This week, I’m featuring a guest post from Christopher Timmins, Associate Professor of Economics at Duke University.
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Prompted by a number of headline cases of hazardous waste contamination in the late 1970s, the US Congress established the Superfund program under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980. Under that program, the Environmental Protection Agency has placed some of the most contaminated waste sites in the country on the National Priorities List, where federal funds are directed towards cleanup when those funds cannot be recovered from a “responsible party”. Since that time, the EPA has identified more than 47,000 hazardous waste sites that potentially require some sort of cleanup action. By 2007, more than 1,500 sites had been placed on the NPL.
Superfund site cleanups are not cheap. Even before the budget crisis in Washington, there were many calls for an evaluation of the costs and the benefits of the program – the former requiring a careful accounting of all the resources that go into a cleanup, and the latter necessitating a non-market valuation exercise. Superfund cleanups do not trade in the marketplace, but the houses surrounding a remediated site do – this provides one of the most simple and straightforward ways in which to look for estimates of the benefits of a Superfund cleanup – property value hedonics. Economic theory tells us that homebuyers’ marginal willingnesses to pay for the remediation of a site can be deduced from what they are willing to additionally pay for a house that is near a remediated site versus a house that is near a site that has not been cleaned up.[1] This seems like it should be a simple empirical problem. Take two houses – one in a neighborhood surrounding a site that has been cleaned up and one in a neighborhood surrounding a site that has not. How do their prices differ? The problem here (and in most hedonic analysis) is that these two neighborhoods may be different in ways that are not observed by (and hence, not controlled for) by the researcher. These unobservables can confound the effect we are trying to measure.[2]
Empirical techniques have been developed to try to deal with these confounding unobservables. In the parlance of applied microeconomists, researchers have looked for “quasi-experimental” data variation. True “experimental” variation would require the researcher to randomize over which sites get cleaned up – something that the real world isn’t quite ready for yet. Quasi-experimental variation is variation in which sites are cleaned that mimics experimental variation in one way or another. One of the cleanest forms of variation used to date in the literature was suggested by Michael Greenstone and and Justin Gallagher.[3] They demonstrated that a twist in how the first wave of sites proposed to the NPL in 1982 were funded led to two batches of sites that were very similar in terms of how the EPA evaluated the hazard they posed, but only one of which received funding. Comparing similar neighborhoods across these two groups allows the researcher to safely assume that unobservables are not the driving force in any differences in housing prices. Rather, those differences must arise from the effect of the treatment being administered by EPA.
The Greenstone and Gallagher analysis, while relying on a clean source of quasi-experimental variation in data, suffered from another flaw. In particular, it relied on publicly available data describing housing prices at the level of the Census tract. Census tracts are areas containing several thousand individuals and can have a radius of several kilometers. In their hedonic analysis, Greenstone and Gallagher used the median housing price in each census tract as their housing price measure. While this may seem like an innocuous choice, it can have big impacts. In particular, the externalities associated with many Superfund sites are highly localized – unless contamination works its way into groundwater or leaks into the air, it may not affect people outside a narrow geographical range. Still it could have a big impact on the people it does affect. Given the size of a census tract, it is therefore possible that a tract median price may not be affected at all by the cleanup of a Superfund site, while other parts of the house price distribution could be dramatically affected. Indeed, Greenstone and Gallagher found no effect of Superfund cleanup on median house prices. This result has had big effects on Superfund program policy decisions over the last few years.
In our work,[4] we address this problem of localized externalities on several levels. First, using publicly available census housing price data, we take an extra step to construct other parts of the house price distribution (e.g., the 10th, 20th, etc… percentiles of the distribution of house prices in each census tract) and look to see how these vary with site cleanup. Where effects at or above the median become small or disappear altogether, we find big effects of cleanup (e.g., 18.2%) at the bottom end of the of the house price distribution. Within a census tract, it is the cheaper houses that are benefitting from the Superfund program.
Next, we verify this result using restricted-access census block data. Census blocks are much smaller than tracts (think about a typical city block). Data on census blocks can only be used on-site in a Census Bureau Research Data Center, and only after going through a long series of security checks. These data confirmed once again the presence of big cleanup effects on nearby houses (e.g., 19.4% on houses within one kilometer).
Based on these results, we feel confident that Superfund cleanups do, in fact, provide benefits to nearby homeowners. Whether those benefits are big enough to exceed cleanup costs is another question that we are currently studying. Passing a simple cost-benefit test will be made more difficult by the fact that benefits are localized, so a small set of houses will see price increases from cleanup. Whether the benefits to those houses are sufficient to justify the costs is an empirical question. Note that this sort of analysis ignores benefits that might arise from improved labor market conditions if a site cleanup leads to economic revitalization of a neighborhood. It may also ignore health benefits if people aren’t aware of them, and hence don’t build them into their home-buying decisions.
[1] Note to reader – this is a delicately worded sentence. Current research in non-market valuation theory (hedonic theory in particular) is aimed at rectifying shortcomings in the simple hedonic analysis that prevent the researcher from recovering preferences from compensating differentials in housing prices. For example, when a change in a neighborhood is non-marginal (i.e., big relative to the size of the housing market), simple welfare measures are invalid. Moreover, we may expect people to move around (i.e., re-optimize) in response to the change. Simple hedonic techniques are not able to handle either of these possibilities.
[2] Note that research on this question has seldom even bothered trying to compare neighborhoods containing Superfund sites (cleaned or uncleaned) with neighborhoods that contain no sites at all – the thought being that the determinants of housing prices that we can’t see are likely to be very different across these two groups – we should at least restrict those unobservables to be the sort we would find in the vicinity of a site of some type.
[3] Greenstone, Michael, and Justin Gallagher, “Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program,” The Quarterly Journal of Economics, 123 (2008), 951-1003.
[4] Gamper-Rabindran and Timmins (2011). “Does Cleanup of Hazardous Waste Sites Raise Housing Values? Evidence of Spatially Localized Benefits.” http://econ.duke.edu/~timmins/Gamper_Rabindran_Timmins.pdf
It makes perfect sense that homes nearby to Superfund cleanup sites would be more valuable than homes near sites which have yet to be cleaned up. That being said, it would be interesting to see if the sites which have been cleaned up were already any more valuable neighborhoods to begin with. If there is a NPL site in an old industrial district in an essentially abandoned part of a city versus an old NPL warehouse in a revitalized neighborhood, it would make sense that the site in a revitalized area would get cleaned first. Thus, due to its value to start, the median home price (or real estate price in general) would be set up to have a higher price.
If such bias was placed on which sites have already been cleaned up, it would seem that the federal government should try a more randomized selection of sites, whether it be a site which costs $1 billion to clean up or $10 million. That would provide true equality for all the neighborhoods affected by Superfund sites and hopefully return their surrounding neighborhoods back to a higher and more stable home price equilibrium.
One benefit that’s not mentioned in the analysis above is existence benefit. Personally, it’s worth something to me to know that hazardous sites in this country are being cleaned up, even though I’m unlikely ever to be directly impacted by the hazardous waste at these sites. The benefit to me may not amount to much, but assuming there are others out there like me who also derive an existence benefit from the clean-up, the total benefits provided by a site clean-up become a bit larger and a bit less localized. It’s important that any cost-benefit analysis take existence value into account, though quantifying it is admittedly difficult.
It seems like this research is a good example of the problems that are involved in incorporating externalities into an economic analysis appropriately. In this case, it was the localized positive externalities for a small subset of houses. I actually thought the most interesting part of the article was at the end when Dr. Timmins acknowledged that it’s hard to say whether or not the benefits he found for nearby homeowners would be enough to outweigh the costs associated with cleaning up the Superfund site. Granted, there are certainly benefits not accounted for, as he pointed out, but Superfund sites can cost a lot to clean up and can only add so much to housing values. Another issue associated with determining the actual impact of cleaning up a Superfund site on the surrounding neighborhood is how clean is clean. Cleaning up the site by 90% may be worth it for the extra value added to these homes, but the remaining 10% may end up costing way more than any additional benefits associated with it.
I agree that the end of the article is interesting because the author reiterates the fact that a cost benefit analysis may not truly capture all values of the costs and benefits associated with superfund sites. I understand that from an economist’s viewpoint, clean up costs increase at an exponential rate and occur at a rate of diminishing returns. However, as an informed citizen who cares about public health, I firmly believe the benefits of cleaning up hazardous waste sites astronomically outweigh the costs. First and foremost, we cannot truly comprehend the full ramifications of the presence of hazardous waste entering the many natural cycles of the earth (hydro, sedimentary, etc.). Therefore how could we possibly identify the true benefits of removing the toxins? Second, companies/ corporations should not be allowed to degrade the earth in such a horrendous manner without just compensation. Although CERCLA provides liability of persons responsible for the release of toxic substances, not all companies are always held responsible/found liable. Perhaps the solution to the costly nature of clean up should look at WHO is financially responsible rather than IF it should be done at all. I think there is a definite need for superfund sites, despite costs potentially outweighing the measureable benefits. In addition more efforts should be put toward identifying responsible parties for clean up rather than relying on just the trust fund (made possible by CERCLA) to provide for clean up.
While I agree with Daniel that there should be equality and randomization in selecting Superfund clean up sites, I do think the cost-benefit analysis could be skewed by looking at neighborhoods in which clean ups will contribute to an already ongoing revitalization or gentrification. In that case, the benefits of cleaning up a Superfund site may not only contribute to housing prices, but may also affect local business revenues and public perception. On the other hand, the same argument could be tacked onto the “cost” side of the equation for neighborhoods not likely to undergo any kind of revitalization unless a Superfund clean up is conducted. Either way, no one deserves to live in a toxic environment.
The article reveals the fact that cost-benefit test of the superfund clean up is complex and worth a lot of thinking.One of the most simple and straightforward ways in which to look for estimates of the benefits of a Superfund cleanup – property value hedonics.However,two neighborhoods may be different in ways that are not observed by the researcher.Furthermore,in the hedonic analysis, the median housing price is used in each census tract as their housing price measure. However,the externalities associated with many Superfund sites are highly localized,it is therefore possible that a tract median price may not be affected at all by the cleanup of a Superfund site.We can make every endeavor to modify this analysis ,but it seems like that the analysis still ignore some important elements.Therefore we need to take an overall perspective.However,from my point of view,this kind of clean up is necessary because peoples’ health is the most important benefits that we need.
It is indeed the case that the efficacy of CERCLA is questionable and foreseeably unquantifiable to warrant such interventionist policy. The problem results from a maligned incentive structure, which fails to hold site owners accountable for damage done to neighboring people and property. In this system, the true “polluter pays” policy goes unnoticed. As a result, many sites go untouched, with little to no cleanup started, while the government and “potentially responsible parties” contend over the delineation of responsibility (not to mention amassing huge costs and legal fees). Another major shortcoming of Superfund is the issue of organized political interests in the decision-making process of site cleanup. Politic interests can push for – or against – specific types of cleanup strategies. Such political clout can determine the course of remediation or lack of it regardless of the technical feasibility and cost effectiveness in protecting human health, the primary goal of the Superfund. These pressures can limit the choices available for pollution mitigation to program decision makers. As in the case of the blog, biases can dominate site selection where priorities are given partially to sites that have more “value to start.” Since most hazardous waste problems are local issues, it seems hard to justify federal government interference as opposed to state or local government involvement in wastes sites that pose a serious public health problem.
I am curious as to why only the sites listed on the National Priority List are considered for cleanup. I understand that there are 47,000 waste sites and categorizing the sites based on priority simplifies the math. However, with a fixed amount of money that is to be used for cleanup, the most efficient and effective allocation of that money may not be within the realm of the 1,500 NPL sites. Granted, this is probably a moot point…
As for Timmins` findings of lower value housing benefitting more from contamination cleanup, that makes sense to me. Having said that, I would assume that places that were contaminated, e.g. land with factories and similar industries, would be located in areas where housing prices would be low. Therefore, I feel that would lead to the increase in price of lower valued housing, because those are the houses that are in the area of the contamination. Are there examples of houses in wealthier suburbia that were built on contaminated fields? I would assume probably not.
There are several consulting firms that do brownfield remediation (like Cherokee right here in the Triangle), and build highly functional developments on them. They’re not all Superfund sites, but they are all degraded, uninhabitable landscapes. The result is typically mixed use, and some of them do cater to the wealthier set. Also, sometimes brownfield sites (and maybe Superfund, too, I don’t know) are turned into ritsy golf courses. With the right amount of the proper press, any site’s reputation can be turned around after remediation.
This blog post reminds me about NIMBY – Not In My Backyard- often a public outcry associated with the location of new nuclear energy facilities close to residential neighborhoods. I’m curious to understand the similarities between the methods and calculations mentioned in this article and the methods used to evaluate the placement of a nuclear facilitiy or even factory in a neighborhood. Are the measurements the same? what about the metrics? I imagine that some externalities would obviously be similar but it is my assumption that actual measurements would be different as in this example, the focus is after the incident and not before. In short- what are the considerations made before the possibility of an incident occurs?
I was really glad to see that Timmins took his research into more detailed data than a census tract. As soon as I read that from Greenstone & Gallagher’s methods, I knew that there was no way they could get accurate results. If you look at Los Angeles County, or even more drastic: Orange County, CA, house prices range from the low $200,000 to over $5 million and that’s within the same census tract. If there were a Superfund site nearby then the housing prices would change at very different percentages because of so many other factors that I don’t think a reliable assessment could be performed.
For example, if you look at Alistar’s comment about nuclear power plants and how they could affect housing prices etc., there is a nuclear power plant at the southern border of Orange County as you enter San Diego County. The $5 million houses I mentioned above are within the radiation poisoning radius of that facility and yet they are still $5 million. I think when it comes to housing, there are certain things people care about (which can be very different depending on the person or family). Things like: quality of the school system, commuting distance to work, whether or not you have a view from your backyard, and tons of other factors. If the Superfund sites were not announced or weren’t easily noticed, I think that there are a lot of people, who would not take it into account when paying for their house.
I also agree with Keith in his comment about the existence benefit, and I would also like to add the option benefit that could potentially be gained from cleaning up Superfund sites. Yes, I get a certain amount of satisfaction from knowing that there is less hazardous waste in the world, but I think I would get even more out of knowing that there was no hazardous waste in places I actually want to visit/live/etc. And along the lines of living someplace near a Superfund site, I think one of my biggest concerns would be the health aspect more so than housing values (though I understand that housing is much easier to quantify & compare than health). I wouldn’t want my kids around hazardous waste, so I would make that one of my factors when looking at a house.
Going back to how this all works into a cost-benefit analysis, there seems to be so much variability in what to account for under use value that you would almost have to find a way to quantify non-use (existence & optional) value as well to make an analysis at all reliable.
Am I glad Timmins determined that it was beneficial to keep the Superfund program going? Definitely. Do I think cleaning up hazardous waste sites is worth the costs? Yes. Am I sure that the benefits outweigh the costs? Unfortunately, no. And I’m not sure anyone ever could be.
I would think that not all of the hazardous waste sites are equally contaminated as I’m sure there were different causes of contamination for different sites. Would this not affect homebuyers decision or are they not informed about the magnitude of the contamination? If there is significant variation in knowledge of the level of contamination then simply comparing cleaned-up sites with non-cleaned-up sites doesn’t seem to be enough.
I wonder if contingent valuation wouldn’t be a better method for determining the value of site cleanup to potential homebuyers. That way all other variables could be kept constant with only the condition of the site varying to different degrees. This would of course would be much more expensive but it might have more meaningful results.
This blog reminds me of my hedonic research on impacts of green spaces in Shanghai. Since real estates are really complicated properties which include bunches of attributes, it is really difficult to take all the observables and non-observables into account. Most researches only considered the driving variables that mostly determined the housing prices. Thus, as that being said in paragraph 3, the unobservables are not the driving forces in any differences in housing prices, I believe hedonic model is a reliable and useful tool to evaluate the benefits of sites clean-up. The biggest concern about using this method is whether people living nearby know the action of clean-up or not. If they are not aware of such actions, the differentiated prices could result from community revitalization after the clearn-up, but they can by no means used to estimate the benefits of superfund clean-up action.
Another interesting point to me in this article is that within a census tract, it is the cheaper houses that are benefitting from the Superfund program. Generally, wealthier people in the society are more aware of the surrounding environment, so this conclusion is beyond my understanding. I would like to know if there is any further research explaining this conclusion.
I too am wondering about cheaper houses benefiting from the Superfund program. Like other students in LAW 235 have said, a major issue is the fact that Superfund sites located in close proximity to high-income neighborhoods are actually cleaned up much faster and more completely than sites located in low-income communities. I would be interested in looking at further research, including Superfund clean up leading to actual improvement in the quality of houses around it.
I think it’s interresting that several posters have indicated that they dont believe they will ever live in a neighborhood like that under consideration in the study. As a personal reality check, I consider myself to be someone who is highly aware of these issues, and yet I found it to be quite difficult to get good information on the location of various types of hazardous waste sites when purchasing a home. The availability of such information not necessarily the NPL sites, but certainly state sites, is changing from more to less open. So as a matter of personal valuation I couldn’t tell you what premium was placed on this particular attribute of my house. Real estate is a pretty interesting indicator of priorities. I wonder what the influence of an increasingly transient population (generationally at least) has on the question of interest and the future value analysis.
Here is a link on the EPA’s website. It allows you to find Superfund, Brownfield, RCRA, and other types of sites that report to EPA in your neighborhood. There are quite a few in Durham. As someone who lives Downtown, there are quite a few close to my apartment!
http://www.epa.gov/myenv/MyMap.html?minx=-78.99754&miny=35.96050&maxx=-78.80699&maxy=36.03133&ve=12,35.99928,-78.90154&pSearch=&pLayers=npl,rcra,triland,acres,tsca
One of the assumed things about markets in economics is perfect information. When it comes to Superfund and other types of sites, this cannot be assumed. Many people may not know if they actually live near a Superfund site. Also, the extent of knowledge about the actual contamination and effects on health is probably unknown as well. In addition, many of these Superfund announcements and cleanups take place years later. As well, the studies on negative health effects will also not take place until years later. Most of these buying prices will be based on people’s feelings of not wanting to live near a Superfund site or believing a site has been cleaned up, not based on actual damages or abated damages of living near the neighborhood. The purpose of cleanup of the site is actual abatement of environmental and health damages, not making people feel better so they’ll move back in. I feel the costs and benefits are measuring different things. Just looking at hedonic market prices is incomplete. Also, housing markets, especially in low-cost neighborhoods, are often not truly elastic or free (subsidies, public housing, etc). Health costs and data would be a better measurement for cost-benefit analysis of superfund cleanups than hedonic prices.
I agree with Liz that people are often not aware of the environmental hazards around them. As environmentalists superfund sites are well known to us, but often the people living on the site have no idea what the dangers are. One of my undergraduate professors, Dr. Artiola, was involved in assessing the Love Canal site. When the decision was made to remediate the site there were still people living in some of the most contaminated areas. Many of these people did not want to leave. Scientists and workers were wearing biohazard suits whenever they got near the property yet the residents still did not understand the danger they were in. I feel that if this can be the case in such an extreme situation, it is hopeful at best to expect housing prices to be a satisfactory indicator of cost by itself.
Due to the highly localized nature of the externalities associated with Superfund sites, it is critical to narrow the geographic focus when estimating the depreciation value on homes near Superfund sites. As Timmins points out in his posting, many community members are unaware of the health risks of being in the vicinity of a Superfund site, and therefore do not factor that into their home-buying decisions. Therefore, being in the very near vicinity (i.e. within sight) may have a much more drastic impact on home values that simply being in the Census block (and most certainly tract.) Out of sight out of mind, as some people might say. This process also presents an environmental injustice to citizens of low income that reside in the homes in close proximity to the sight. Timmins et al research takes into account the appreciation value of these low-income houses and ensures they are factored into the overall cost-benefit analysis of the remediation program. I would be interested to see an even narrower drill down of home values, such as the expansion Timmons et al made in the four markets. I would imagine there is a drastic effect on homes within 0.5, and 0.1 km of the site. I’d also be interested to know the mean home prices at the time the Superfund cleanup was publicly announced to see if home values begin to increase immediately at that point. The appreciation captured in Timmons et al study only accounts for year 1990 to year 2000, in alignment with the Census.
I think the last two sentences of Prof. Timmins’ blog post are very important in evaluating the benefits of cleaning up Superfund sites. Although the human health benefits of site cleanup are the most important, remediating a Superfund site isn’t just about removing hazardous materials. It can be the first of a series of events that restores a community. Blighted sites are like broken windows- once you start fixing one, there is more momentum to continue improving entire neighborhoods. Brownfields and Superfund sites are not only hazardous, but downright ugly. Removing this blight makes people feel better about the neighborhood and more committed to it. This sense of community pride may or may not be reflected in home prices.
As Prof. Timmins suggests, revitalizing these sites can lead to economic development and job creation if they are used for industrial or commercial spaces. This is an important benefit that should be captured in an analysis of benefits.
It is obvious that choosing an inappropriate method to do analyzing tends to lead to biased results. Since houses with different distances to the Superfund Sites are affected to different extents, it is irrational to take all the houses in the Census tract as a population and use the median to represent the population. Timmins’ work corrected this flaw by constructing the house price distribution. And the result that “within a census tract, it is the cheaper houses that are benefiting from the Superfund program” may also reflect that the reason why these houses are cheaper is that probably they are affected more by the Superfund Site. So they benefit more from Superfund cleanups.
Also people’s health benefits are mentioned at the end of the blog. Although this factor is difficult to be quantified and calculated, it is actually a crucial element to consider in home-buying. For example, I will never buy a house near the Superfund Site no matter how perfect the house is. Because I know the potential hazards of the Superfund Site may be caused to people, although it may not be clearly proved. Therefore, evaluation of the costs and benefits of the cleanup program should take these factors into consideration.
As Yifei mentioned, the part that most confused me was that the cheaper homes were the ones most benefiting from the superfund program. This at first seems counter intuitive since if you are talking about a cost benefit analysis it seems that improving an area around more expensive homes would be more beneficial and have a higher chance of exceeding the cost of the clean up.
Although then as I thought about it more I realized potential development in lower income areas is much higher so future benefit would be much greater then in areas already highly developed.
Also it is usually in these lower income areas where business is the most prevalent. Cleaning up a business area can often greatly reduce their cost and cause more business to come in. Where as in wealthier sections there are usually local mandates against businesses moving in so even as the area gets cleaned up the amount of businesses would not increase. In addition some of these local mandates may cause the cost of removal to increase as they likely have restrictions on hours and level of construction equipment use.
Bringing in businesses would to me have a much higher affect on increasing benefits, so I think rather than just looking at home prices it would be interesting to see the other statistics of the area.
Another reason I questioned it is you would think from a political standpoint the wealthy home owners would have more sway to have the fund used on them, but who knows maybe in this small little sliver of political decisions where there is not corruption (although doubtful).
I would like to second the reply made by Keith regarding the significance of benefits from existence value that are being ignored in the cost-benefit analysis of Superfund cleanups. As Keith said, while only a few people may be directly affected by the cleanup of these sites, many more would likely have some willingness-to-pay due to existence value. I will take his comment further however, and say that all environmentalism ideologies aside; many people would have some willingness-to-pay for cleanups of Superfund sites based solely on humanitarian principles. I think it would bother many people to imagine other Americans living in a neighborhood where they felt they couldn’t enjoy a barbeque or play catch with their kids for fear of stumbling upon poison in their own backyard. People shouldn’t feel compelled to worry about the risks of living near abused and abandoned land, especially when it’s someone else’s doing. It seems like a human right to be free from such worries, and I think most other people would agree.
This “superfund site” kind of reminds me of brownfield. There are many consulting firms doing brownfield cleanup projects nowadays, and I assume the process is similar to the cleanup of superfund site. My point is, it is not quite necessary for the government to spend money on these cleanups. Usually, in my opinion, government-invested projects are just not cost effective, since people don’t really care about the money that they are spending (because it’s not their money!). I think it’s better for the government to sell or rent these “superfund sites” to interested parties such as real estate developers, and let them do the cleanup works. In this way, the government is actually making profits (maybe not as big as commercial profits) instead of spending people’s tax money. The real estate developers would consult specialists if they think the site is worthy, and the project would end up being more cost effective. In addition, I don’t know if anyone wants to live in a house that is built on contaminated waste site, so it’s not very reasonable to compare housing price of clean site with that of polluted site. It would make more sense to compare housing price of cleaned-up sites with that of regular sites that have never been contaminated.
It is acknowledged in the blog that the study concentrated on comparing the prices of housing which are located near Superfund sites, cleaned or uncleaned or proposed for cleaning while it does not take into account the variation in housing prices between neighborhoods of non-Superfund sites and those of Superfund sites. The housing prices may be impacted by the fact that a particular neighborhood was recognized as severely polluted and was put on the National Priorities List for clean up. Coupled with it will be the factor of how much people are willing to trade-off external factors such as work opportunities, community, school systems, etc. with living in a relatively less/more polluted area.
Also, it would be useful to consider the non-use value of housing in Superfund sites for further analysis and to obtain a more realistic measure of WTP. As already discussed by my classmates already, I would like to know that hazardous waste sites in my country were getting cleaned up and I might even be willing to contribute towards such a clean up if asked to.
This mirrors the hedonic property valuation exercises we have been doing in class, though this real example strikes me as a gross oversimplification. Much like the previous blog post evaluating health effects of smog, it seems that this analysis would underestimate the true benefits of cleaning up a superfund site. If any real individual were faced with a mess of hazardous waste, their first concerns would certainly not be focused on how the waste will affect their housing prices! They would consider the effects on their health, their children’s health, and if they were evironmentalists, they’d have the ecosystem effects to tack on. Placing a money value on this is understandably quite difficult, but it doesn’t seem to me to reflect how any non-economist would value this danger. Additionally, individuals not faced directly with the effects of toxic waste might still be willing to pay to have it cleaned up, as others have mentioned. As with health-related environmental issues, it surprises me that the costs might ever exceed the tremendous benefits.
One factor about which I’m curious in this equation is not “willingness to pay” as much as “ability to pay.” If someone is inquiring about your WTP, if you are giving an honest answer, than it is likely that you’re basing your response on your income. To a person of low income, a high number to them might seem low in the grand scheme of things. The collective WTP of a low-income neighborhood might result in a lower number than that of a similar all-other-things-constant middle class neighborhood, even if the value they’re trying to express is exactly the same. As Superfund sites are occasionally the topic of environmental justice discussions, income of the community that was already there could come into play. That being said, I don’t know enough about how benefit-cost analyses and other calculations account for this, so this entire comment could be a moot point. I will echo several other commenters when I say that people deserve to live near non-contaminated areas, even if the benefits don’t outweigh the costs.
This article made me realize the complexity of cleaning up Superfund sites. My thinking before this article was that all Superfund sites should be automatically cleaned up and that people should not have to live near damaging waste that they did not cause. While I still have this viewpoint, I now realize all of the complex factors in the decision making process of when and which sites should be cleaned.
It would be intersting to note if houses at the level of the Census tract around a cleaned Superfund site increase in value because of the increase in home value of the houses geographically very near the cleaned Superfund site. So while this increase in home values may not be directly linked with the clean up of the Superfund site, it is an indirect benefit. I also agree that there are significant benefits from existance values. I would like to know that a place I could potentially move to in the future is safe and clean.
This study represents an improvement in the methodology of the Hedonic Housing Model by breaking the study area into smaller “parcels” and thus being able to pinpoint specific willingness to pay. However the Hedonic Housing Model ignores many of the values that do not come into play in the housing prices. This is acknowledged in the article with the example of health benefits. Thus perhaps contingent valuation would be a more effective way to measure people’s willingness to pay and account for non-use value. This includes considering the existence value. It is worth something to individuals that these sights are getting cleaned up. Although this study represents a significant improvement in one specific method (the Hedonic housing model), it appears that a combination of methods may be more accurate in revealing the true benefits of site clean-up.
I think the major factor we are forgetting to take into account regarding cleanups is future costs and benefits. These efforts may be costly to conduct and have a small relative effect on the value of homes now, however, if the Superfund sites continue to accumulate hazardous materials in the soil and the air, the impacts for the future will be compounded and cost even more. What will happen to the air quality, water quality, soil quality, human health, biodiversity health, ecosystem services, etc. if these sites are still contaminated in 5 years? 10 years? Parties that are largely responsible for the toxic emissions should be prepared to provide compensation to support clean up efforts now, and more importantly, be prepared to use these funds to improve their technology and strategies to emit less waste in the first place. The Superfund sites are a “band aid” on the problem, not the solution.
I think this posting did a good job of pointing out the many complexities of carrying out an analysis to determine the monetary benefits of cleaning up Superfund sites (or indeed any economic analysis to determine costs and benefits). The analysis Dr. Timmins describes certainly seems like an improvement over the method used by Greenstone and Gallagher given that census tracts are large enough that they could include a large range in housing prices. It also makes sense that those houses closest to the Superfund sites would benefit a great deal from clean-up, while those further away may not see a significant change in prices, thus showing the importance of looking at the smaller census blocks. However, while this method is an improvement, I am still interested in how the cost-benefit analysis would be affected if other variables were taken into consideration. For example, factors surrounding health benefits (and costs) were touched on by Dr. Timmins and other students, and I too wonder if the hedonic property model can truly capture the willingness to accept health risks since it would require that buyers have perfect knowledge of the risks. Is it truly the case that buyers know of the health risks and fully take the potential costs of health problems into account in buying cheaper property that is closer to the hazardous sites? Or are they, on some level, being forced to accept risks (for which they are uncompensated) that they wouldn’t normally accept given better financial means. I also wonder how time could be better considered for this type of analysis. If sites are allowed to persist without cleaning up, property values close to the sites could fall even further. I would assume, then, that this would eventually negatively impact housing values further from the site, thereby changing the benefits calculation of cleaning up a site now. These factors are, obviously, hard to take into account when putting a dollar value on benefits, but I think that they are important to at least consider when making policy decisions given that everybody has a right to live in a clean neighborhood.
As stated in the initial post, most of the home sites near a Superfund Site, whether it has been cleaned up or not, are on the lower cost of the housing spectrum. The knowledge that a home is near a Superfund Site would definitely be a deterrence to anyone who is able to afford better housing. This seems to be a constant theme, that lower income families are forced to bear the burden of the country’s problems, and it is sometimes the result of ignorance. I firmly believe that the existence, location, and associated health risks of these sites should be well advertised to the local population and anyone looking to purchase a home there. I believe it is the lack of full understanding and ignorance that cause people to put their health at risk by moving near a Superfund Site. My point is that if the sites were more widely known, I believe the property values near sites, both cleaned and not cleaned, would be much lower than they currently are. And, I believe the difference in property values between clean and un-cleaned sites might be even greater if the facts were more publicized.
As far as the analysis goes, I think that the author’s approach more closely represents the true economic impact of the effect of Superfund Sites on the local area than the original estimates. To go further, I think capturing the level of awareness of the residents near the sites, both clean and un-cleaned, would be beneficial in order to capture whether their ignorance plays a role in skewing the economic impact.
Timmins’ article illustrates just how complicated it is to evaluate localized positive externalities. It seems obvious that homes near sites that have been cleaned up would be more valuable than homes that are located by ones that have not. However, it seems there are many other factors to consider when evaluating these benefits. As of 2007, there were 1,569 sites on the NPL, but only 324 had been officially remediated and deleted off the list. So even if people in these localized areas are seeing their housing values increase, is the whole Superfund program cost effective? Also, after searching the Superfund sites in the area where I lived I noticed some are much larger than others. Certain sites encompass a wider area, while some are just residential addresses. When the benefits are analyzed is it taken into account how extensive the clean-up sites are? Finally, because of all these factors that make it difficult to evaluate the benefits of cleanup and the huge amount of money they cost I believe it is important to focus on identifying potentially responsible parties. Although many superfund sites are cleaned up by PRP’s, if more incentives were provided for companies to take responsibility for the hazardous sites such as settling claims quickly without litigation, this program could be more effective and more of these localized benefits realized.
Many of us have been learning about the superfund litigation process in Environmental Law. After EPA cleans up a site, it sues the responsible parties, including current and past owners of the site, to force them to pay part of the expense for cleaning the site. It strikes me that contingent valuation could be an interesting way for the lawyers involved in litigation to quantify the value of the clean up of a site beyond the costs of the actual removal and remediation. I think many people who don’t live near superfund sites and will not be directly affected by a clean up still derive option or existence value from knowing that their community or state is safer and healthier overall with the cleanup of this site. While I know the EPA has very little superfund money for clean up let alone the expense of a CV study, I think that the comments in this blog reflect the benefits garnered by society at large from superfund site clean ups. If the EPA could incorporate these benefits into the total pricetag of their clean ups, they could potentially hold companies financially responsible for a larger share.
Like many of your readers, I am also taking Environmental Law with Professor Salzman and I found the topic of Superfund very interesting.Superfund is one of the most controversial environmental laws due to the fact that it has been criticized of lacking a clear structure and being ineffective in its implementation. In the Mid 1990’s lack of funding from the Congress stunted the pot of money the Superfund pooled from.
After reading Dr. Timmins blog post, it became even more apparent to me how much policy and economics intertwine. The benefits of Superfund are clearly illustrated. I think if more in-depth economic analyses were done to support Superfund’s policy approach (focusing on different angles of the issue), the topic could be less controversial. In addition, the EPA states they have recovered $165 million of $294 million (56 percent) of the total Superfund costs from the sites (www.epa.gov/oig/reports/2008/20080326-08-P-0116_glance.pdf, 2008). I do believe that Superfund has significant benefits to society and if there was a clearer model on who is responsible for the cost than Superfund would be a less controversial law.
This is an example where estimating the benefits of a good is extremely difficult. Here, cost benefit analysis should be only one of the many factors which go into evaluating a policy. Having discussed CERCLA in LAW 235, a major issue was the fact that superfund sites located in close proximity to high income neighborhoods are cleaned up much faster and more completely than sites located in poor communities of color. James Hamilton, a Duke graduate, did his dissertation researching factors influencing superfund clean up. He found the single most effective factor is voting percentage.
It is possible that the hedonic property model overlooks some confounding factors. Perhaps wealthier communities are able to petition the government and trust the system; whereas, those who are living in poorer communities near superfund sites distrust the ability for the government to protect the community or are unaware of the potential harm from these sites.
I believe Timmins’ finding that lower value housing benefits more from contamination cleanup is to be expected. A wealthier community receives contamination cleanup because they have political power, there is not much higher up in the spectrum of prices for these houses to go as compared to lower value housing.