Negative Externalities - Bonneville and Glen Canyon Dams

Negative externalities are the costs of an action that accrue to someone other than the people directly involved in the action. In the case of the Glen Canyon and Bonneville dams many of these externalities were unknown at the time of their development. It was not until later that many of the ecological and social costs became explicit. The situation is now one in which these long term investments in infrastructure have generated large social and ecological costs as a result of economic shortsightedness. The Bureau of Reclamation and the BPA do not internalize these costs. The costs of these externalities are eventually borne by the consumer in the form of higher taxes and increases in energy prices.

Nobel Laureate Ronald Coase first elucidated the reciprocal nature of externalities in his 1960 paper "The Problem of Social Cost"(The Journal of Law and Economics, Oct. 1960). In addressing externalities one cannot think of merely how, to use Coase's example, A inflicts harm upon B and consequently, how we should restrict the behavior of A. To restrict the harm upon B would be to inflict harm upon A. In order to determine who should get to inflict harm upon who one needs to evaluate the costs of the harm done to A in relation to the costs of the harm done to B. The action that minimizes the overall costs is the one that should be pursued. However, when the natural environment is involved, this utilitarian evaluation becomes complicated. Applying this mode of evaluation to the salmon situation in the Columbia river, the difficulties become readily apparent. Few would argue that the Bonneville dam has not negatively impacted upon the salmon population. Expenditures made by the BPA to mitigate the damage done to the salmon population have been enormous. The BPA has recently announced that it will cost as much as $721 million a year through 2006 to help save the salmon (ABC News Online- Whether or not these expenditures represent the actual value of the salmon is not clear. Indeed, these costs could be either an over or undervaluation depending upon the relative success (in terms of number of salmon saved) of the measures taken. Further complicating the issue is the fact that placing a monetary value on a species cannot be done solely in terms of its market value. Leaving the notion of inherent worth aside, market values often ignore the value of the role that a species serves within its ecosystem. To put these costs of saving the salmon into perspective, in 1997 the power generated by the Bonneville dam was estimated to be worth $100 million, less than one-seventh of the annual expenditures on salmon protection.

At the time the Glen Canyon and Bonneville dams were being built the negative externalities that they would create were not recognized. This shortsightedness can be attributed to the prevailing worldview of the time. The dams were being built under the notion of development for humankind. Water, like most other natural resources, was viewed solely as a resource for humans. Economic evaluations did not incorporate the potential costs of environmental degradation and, in turn, the costs that would be borne by producers and consumers. The successful manipulation of natural factor endowments has allowed for increased production levels in the agricultural sector. The Bonneville has generated enough power to meet the demands of an expanding population. Yet, the question of sustainability is now coming into question. No longer is it believed that these dams will stand for the next 500 years. Siltation will, in 150 years, cover the intake valves of the Glen Canyon Dam, effectively eliminating its power generating capabilities. Further the costs of externalities, especially those with respect to the environment, may exceed the benefits of these large dams.

The process of erecting a large dam requires large initial capital outlays and intensive use of labor. Workers on both the Bonneville and Glen Canyon dams were exposed to significant amounts of danger during the construction process. In order to carve the canyon walls into the requisite form for the Glen Canyon dam dynamite was necessary. In addition to the risks inherent to the use of explosives was the fact that workers often had to perform tasks high up from the ground. The combination of these two dangers resulted in the death of 17 workers during the seven year construction period of the Glen Canyon dam.

The Glen Canyon dam entirely restructured the availability of water in the surrounding region. Native American tribes' relationship with the natural environment was fundamentally altered by the increased amount of water. The creation of the dam has forced Native American's in the area into a situation of dependance. They now rely upon the dam both socially and economically. The Sierra Club's recent proposal to drain Lake Powell elicited a response from Navaho officials that made the extent of their dependence upon the dam clear, "The draining of Lake Powell would do nothing but harm the economic and social welfare of the Navaho Nation" (Melvin Bautista, executive director of the Navaho Nation's division of natural resources, ABC News Online).

The negative externalities resulting from the Glen Canyon dam do not impact solely upon the local community. Rather, these negative effects cross both state and national boundaries. With the marked decrease in the amount of water allowed down stream many ecosystems below the dam have been fundamentally altered in a negative manner. The Colorado River runs through Mexico on its way to the Sea of Cortez. The delta area, which was classified as an International Biosphere in 1992, is dependant upon the water to maintain the health of its terrestrial and aquatic ecosystems. But, after the Glen Canyon Dam was built the Colorado rarely reaches the delta area. Last year the Colorado only reached the Sea of Cortez on two days (David Wegner, Personal communication). The lack of water is crippling many species in the surrounding ecosystems and has forced a marked decline in the overall health of the delta area. Thus, the costs of the Glen Canyon dam have not only effected those in the U.S., but have negatively impacted upon Mexico as well.

Lake Powell draws approximately 2.5 million tourists every year that come to enjoy recreational activities such as fishing and boating. Much of the boating that takes place on the lake is in power boats. The effect of the chemicals released into to lake by motorized boats has not yet been quantified. This serves as an example of the fact that costs may increase further due to externalities that have not yet been incorporated into economic analyses.

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