Bankers,Developers,and New Investment in Brownfield Sites: Environmental Concerns and the Social Psychology of Risk

Abstract

The 1980 Superfund Act has severely retarded economic development efforts to renovate abandoned and underused lands and buildings by holding past and present landowners liable for environmental hazards on their properties. This article takes a look at some noneconomic factors shaping investor risk perception. We review risk characteristics such as uncertainty and uncontrollability, the workings of the availability heuristic (a critical psychological factor), and the social amplification of risk We apply findings and insights from the literature to property developers and financiers to better understand both their motivations and specific fears of brownfield opportunities. This review permits us to assess the opportunities available for public sector intervention to stimulate capital flows to brownfield locations. We conclude by recommending public sector efforts that could both improve the environmental status of old brownfield sites and stimulate new investment and economic development in locales suffering excessive capital flight.