Market Failure in Minnesota

During a recent "special" session of the Minnesota legislature, a bill was snuck through the House and Senate eliminating the Minnesota Pollution Control Agency Citizen's Board. Established in the 1960s, the Citizens' Board had consisted of eight members and the Commissioner of the MPCA. Their bylaws called for one member to be "knowledgeable in the field of agriculture." According to former Board member Jim Riddle, "The Citizens’ Board came under fire from corporate agribusiness interests last fall, after we required an Environmental Impact Statement (EIS) for a proposed confined animal feeding operation (CAFO)."

The owners of the CAFO didn't have enough land to spread even half the manure they would generate. They had no idea (or interest) how much their water use would impact existing farms in the area. Their water plan consisted of building a twelve mile pipeline from a well that had been permitted seven years earlier for an ethanol plant that had never been built.

The Board's request for an environmental impact statement angered the
Agri-Growth Council, whose Directors include executives from Cargill, CHS, and General Mills. Although Riddle says the Board didn't prohibit the CAFO, apparently agribusiness is unhappy with the idea that anyone has the authority to insure that "more information be provided on the environmental and economic impacts of the proposed facility, in order to demonstrate that Minnesota’s laws would be followed and the health and safety of area residents and the environment would be protected."

Advocates for a lot of schemes like CAFOs, sulfide mining on the Iron Range and pipelines through the Headwaters like to portray the opponents of these schemes as head-in-the-sand Luddites. Elimination of the Board, says Riddle, will make it "easier for industrial agriculture, mines, pipelines and other extractive and polluting activities to be approved with little or no citizen participation."

The reality, it seems to me, is that the advocates of these schemes fear their plans won't stand up to close scrutiny. The point is not that CAFOs should never be built, that copper should never be mined, or that oil should never be transported. People could argue those points, but that's not the point here. The point is that politically powerful owners and corporations want to do these things in the cheapest, sloppiest way possible, with no oversight. This makes good economic sense, if your economic perspective extends only to the next quarterly or year-end report. The corporations are acting rationally, from their economic point of view, when they behave this way. CAFOs and companies like Enbridge and Polymet have a long history of cutting corners to save money, and then trying to evade the penalties and costs of cleanup when things go wrong.

But clearly this kind of sensible economic behavior is not in the public interest, or even in the long-term interest of the companies involved. The decision to do it anyway and try to silence the opposition is what economists call "market failure." It is precisely why we can't have a completely free market (despite the fantasies of Ayn Rand-readers), and why regulatory agencies and citizen boards need to exist.