COMMENTS ON SCHULER PAPER

ROBERT E. KOHN Southern Illinois University (Edwardsville)

Considerable attention is being given to the relationship of air pollution and land use. Schuler's paper is an important theoretical contribution to this re- search. I The principal assumption on which Schuler's work is based is a behavioral one: that the desirability of a particular residential location is inversely related to the pollutant concentration there. This is an assumption for which there is increasing empirical support? Schuler pioneers by distinguishing and inter- relating three major categories of polluting activities: industrial processes, re- sidential heating, and transportation. The configuration of his city is a rectangle with industrial emissions originating along a vertical line at the center and diffusing horizontally.

Given the long-run time horizon, the partial equilibrium assumptions appear especially restrictive. Production (and hence the level of industrial emissions) is fixed and there is no trade-off between total output and transportation. Both industry and land must be nonlocally owned so that income remains constant. The relative and absolute prices of polluting goods remain the same before and after abatement.

Oron, Pines, and Sheshinski have completed work very similar to Schuler's and a comparison of the models is useful. 3 The model of O. P. and S. is based on the same behavioral assumption concerning utility, housing, and air pollution. It is more simple in that it is confined to transportation emissions alone,' but more complex in that the city is circular. The context is general equilibrium, in which income is not fixed. Whereas Schuler's focus is on competitive spatial equilibrium before and after abatement, O. P. and S. are mainly concerned with the difference between a competitive equilibrium allocation and the optimum allocation in which taxes are used to internalize pollution effects. Their model does not include public services nor alternative transportation technologies, as Schuler's does.

1 For a significant empirical contribution, see Jean-Michel Guldman, Optimization Models for Air Pollution Strategies and Location of Industry: A Case Study of the Haifa Region (Haifa: Israel Institute of Technology, 1973).

See, for example, R .N. Troy, "Residents and Their Preferences: Property Prices and Residential Quality," Regional Studies, VII (June, 1973), pp. 183-192.

3 y. Oron, D. Pines, and E. Sheshinski, "The Effect of Nuisances Associated with Urban Traffic on Suburbanization and Land Values," Journal of Urban Economics (forthcoming). The authors are hereafter referred to as O. P. and S.

4 0 r o n and Pines have examined the relationship of industrial emissions at the CBD to residential location in "The Effect of Efficient Pricing of Air Pollution on lntra-Urban Land Patterns," Proceedings of the Israeli Regional Science Association, December, 1972, forthcoming.

149

A0

A]

PAPERS OF THE REGIONAL SCIENCE ASSOCIATIONr VOLUME THIRTY-TWO 150

B 1 BII . CBD BI[ BI r

F IGURE 1. D I R E C T AND INDIRECT EFFECTS OF INDUSTRIAL ABATEMENT

ON AtR QUALITY

The scenario of Schuler's model is illustrated in Figure 1. To begin with, the pattern of air quality in the city looks something like curve A0 in the accompany- ing diagram. With abatement by industry at the CBD, the air quality configuration becomes A~. Households now observe that they can move closer to the CBD, pay less for transportation, enjoy more leisure time, and have equal or better air quality than they had before abatement. ~ Assuming that households simul- taneously relocate closer to the CBD, commuting distances decrease, transporta- tion emissions fall, and the new pattern of air quality becomes As. Furthermore, the boundary of the city contracts from BI to BH. (This is a departure from the Schuler model in which the boundary of the city is fixed. Such an assumption may, given sufficient abatement, imply a negative equilibrium rent at the boundary.) This additional improvement in air quality would stimulate still further relocation toward the CBD, hence the curve A3 and some new boundary still closer to the CBD. However, the equilibrium air quality configuration would never be as low as the optimal configuration because households would not take into account the fact that their own reduction in commuting distance would provide external economics (that is, reduced transportation emissions) for households residing between their present location and an alternative location closer to the CBD. The divergence of the competitive and optimal equilibrium is one of the results of the paper by O. P. and S.

5 In "The Problem of Social Cost," Journal of Law and Economics, 11I (October, 1960), pp. 1- 44, Ronald Coase suggested that as pollution increases, hurt parties make economic adjustments to reduce the damage suffered. The long-run adjustments to abatement, which Schuler describes, are the reverse of the process which Coase identified.

KOHN: COMMENTS ON SCHULER PAPER 151

FIGURE 2.

/ ,2" i

I I I I

aL as Abatement of Industrial Emissions

SHORT-RUN AND LONG-RUN BENEFITS OF INDUSTRIAL ABATEMENT

In view of the fact that long-run locational adjustments to pollution abate- ment have been largely overlooked, Schuler suggests a re-examination of the costs and benefits of pollution control. The cost curve in Figure 2 represents the total cost of abating various quantities of industrial emissions at the CBD. The short- run total benefit curve indicates the dollar value of the immediate benefits which result when the pattern of pollution in the city is changed from A0 to A1 in Figure 1. In the long run, because the air is cleaner, people will tend to move closer to the CBD and there will be the additional benefits of increased leisure and reduced transportation costs. (The latter makes possible an increased consumption of goods, although this benefit will be somewhat offset by reduced consumption of housing.) In addition, the decline in transportation pollution will yield further benefits, both short and long run. At all points, the long-run total benefit curve lies above the short-run total benefit curve. However, Schuler is not correct in arguing that long-run considerations necessarily imply that the optimal quantity of industrial abatement is larger than would be the case on the basis of short-run calculations alone. What matters is the relationship of marginal benefits to marginal costs. The long-run total benefit curve in Figure 2 is purposely drawn in such a way that long-run marginal benefits equal marginal cost at aL, which is less than as. This could be the case if the induced reduction in transportation emissions would be substantial and marginal pollution damage decreases rapidly as emissions (from both industrial and transportation sources) decline.

A major contribution of Schuler's paper is the identification of two new dimensions in the vector of pollution abatement benefits. The modern economics

152 PAPERS OF THE REGIONAL SCIENCE ASSOCIATION, VOLUME THIRTY-TWO

of air pollution started with the listing and evaluation of air pollution damages. Nowhere in this extensive literature do I recall reading that the costs of pollution include the value of transportation resources expended and leisure foregone in the quest for cleaner air. 6 Property value studies of pollution damage would not pick up these particular long-run costs as they would already be accounted for by the accessibility variables. The problem of relating these locational costs to pollution levels remains to be solved and, hopefully, this important paper by Schuler will stimulate research in that direction.

For an excellent survey of this literature, see Larry B. Barrett and Thomas E. Waddell, Cost o f Air Pollution Damage: A Status Report, Publication No. AP-85, Environmental Pro- tection Agency, Research Triangle Park, North Carolina, 1973.