but the problem isn't that our planet isn't made up of a finite number of atoms. The problem is that a lot of those atoms are not owned by anyone. Therefore, we have no incentive to use them wisely. People have incentives to conserve that which is privately owned, and rising prices that result give people incentives to develop substitutes.
Just because it's been thrown away doesn't mean it is lost forever. Non-biodegradability can be a virtue: disposable plastics sequester carbon for centuries and may even someday provide a source of energy. My friend and co-blogger Michael Munger hypothesizes that, someday, people will be mining old landfills for petroleum products that can be turned into fuel. We aren't yet there technologically. But if you're looking for earth-friendly ways to use your time, finding ways to turn garbage into energy is probably more effective than badgering your friends about whether they are using too many napkins.
Private property rights also allow us to solve problems of environmental justice. To use another example, environmental amenities are capitalized into real estate prices. Harm can be identified--and blame can be assigned--when rights are clearly defined.
Finally, when measuring costs and benefits, we must always ask, "Compared to what?" It is true that smog is noxious, but it's a great improvement over the pulverized horse manure that filled city air just a few generations ago.
Economic analysis is indispensable to sensible environmental policy. It shows that a lot of what we think is "green" really isn't. We have the opportunity to better the world for ourselves, our friends and our neighbors by seriously considering what careful economic analysis can teach us about the importance of private property rights and prices.
Art Carden is an assistant professor of economics and business at Rhodes College in Memphis, Tenn., and an adjunct fellow with the Oakland, Calif.-based Independent Institute. He is a regular contributor to Mises.org, Lifehack.org and Division of Labour.

Carbon Tax

The following is the week four blog assignment. It is a timely article written by Greg Mankiw of Harvard University for the National Journal.

To paraphrase Ronald Reagan paraphrasing Will Rogers, some people around here never met a tax they didn’t dislike. Others have met just one: a carbon tax.
A number of the nation’s leading conservative economists, who as a rule do not like taxes, are touting some benefits to a federal carbon tax. That group includes Gregory Mankiw, a former Romney adviser and George W. Bush-era chairman of the Council of Economic Advisors; Douglas Holtz-Eakin, Sen. John McCain’s 2008 chief economic adviser; and Art Laffer, progenitor of Reagan’s treasured Laffer Curve.
Such a tax could raise an estimated $1.5 trillion over 10 years and help wean the country from carbon-intensive fuels. And with Congress set for a season of budget fights and a possible effort to overhaul the tax code, the carbon tax is likely to reenter the conversation about getting America’s fiscal house in order.
So, it’s worth understanding why the economics of a carbon tax might make it appealing to some conservative economists, and why many political arguments about taxes don't apply to it.


A Pigovian Tax
A carbon tax is a special kind of tax called a Pigovian tax, named after 20th-century British economist Arthur Pigou.
Normally, a competitive market produces just the right amount of a good. If there are not enough people selling glue, its price will rise and people will cash in by selling more glue. If too many people are selling glue, the price will go down, and some people will find it’s not worth their while to sell glue anymore. Either way, the market should settle at the point where the cost of producing more glue is equal to the value people place on that additional glue.
But Pigou realized that if a producer wasn’t paying for the full cost of producing a good, they would produce too much of it anyway and everyone else would foot the bill. Imagine that making glue is expensive because it costs a lot to cart away all the horse carcasses used in its production. There’s not going to be a lot of glue because only people who really like glue will be willing to pay to produce it.
Now imagine that instead of carting away the dead horses, glue factories realize they can dump them in nearby rivers for free. All of a sudden, it becomes a lot cheaper to make glue, so the price goes down. At a price like this, you can’t afford not to buy glue, so people consume more of it, and new glue factories pop up.
It all looks like economic growth, until the dead horses start piling up, and people start getting sick. Then they get a bunch of medical bills and the government has to spend money cleaning up the river. The sticky-fingered glue barons don’t mind much, because they can afford to buy the expensive houses upriver, and when the cost of cleanup gets spread to everyone, the cost to them is a pittance compared to their newfound glue fortunes.
Meanwhile, the tape users are fuming. They’re getting sick from glue they don’t even use, and the horse-dredgings are driving up their tax bill. And because a bunch of the former tape-makers have jumped on the glue bandwagon, there’s now a tape shortage. It’s a mess.
When you account for the costs of sickness and cleanup, each tub of glue costs $20 to produce. But the glue factories don’t pay for this, so they can sell glue at a going rate of $12. Glue that’s only worth $12 is being made at a cost of $20, so $8 is being wasted on each new tub of glue.
In this case, Pigou would prescribe an $8 tax on glue. Now, it costs glue factories $20 to produce glue, and only people willing to pay that much for glue will buy it. Less glue is produced, so fewer dead horses end up in the river, and the revenue raised from the tax can be used deal with the problems caused by the ones that do.

How It Works in the Energy Market
The dysfunctional glue market looks a lot like the current energy market.
Carbon, like the dead horses, creates what economists call a negative externality. A negative externality is the cost of an economic transaction that’s not borne by either the buyer or the seller, and is instead pushed onto society. It distorts markets and leads to inefficient outcomes, such as producing $12 worth of glue for $20.
A Pigovian tax corrects for a negative externality by making sure buyers and sellers pay the true cost of a good or service.
In this case, high-carbon fuel looks cheap on paper, because the costs to the producer don’t include the costs of global climate change or dependence on foreign oil. So, too much high-carbon energy is consumed. The producers don’t mind, because the extra costs are spread to everyone, while much of the benefit accrues to them. The people who use the most fossil fuels also benefit from buying lots of underpriced energy. Meanwhile, residents of places like New York and New Orleans, who don’t consume all that much carbon, pay the costs of the uptick in extreme weather that scientists say is linked to carbon emissions.
A tax on carbon would raise the price to include the trust cost of burning it, so that the economy doesn’t end up producing $12 worth of energy at a cost of $20.
By making carbon emissions more expensive, it would cause them to decrease. It would also lead to increased use of low-carbon energies—natural gas, wind, solar— which suffer from society’s de facto subsidy of carbon emissions.

Why It Appeals to Conservative Economists
So, why do some conservative economists who normally oppose new taxation support a carbon tax? Because a carbon tax, like any Pigovian tax, taxes something we want less of. And when you tax something, you get less of it. Even for the remaining cohort of climate-change deniers, Mankiw lists a slew of other downsides to carbon emissions in his Pigovian manifesto.
Taxes on alcohol can also be considered Pigovian taxes, because alcohol consumption can have harmful effects for society because it can contribute to crime and lost productivity at work. Taxes on cigarettes fit the bill, too, because of the public health costs of tobacco use.
But most taxes, especially at the federal level, tax things we want more of: labor, investment, business activity.
Depending on how broadly or narrowly you define economic growth, these taxes either arguably or definitely hurt growth.
But a Pigovian tax creates economic growth by allowing markets to allocate resources more efficiently. Think of all the wasted resources that went into making those jars of glue that cost $20 but were only worth $12. When the market produces the right amount of glue, those resources are freed up for more useful purposes.
Liberal economists tend to like a carbon tax, too, but usually differ with conservative economists over what to do with the revenue. They’re more likely to see the revenue as an opportunity to extend government services, subsidize alternative energy, or, in the current economic environment, pursue some other form of stimulus.
Conservative economists are more likely to advocate using the revenue to lower rates on other taxes, give everyone a tax rebate, or pay down the deficit. It’s these latter uses that are likely to dominate the discussion of a carbon tax in the coming months.

Lead and Crime

The following is a lengthy article ; over 15 pages. But it is a fascinating one for at least 2 reasons: (1) The UN mandated date for elimination of lead from gasoline all over the world is to be recognized and celebrated. (2) The controversial hypothesis of this article that there is an observable relationship between the level of lead and crime is bewitching and captivating.
The following does not show the graphs. If you prefer to look at the graphs as an integral part of the essay then copy the following link into your browser:
http://www.motherjones.com/environment/2013/01/lead-crime-link-gasoline

When Rudy Giuliani ran for mayor of New York City in 1993, he campaigned on a platform of bringing down crime and making the city safe again. It was a comfortable position for a former federal prosecutor with a tough-guy image, but it was more than mere posturing. Since 1960, rape rates had nearly quadrupled, murder had quintupled, and robbery had grown fourteenfold. New Yorkers felt like they lived in a city under siege.

Throughout the campaign, Giuliani embraced a theory of crime fighting called "broken windows," popularized a decade earlier by James Q. Wilson and George L. Kelling in an influential article in The Atlantic. [7] "If a window in a building is broken and is left unrepaired," they observed, "all the rest of the windows will soon be broken." So too, tolerance of small crimes would create a vicious cycle ending with entire neighborhoods turning into war zones. But if you cracked down on small crimes, bigger crimes would drop as well.

Giuliani won the election, and he made good on his crime-fighting promises by selecting Boston police chief Bill Bratton as the NYPD's new commissioner. Bratton had made his reputation as head of the New York City Transit Police, where he aggressively applied broken-windows policing to turnstile jumpers and vagrants in subway stations. With Giuliani's eager support, he began applying the same lessons to the entire city, going after panhandlers, drunks, drug pushers, and the city's hated squeegee men. And more: He decentralized police operations and gave precinct commanders more control, keeping them accountable with a pioneering system called CompStat that tracked crime hot spots in real time.

The results were dramatic. In 1996, the New York Times reported [8] that crime had plunged for the third straight year, the sharpest drop since the end of Prohibition. Since 1993, rape rates had dropped 17 percent, assault 27 percent, robbery 42 percent, and murder an astonishing 49 percent. Giuliani was on his way to becoming America's Mayor and Bratton was on the cover of Time. It was a remarkable public policy victory.

But even more remarkable is what happened next. Shortly after Bratton's star turn, political scientist John DiIulio warned that the echo of the baby boom would soon produce a demographic bulge of millions of young males that he famously dubbed "juvenile super-predators [9]." Other criminologists nodded along. But even though the demographic bulge came right on schedule, crime continued to drop. And drop. And drop. By 2010, violent crime rates in New York City had plunged 75 percent from their peak in the early '90s.

All in all, it seemed to be a story with a happy ending, a triumph for Wilson and Kelling's theory and Giuliani and Bratton's practice. And yet, doubts remained. For one thing, violent crime actually peaked in New York City in 1990, four years before the Giuliani-Bratton era. By the time they took office, it had already dropped 12 percent.

The PB Effect

What happens when you expose a generation of kids to high lead levels? Crime and teen pregnancy data two decades later tell a startling story.

Second, and far more puzzling, it's not just New York that has seen a big drop in crime. In city after city, violent crime peaked in the early '90s and then began a steady and spectacular decline. Washington, DC, didn't have either Giuliani or Bratton, but its violent crime rate has dropped 58 percent since its peak. Dallas' has fallen 70 percent. Newark: 74 percent. Los Angeles: 78 percent.

There must be more going on here than just a change in policing tactics in one city. But what?

There are, it turns out, plenty of theories. When I started research for this story, I worked my way through a pair of thick [10] criminology tomes [11]. One chapter regaled me with the "exciting possibility" that it's mostly a matter of economics: Crime goes down when the economy is booming and goes up when it's in a slump. Unfortunately, the theory doesn't seem to hold water—for example, crime rates have continued to drop recently despite our prolonged downturn.

Another chapter suggested that crime drops in big cities were mostly a reflection of the crack epidemic of the '80s finally burning itself out. A trio of authors identified three major "drug eras" in New York City, the first dominated by heroin, which produced limited violence, and the second by crack, which generated spectacular levels of it. In the early '90s, these researchers proposed, the children of CrackGen switched to marijuana, choosing a less violent and more law-abiding lifestyle. As they did, crime rates in New York and other cities went down.

Another chapter told a story of demographics: As the number of young men increases, so does crime. Unfortunately for this theory, the number of young men increased during the '90s, but crime dropped anyway.

There were chapters in my tomes on the effect of prison expansion. On guns and gun control. On family. On race. On parole and probation. On the raw number of police officers. It seemed as if everyone had a pet theory. In 1999, economist Steven Levitt, later famous as the coauthor of Freakonomics, teamed up with John Donohue to suggest that crime dropped because of Roe v. Wade [12]; legalized abortion, they argued, led to fewer unwanted babies, which meant fewer maladjusted and violent young men two decades later.

But there's a problem common to all of these theories: It's hard to tease out actual proof. Maybe the end of the crack epidemic contributed to a decline in inner-city crime, but then again, maybe it was really the effect of increased incarceration, more cops on the beat, broken-windows policing, and a rise in abortion rates 20 years earlier. After all, they all happened at the same time.

To address this problem, the field of econometrics gives researchers an enormous toolbox of sophisticated statistical techniques. But, notes statistician and conservative commentator Jim Manzi in his recent book Uncontrolled [13], econometrics consistently fails to explain most of the variation in crime rates. After reviewing 122 known field tests, Manzi found that only 20 percent demonstrated positive results for specific crime-fighting strategies, and none of those positive results were replicated in follow-up studies.

Did Lead Make You Dumber?

Even low levels have a significant effect.

So we're back to square one. More prisons might help control crime, more cops might help, and better policing might help. But the evidence is thin for any of these as the main cause. What are we missing?

Experts often suggest that crime resembles an epidemic. But what kind? Karl Smith, a professor of public economics and government at the University of North Carolina-Chapel Hill, has a good rule of thumb for categorizing epidemics [14]: If it spreads along lines of communication, he says, the cause is information. Think Bieber Fever. If it travels along major transportation routes, the cause is microbial. Think influenza. If it spreads out like a fan, the cause is an insect. Think malaria. But if it's everywhere, all at once—as both the rise of crime in the '60s and '70s and the fall of crime in the '90s seemed to be—the cause is a molecule.

A molecule? That sounds crazy. What molecule could be responsible for a steep and sudden decline in violent crime?

Well, here's one possibility: Pb(CH₂CH₃)₄.
 

In 1994, Rick Nevin was a consultant working for the US Department of Housing and Urban Development on the costs and benefits of removing lead paint from old houses. This has been a topic of intense study because of the growing body of research linking lead exposure in small children with a whole raft of complications later in life, including lower IQ, hyperactivity, behavioral problems, and learning disabilities.

But as Nevin was working on that assignment, his client suggested they might be missing something. A recent study had suggested a link between childhood lead exposure and juvenile delinquency later on. Maybe reducing lead exposure had an effect on violent crime too?

That tip took Nevin in a different direction. The biggest source of lead in the postwar era, it turns out, wasn't paint. It was leaded gasoline. And if you chart the rise and fall of atmospheric lead caused by the rise and fall of leaded gasoline consumption, you get a pretty simple upside-down U: Lead emissions from tailpipes rose steadily from the early '40s through the early '70s, nearly quadrupling over that period. Then, as unleaded gasoline began to replace leaded gasoline, emissions plummeted.

Gasoline lead may explain as much as 90 percent of the rise and fall of violent crime over the past half century.

Intriguingly, violent crime rates followed the same upside-down U pattern. The only thing different was the time period: Crime rates rose dramatically in the '60s through the '80s, and then began dropping steadily starting in the early '90s. The two curves looked eerily identical, but were offset by about 20 years.

So Nevin dove in further, digging up detailed data on lead emissions and crime rates to see if the similarity of the curves was as good as it seemed. It turned out to be even better: In a 2000 paper [15] (PDF) he concluded that if you add a lag time of 23 years, lead emissions from automobiles explain 90 percent of the variation in violent crime in America. Toddlers who ingested high levels of lead in the '40s and '50s really were more likely to become violent criminals in the '60s, '70s, and '80s.

And with that we have our molecule: tetraethyl lead, the gasoline additive invented by General Motors in the 1920s to prevent knocking and pinging in high-performance engines. As auto sales boomed after World War II, and drivers in powerful new cars increasingly asked service station attendants to "fill 'er up with ethyl," they were unwittingly creating a crime wave two decades later.

It was an exciting conjecture, and it prompted an immediate wave of…nothing. Nevin's paper was almost completely ignored, and in one sense it's easy to see why—Nevin is an economist, not a criminologist, and his paper was published in Environmental Research, not a journal with a big readership in the criminology community. What's more, a single correlation between two curves isn't all that impressive, econometrically speaking. Sales of vinyl LPs rose in the postwar period too, and then declined in the '80s and '90s. Lots of things follow a pattern like that. So no matter how good the fit, if you only have a single correlation it might just be a coincidence. You need to do something more to establish causality.

As it turns out, however, a few hundred miles north someone was doing just that. In the late '90s, Jessica Wolpaw Reyes was a graduate student at Harvard casting around for a dissertation topic that eventually became a study she published in 2007 as a public health policy professor at Amherst. "I learned about lead because I was pregnant and living in old housing in Harvard Square," she told me, and after attending a talk where future Freakonomics star Levitt outlined his abortion/crime theory, she started thinking about lead and crime. Although the association seemed plausible, she wanted to find out whether increased lead exposure caused increases in crime. But how?

In states where consumption of leaded gasoline declined slowly, crime declined slowly. Where it declined quickly, crime declined quickly.

The answer, it turned out, involved "several months of cold calling" to find lead emissions data at the state level. During the '70s and '80s, the introduction of the catalytic converter, combined with increasingly stringent Environmental Protection Agency rules, steadily reduced the amount of leaded gasoline used in America, but Reyes discovered that this reduction wasn't uniform. In fact, use of leaded gasoline varied widely among states, and this gave Reyes the opening she needed. If childhood lead exposure really did produce criminal behavior in adults, you'd expect that in states where consumption of leaded gasoline declined slowly, crime would decline slowly too. Conversely, in states where it declined quickly, crime would decline quickly. And that's exactly what she found [16].

Meanwhile, Nevin had kept busy as well, and in 2007 he published a new paper looking at crime trends around the world [17] (PDF). This way, he could make sure the close match he'd found between the lead curve and the crime curve wasn't just a coincidence. Sure, maybe the real culprit in the United States was something else happening at the exact same time, but what are the odds of that same something happening at several different times in several different countries?

Nevin collected lead data and crime data for Australia and found a close match. Ditto for Canada. And Great Britain and Finland and France and Italy and New Zealand and West Germany. Every time, the two curves fit each other astonishingly well. When I spoke to Nevin about this, I asked him if he had ever found a country that didn't fit the theory. "No," he replied. "Not one."

Just this year, Tulane University researcher Howard Mielke published a paper [18] with demographer Sammy Zahran on the correlation of lead and crime at the city level. They studied six US cities that had both good crime data and good lead data going back to the '50s, and they found a good fit in every single one. In fact, Mielke has even studied lead concentrations at the neighborhood level in New Orleans and shared his maps with the local police. "When they overlay them with crime maps," he told me, "they realize they match up."

Location, Location, Location

In New Orleans, lead levels can vary dramatically from one neighborhood to the next—and the poorest neighborhoods tend to be the worst hit.

Maps by Karen Minot

Put all this together and you have an astonishing body of evidence. We now have studies at the international level, the national level, the state level, the city level, and even the individual level. Groups of children have been followed from the womb to adulthood, and higher childhood blood lead levels are consistently associated with higher adult arrest rates for violent crimes [19]. All of these studies tell the same story: Gasoline lead is responsible for a good share of the rise and fall of violent crime over the past half century.

When differences of atmospheric lead density between big and small cities largely went away, so did the difference in murder rates.

Like many good theories, the gasoline lead hypothesis helps explain some things we might not have realized even needed explaining. For example, murder rates have always been higher in big cities than in towns and small cities. We're so used to this that it seems unsurprising, but Nevin points out that it might actually have a surprising explanation—because big cities have lots of cars in a small area, they also had high densities of atmospheric lead during the postwar era. But as lead levels in gasoline decreased, the differences between big and small cities largely went away. And guess what? The difference in murder rates went away too. Today, homicide rates are similar in cities of all sizes [20]. It may be that violent crime isn't an inevitable consequence of being a big city after all.

The gasoline lead story has another virtue too: It's the only hypothesis that persuasively explains both the rise of crime in the '60s and '70s and its fall beginning in the '90s. Two other theories—the baby boom demographic bulge and the drug explosion of the '60s—at least have the potential to explain both, but neither one fully fits the known data. Only gasoline lead, with its dramatic rise and fall following World War II, can explain the equally dramatic rise and fall in violent crime.

If econometric studies were all there were to the story of lead, you'd be justified in remaining skeptical no matter how good the statistics look. Even when researchers do their best—controlling for economic growth, welfare payments, race, income, education level, and everything else they can think of—it's always possible that something they haven't thought of is still lurking in the background. But there's another reason to take the lead hypothesis seriously, and it might be the most compelling one of all: Neurological research is demonstrating that lead's effects are even more appalling, more permanent, and appear at far lower levels than we ever thought. For starters, it turns out that childhood lead exposure at nearly any level can seriously and permanently reduce IQ. Blood lead levels are measured in micrograms per deciliter, and levels once believed safe—65 μg/dL, then 25, then 15, then 10—are now known to cause serious damage. The EPA now says [21] flatly that there is "no demonstrated safe concentration of lead in blood," and it turns out that even levels under 10 μg/dL can reduce IQ by as much as seven points. An estimated 2.5 percent of children nationwide have lead levels above 5 μg/dL.

[2]

Is There Lead in Your House? [2]

But we now know that lead's effects go far beyond just IQ. Not only does lead promote apoptosis, or cell death, in the brain, but the element is also chemically similar to calcium. When it settles in cerebral tissue, it prevents calcium ions from doing their job, something that causes physical damage to the developing brain that persists into adulthood.

Only in the last few years have we begun to understand exactly what effects this has. A team of researchers at the University of Cincinnati has been following a group of 300 children for more than 30 years and recently performed a series of MRI scans that highlighted the neurological differences between subjects who had high and low exposure to lead during early childhood.

High childhood exposure damages a part of the brain linked to aggression control and "executive functions." And the impact turns out to be greater among boys.

One set of scans [22] found that lead exposure is linked to production of the brain's white matter—primarily a substance called myelin, which forms an insulating sheath around the connections between neurons. Lead exposure degrades both the formation and structure of myelin, and when this happens, says Kim Dietrich, one of the leaders of the imaging studies, "neurons are not communicating effectively." Put simply, the network connections within the brain become both slower and less coordinated.

A second study [23] found that high exposure to lead during childhood was linked to a permanent loss of gray matter in the prefrontal cortex—a part of the brain associated with aggression control as well as what psychologists call "executive functions": emotional regulation, impulse control, attention, verbal reasoning, and mental flexibility. One way to understand this, says Kim Cecil, another member of the Cincinnati team, is that lead affects precisely the areas of the brain "that make us most human."

So lead is a double whammy: It impairs specific parts of the brain responsible for executive functions and it impairs the communication channels between these parts of the brain. For children like the ones in the Cincinnati study, who were mostly inner-city kids with plenty of strikes against them already, lead exposure was, in Cecil's words, an "additional kick in the gut." And one more thing: Although both sexes are affected by lead, the neurological impact turns out to be greater among boys than girls.

Other recent [24] studies link [25] even minuscule blood lead levels with attention deficit/hyperactivity disorder. Even at concentrations well below those usually considered safe—levels still common today—lead increases the odds of kids developing ADHD.

In other words, as Reyes summarized the evidence in her paper, even moderately high levels of lead exposure are associated with aggressivity, impulsivity, ADHD, and lower IQ. And right there, you've practically defined the profile of a violent young offender.

Needless to say, not every child exposed to lead is destined for a life of crime. Everyone over the age of 40 was probably exposed to too much lead during childhood, and most of us suffered nothing more than a few points of IQ loss. But there were plenty of kids already on the margin, and millions of those kids were pushed over the edge from being merely slow or disruptive to becoming part of a nationwide epidemic of violent crime. Once you understand that, it all becomes blindingly obvious. Of course massive lead exposure among children of the postwar era led to larger numbers of violent criminals in the '60s and beyond. And of course when that lead was removed in the '70s and '80s, the children of that generation lost those artificially heightened violent tendencies.

Police chiefs "want to think what they do on a daily basis matters," says a public health expert. "And it does." But maybe not as much as they think.

But if all of this solves one mystery, it shines a high-powered klieg light on another: Why has the lead/crime connection been almost completely ignored in the criminology community? In the two big books I mentioned earlier, one has no mention of lead at all and the other has a grand total of two passing references. Nevin calls it "exasperating" that crime researchers haven't seriously engaged with lead, and Reyes told me that although the public health community was interested in her paper, criminologists have largely been AWOL. When I asked Sammy Zahran about the reaction to his paper with Howard Mielke on correlations between lead and crime at the city level, he just sighed. "I don't think criminologists have even read it," he said. All of this jibes with my own reporting. Before he died last year, James Q. Wilson—father of the broken-windows theory, and the dean of the criminology community—had begun to accept that lead probably played a meaningful role in the crime drop of the '90s. But he was apparently an outlier. None of the criminology experts I contacted showed any interest in the lead hypothesis at all.

Why not? Mark Kleiman [26], a public policy professor at the University of California-Los Angeles who has studied promising methods of controlling crime, suggests that because criminologists are basically sociologists, they look for sociological explanations, not medical ones. My own sense is that interest groups probably play a crucial role: Political conservatives want to blame the social upheaval of the '60s for the rise in crime that followed. Police unions have reasons for crediting its decline to an increase in the number of cops. Prison guards like the idea that increased incarceration is the answer. Drug warriors want the story to be about drug policy. If the actual answer turns out to be lead poisoning, they all lose a big pillar of support for their pet issue. And while lead abatement could be big business for contractors and builders, for some reason their trade groups have never taken it seriously.

More generally, we all have a deep stake in affirming the power of deliberate human action. When Reyes once presented her results to a conference of police chiefs, it was, unsurprisingly, a tough sell. "They want to think that what they do on a daily basis matters," she says. "And it does." But it may not matter as much as they think.  

So is this all just an interesting history lesson? After all, leaded gasoline has been banned since 1996, so even if it had a major impact on violent crime during the 20th century, there's nothing more to be done on that front. Right?

Wrong. As it turns out, tetraethyl lead is like a zombie that refuses to die. Our cars may be lead-free today, but they spent more than 50 years spewing lead from their tailpipes, and all that lead had to go somewhere. And it did: It settled permanently into the soil that we walk on, grow our food in, and let our kids play around.

That's especially true in the inner cores of big cities, which had the highest density of automobile traffic. Mielke has been studying lead in soil for years, focusing most of his attention on his hometown of New Orleans, and he's measured 10 separate census tracts there with lead levels over 1,000 parts per million.

To get a sense of what this means, you have to look at how soil levels of lead typically correlate with blood levels, which are what really matter. Mielke has studied this in New Orleans [27], and it turns out that the numbers go up very fast even at low levels. Children who live in neighborhoods with a soil level of 100 ppm have average blood lead concentrations of 3.8 μg/dL—a level that's only barely tolerable. At 500 ppm, blood levels go up to 5.9 μg/dL, and at 1,000 ppm they go up to 7.5 μg/dL. These levels are high enough to do serious damage.

"I know people who have moved into gentrified neighborhoods and immediately renovate everything. They create huge hazards for their kids."

Mielke's partner, Sammy Zahran, walked me through a lengthy—and hair-raising—presentation about the effect that all that old gasoline lead continues to have in New Orleans. The very first slide describes the basic problem: Lead in soil doesn't stay in the soil. Every summer, like clockwork, as the weather dries up, all that lead gets kicked back into the atmosphere in a process called resuspension. The zombie lead is back to haunt us.

Mark Laidlaw, a doctoral student who has worked with Mielke, explains how this works [28]: People and pets track lead dust from soil into houses, where it's ingested by small children via hand-to-mouth contact. Ditto for lead dust generated by old paint inside houses. This dust cocktail is where most lead exposure today comes from.

Paint hasn't played a big role in our story so far, but that's only because it didn't play a big role in the rise of crime in the postwar era and its subsequent fall. Unlike gasoline lead, lead paint was a fairly uniform problem during this period, producing higher overall lead levels, especially in inner cities, but not changing radically over time. (It's a different story with the first part of the 20th century, when use of lead paint did rise and then fall somewhat dramatically. Sure enough, murder rates rose and fell in tandem.)

And just like gasoline lead, a lot of that lead in old housing is still around. Lead paint chips flaking off of walls are one obvious source of lead exposure, but an even bigger one, says Rick Nevin, are old windows. Their friction surfaces generate lots of dust as they're opened and closed. (Other sources—lead pipes and solder, leaded fuel used in private aviation, and lead smelters—account for far less.)

We know that the cost of all this lead is staggering, not just in lower IQs, delayed development, and other health problems, but in increased rates of violent crime as well. So why has it been so hard to get it taken seriously?

There are several reasons. One of them was put bluntly by Herbert Needleman, one of the pioneers of research into the effect of lead on behavior. A few years ago, a reporter from the Baltimore City Paper asked him why so little progress had been made recently on combating the lead-poisoning problem. "Number one," he said without hesitation [29], "it's a black problem." But it turns out that this is an outdated idea. Although it's true that lead poisoning affects low-income neighborhoods disproportionately, it affects plenty of middle-class and rich neighborhoods as well. "It's not just a poor-inner-city-kid problem anymore," Nevin says. "I know people who have moved into gentrified neighborhoods and immediately renovate everything. And they create huge hazards for their kids."

Tamara Rubin, who lives in a middle-class neighborhood in Portland, Oregon, learned this the hard way when two of her children developed lead poisoning after some routine home improvement in 2005. A few years later, Rubin started the Lead Safe America Foundation [30], which advocates for lead abatement and lead testing. Her message: If you live in an old neighborhood or an old house, get tested. And if you renovate, do it safely.

Another reason that lead doesn't get the attention it deserves is that too many people think the problem was solved years ago. They don't realize how much lead is still hanging around, and they don't understand just how much it costs us.

It's difficult to put firm numbers to the costs and benefits of lead abatement. But for a rough idea, let's start with the two biggest costs. Nevin estimates that there are perhaps 16 million pre-1960 houses with lead-painted windows, and replacing them all would cost something like $10 billion per year over 20 years. Soil cleanup in the hardest-hit urban neighborhoods is tougher to get a handle on, with estimates ranging from $2 to $36 per square foot. A rough extrapolation from Mielke's estimate to clean up New Orleans suggests that a nationwide program might cost another $10 billion per year.

We can either get rid of the remaining lead, or we can wait 20 years and then lock up all the kids who've turned into criminals.

So in round numbers that's about $20 billion per year for two decades. But the benefits would be huge. Let's just take a look at the two biggest ones. By Mielke and Zahran's estimates, [31] if we adopted the soil standard of a country like Norway (roughly 100 ppm or less), it would bring about $30 billion in annual returns from the cognitive benefits alone (higher IQs, and the resulting higher lifetime earnings). Cleaning up old windows might double this. And violent crime reduction would be an even bigger benefit. Estimates here are even more difficult, but Mark Kleiman suggests that a 10 percent drop in crime—a goal that seems reasonable if we get serious about cleaning up the last of our lead problem—could produce benefits as high as $150 billion per year.

Put this all together and the benefits of lead cleanup could be in the neighborhood of $200 billion per year. In other words, an annual investment of $20 billion for 20 years could produce returns of 10-to-1 every single year for decades to come. Those are returns that Wall Street hedge funds can only dream of.

Memo to Deficit Hawks: Get the Lead Out

Lead abatement isn't cheap, but the return on investment is mind-blowing.

There's a flip side to this too. At the same time that we should reassess the low level of attention we pay to the remaining hazards from lead, we should probably also reassess the high level of attention we're giving to other policies. Chief among these is the prison-building boom that started in the mid-'70s. As crime scholar William Spelman wrote a few years ago, states have "doubled their prison populations, then doubled them again, increasing their costs by more than $20 billion per year"—money that could have been usefully spent on a lot of other things. And while some scholars conclude that the prison boom had an effect on crime, recent research suggests that rising incarceration rates suffer from diminishing returns: Putting more criminals behind bars is useful up to a point, but beyond that we're just locking up more people without having any real impact on crime. What's more, if it's true that lead exposure accounts for a big part of the crime decline that we formerly credited to prison expansion and other policies, those diminishing returns might be even more dramatic than we believe. We probably overshot on prison construction years ago; one doubling might have been enough. Not only should we stop adding prison capacity, but we might be better off returning to the incarceration rates we reached in the mid-'80s.

So this is the choice before us: We can either attack crime at its root by getting rid of the remaining lead in our environment, or we can continue our current policy of waiting 20 years and then locking up all the lead-poisoned kids who have turned into criminals. There's always an excuse not to spend more money on a policy as tedious-sounding as lead abatement—budgets are tight, and research on a problem as complex as crime will never be definitive—but the association between lead and crime has, in recent years, become pretty overwhelming. If you gave me the choice, right now, of spending $20 billion less on prisons and cops and spending $20 billion more on getting rid of lead, I'd take the deal in a heartbeat. Not only would solving our lead problem do more than any prison to reduce our crime problem, it would produce smarter, better-adjusted kids in the bargain. There's nothing partisan about this, nothing that should appeal more to one group than another. It's just common sense. Cleaning up the rest of the lead that remains in our environment could turn out to be the cheapest, most effective crime prevention tool we have. And we could start doing it tomorrow.

Support for this story was provided by a grant from the Puffin Foundation Investigative Journalism Project.