Summers memo

The Summers memo was an excerpt of a 1991 memo signed by Lawrence Summers (though actually written by an aide, Lant Pritchett) who was, at the time, Chief Economist of the World Bank.

In this excerpt, the memo advanced an economic argument for the dumping of pollution from First World countries in the territory of Third World countries. The argument was intended to be an "ironic aside" by the memo's original author, Lant Pritchett, and was intended to support an argument in the memo that free trade would not necessarily cause environmental benefits for developing nations. [http://www.harvardmagazine.com/on-line/050171.html Toxic Memo] , Harvard Magazine, May-June 2001]

The excerpt was leaked to the media with the implication that it was a serious, standalone memo, and it instantly became a symbol within the anti-globalization movement of "the arrogant ignorance of many conventional 'economists' concerning the nature of the world we live in" (Brazilian Secretary of the Environment Jose Lutzenberger). [http://www.whirledbank.org/ourwords/summers.html text and commentary] , The Whirled Bank (satirical website)]

Lawrence Summers initially accepted responsibility for the memo, but claimed that this argument was satirical and not meant to be taken seriously. An aide, Lant Pritchett, later stated that he had written the memo and Summers had only signed it. Critics have argued that even if it was meant as satire, the memo is in fact an accurate reflection of existing World Bank policy.

In Economics, Moral Analysis, and Public Policy, the authors emphasize that this note might seem to be based in economics as a science, but in fact contains strong moral premises which cannot be removed and still leave the argument intact. The argument is based on economic science, but it also is based on a certain view of welfare economics, which is the normative (value laden, non-scientific) side of economics. It is possible for economists to disagree with this memo not just on empirical grounds, but also on moral grounds.Housman, Daniel M., and Michael S. McPherson. Economics, Moral Analysis, and Public Policy. New York, Cambridge University Press, 2006.]

Text of the Excerpt

The following version of the memo excerpt has been posted on a number of websites. [http://www.whirledbank.org/ourwords/summers.html text and commentary] , The Whirled Bank (satirical website)] [http://www.jacksonprogressive.com/issues/summersmemo.html an alternate source] , The Jackson Progressive] However, Pritchett claims that this is in fact a doctored version of the original that has been "shorn of [it's] context and the intended irony." [http://www.harvardmagazine.com/on-line/050171.html Toxic Memo] , Harvard Magazine, May-June 2001]

DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP

'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Least Developed Countries] ? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under 5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.

The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.

External links

* [http://www.pcdf.org/1992/29korten.htm The Logic of a Free Market Economist] , a critique of some of the economic logic in the memo