Market Failures for Love Canal

The first and most obvious market failure surrounding the Love Canal is the negative externality created by pollution. The pollutants dumped into Love Canal had a drastic adverse effect on the people of the area and the school children educated on the dumpsite. The externality was not a direct result of production but was certainly an unattended effect of the production process. Although different from damage created by smokestacks, the byproducts of Hooker Chemical and the United States Army had a direct effect on the people of Niagara, New York. The astonishing rise in miscarriages, birth defects, urinary disorders and other associated illnesses would caused a large shift in social marginal cost function. The function increases or shifts upward because the effect Hooker Chemical had on society was larger than merely the production cost. One example of the adverse effect of Hooker Chemical’s production was miscarriages. One study found that miscarriages increased by three hundred percent in women who relocated to the historically wet areas of the Love Canal region. These are unintended consequence upon a third party creating a negative externality.

Government failure is a second market failure effecting Love Canal. In the case of Love Canal the United States government was directly involved in dumping pollutants. The political system failed the people of Niagara County when it used Love Canal as a secret dumping of research byproducts. In one document we found there is evidence that the people of the region began complaining of odors and substances seeping out of the ground. The government did not help. In fact the city’s response was to cover the area with additional dirt and clay further compounding the problem. The government continued to lie about the site even in the face of its effects. Originally the government moved out the two hundred and thirty-nine families that lived directly over the Canal then they announced that the others outside the original canal were. It wasn’t two years later in October of 1980 that the government evacuated all the families in the community and agreed to purchase their homes at fair market value. The government failure to respond quickly and take responsibility was its biggest offense assuming that in the 1950’s when the site was contaminated no one knew the effects of such a disposal.