The Environmental Deficit: Applying Lessons from the Economic Recession

Abstract

In 2007, the nation entered a financial downturn unprecedented since the Great Depression of the 1930s. A period of national introspection followed, including memorable moments such as Federal Chairman Alan Greenspan's gut-wrenching admission that his "whole intellectual edifice" had collapsed during the summer of 2007. Although prescriptions for financial rescue varied widely in the details, a surprisingly-broad consensus began to emerge as to the underlying pathology of the crisis. This Essay focuses on three underlying errors: rejecting rules through deregulation, trivializing risk through overly-optimistic analyses, and recklessly borrowing and lending money.

Those powerful lessons, accepted by a stunned nation in the midst of financial collapse, apply with equal force to the growing environmental deficit - the unsustainable spending down of natural resource assets. I argue that the environment could benefit from a dose of the same medicine that has been prescribed for the economy: enforcing rules through re-regulation, abandoning inaccurate models of cost-benefit analysis that trivialize the risks of environmental degradation, and making a commitment to sustainable use of the country's natural capital.

This Essay tells two parallel stories of fiscal and environmental unraveling, seeking to capture the cultural moment by reporting the often-frank admissions of political and intellectual leaders as they confront the crisis. The Essay features a section (Part II.A) on the curious modern phenomenon of "midnight regulations," including an Appendix showing the most recent enactments in table format.

Keywords: environmental deficit, recession, deregulation, risk, cost-benefit analysis, sustainability, midnight regulations, thrift