Free Market/spec Sale/avail Hard Only

Terry L. Anderson

• Publisher: Taylor & Francis
• Year: 2019
• eBook ISBN: 9780429717420
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Although there is in the United States a clear national consensus supporting the protection of the environment, advocates often profoundly disagree about the policies best designed to achieve this end. The traditional answer has been that government must intervene, through legislation and regulation of behavior, to preserve environmental values. Th

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Visions of the Environment

Many people see free markets and the environment as incompatible; for them, the very notion of free market environmentalism is an oxymoron. Even many “free marketeers” find themselves on opposite sides of the fence when it comes to governmental regulation of the environment. Some will hold fast to the conviction that markets work best to allocate most of the goods and services we enjoy, but they will also argue that the environment is different and is too precious to be allocated on the basis of profits.

The view that markets and the environment do not mix is buttressed by the perception that resource exploitation and environmental degradation are inextricably linked to economic growth. This view, which first emerged with industrialization, builds on fears that we are running out of resources because economic growth based on materialistic values is tempting us to squander our natural endowment. During the Industrial Revolution in England, the Reverend Thomas Malthus articulated this view by hypothesizing that exponential population growth would eventually result in famine and pestilence; productivity simply would not be able to keep up with population. The human propensity to reproduce, according to Malthus, would eventually surpass our ability to feed ourselves.

Modern-day Malthusians have given such dire predictions an aura of credibility by using complex computer models to predict precisely when Malthusian calamities will occur. In early 1974, a group of scientists from the Massachusetts Institute of Technology predicted:

If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years. The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity.¹

In a graph generated by its computer model, the scientific team showed that the “uncontrollable decline” would begin shortly after the turn of the century—in 2005, to be exact—with a precipitous decline in industrial output, food supplies, and population.²

The Global 2000 Report commissioned by President Jimmy Carter arrived at similar conclusions in its prediction of what the state of the world’s population and natural resources would be at the turn of the next century. “If present trends continue,” the report claimed, “the world in 2000 will be more crowded, more polluted, less stable ecologically, and more vulnerable to disruption than the world we live in now. Serious stresses involving population, resources, and environment are clearly visible ahead.” In every resource category, Global 2000 predicted overuse and declines in quantity and quality.

But there is no indication that these predictions will come to pass, and many of them have already been proven wrong.³ The problem rests in the acceptance of Malthus’s initial premise that demands on resources will be exponential while the supply is finite. All of these forecasts fail to take account of the ability of humans to react to problems of scarcity by reducing consumption, finding substitutes, and improving productivity. As economist Julian Simon observed, the “ultimate resource” is the human mind, which has allowed us to avoid Malthusian cycles.⁴

Neo-Malthusians might agree with Simon about the value of the human mind, but they generally see political controls of resource use as the only way to implement this human ingenuity. If markets that promote resource consumption are the cause of the problem, then government must be the solution. When nineteenth-century timber harvests denuded portions of the upper Midwest, there was a call to nationalize the forests to ensure against predicted timber famines. Although there has been no timber famine and private forests continue to be more productive than public forests, the political response has endured. From land to water to air, governmental control—which means political control—is seen as a necessary check on the environmental ravages of free markets.

This book will challenge this common perception and offer an alternative way of thinking about environmental issues, markets, and political choice. This way of thinking does not always provide solutions; instead, it concentrates on how alternative processes link information about the environment with individual incentives to interact with it. Here, the environment and the market are inextricably connected in a positive rather than a negative way.

At the heart of free market environmentalism is a system of well-specified property rights to natural resources. Whether these rights are held by individuals, corporations, non-profit environmental groups, or communal groups, a discipline is imposed on resource users because the wealth of the owner of the property right is at stake if bad decisions are made. Of course, the further a decision maker is removed from this discipline—as he is when there is political control—the less likely it is that good resource stewardship will result. Moreover, if well-specified property rights are transferable, owners must not only consider their own values, they must also consider what others are willing to pay.

The Nature Conservancy’s private land management program offers an excellent example of how free market environmentalism works.⁵ When the Conservancy obtains title to a parcel of land, the group’s wealth, defined in terms of preserving habitat for a rare or endangered species, depends on good stewardship. When The Wisconsin Nature Conservancy was given title to forty acres of beachfront property on St. Croix, Virgin Islands, some may have thought that the group would protect that pristine beach at all costs. But the Conservancy traded the property (with covenants) for a larger parcel of rocky hillside in northern Wisconsin. The trade allowed the Conservancy to protect an entire watershed containing many endangered plant species. To be sure, tradeoffs were made, but through the exchange of well-defined and enforced property rights—that is, markets—The Nature Conservancy’s wealth in the form of environmental amenities was enhanced.

Free market environmentalism emphasizes an important role for government in the enforcement of property rights. With clearly specified titles—obtained from land recording systems, strict liability rules, and adjudication of disputed property rights in courts—market processes can encourage good resource stewardship. It is when rights are unclear and not well enforced that over-exploitation occurs.

This way of thinking will be alien to some and acceptable to others largely because of the different “visions” each person brings to the issue. In A Conflict of Visions, Thomas Sowell described a vision as

what we sense or feel before we have constructed any systematic reasoning that could be called a theory, much less deduced any specific consequences as hypotheses to be tested against evidence. … Visions are the foundations on which theories are built.⁶

The theory of free market environmentalism is founded on certain visions regarding human nature, knowledge, and processes. A consideration of these visions helps explain why some people accept this way of thinking as the only alternative to bureaucratic control and why others reject it as a contradiction in terms.

Human nature. Free market environmentalism views man as self-interested. This self-interest may be enlightened to the extent that people are capable of setting aside their own well-being for close relatives and friends or that they may be conditioned by moral principles. But beyond this, good intentions will not suffice to produce good results. Developing an environmental ethic may be desirable, but it is unlikely to change basic human nature. Instead of intentions, good resource stewardship depends on how well social institutions harness self-interest through individual incentives.

Knowledge. In addition to incentives, good resource stewardship depends on the information available to self-interested individuals. Free market environmentalism views this information or knowledge as diffuse rather than concentrated. Because ecosystems depend on the interaction of many different natural forces, they cannot be “managed” from afar. The information necessary for good management varies significantly from time to time and from place to place, and resource management requires knowledge that can only be obtained “on the ground.” Therefore, knowledge cannot be gathered into a single mind or group of minds that can then capably manage all of society’s natural resources.

The difference between perceptions of knowledge under centralized, political resource management and free market environmentalism centers on the distribution of knowledge among individuals. In visions of centralized, political control, the distribution has a low mean with a high variance. That is, the common man is not perceived as knowing much about the environment, and what he does know (including knowledge of his own values) is incorrect; the high variance means that experts can manage for the good of the masses. Free market environmentalism sees a much smaller knowledge gap between the experts and the average individual. In this view, individual property owners, who are in a position and have an incentive to obtain time- and place-specific information about their resource endowments, are better suited than centralized bureaucracies to manage resources.

Processes or solutions. These visions of human nature and knowledge combine to make free market environmentalism a study of process rather than a prescription for solutions. If man can rise above self-interest and if knowledge can be concentrated, then the possibility for solutions through political control is more likely. But if there are self-interested individuals with diffuse knowledge, then processes must generate a multitude of solutions conditioned by the checks and balances implicit in the process. By linking wealth to good stewardship through private ownership, the market process generates many individual experiments; and those that are successful will be copied. The question is not whether the right solution has been achieved but whether the relevant trade-offs are being considered in the process.

These three elements of free market environmentalism also characterize the interaction of organisms in ecosystems. Since Charles Darwin’s revolutionary study of evolution, most scientific approaches have implicitly assumed that self-interest dominates behavior for higher as well as lower forms of life. Individual members of a species may act in “altruistic” ways and may cooperate with other species, but species survival depends on adjustments to changing parameters in ways that enhance the probability of survival. To assume that man is not self-interested or that he can rise above self-interest because he is part of a political process requires heroic assumptions about homo sapiens vis-à-vis other species.

Ecology also emphasizes the importance of time- and place-specific information in nature. Because the parameters to which species respond vary considerably within ecosystems, each member of a species must respond to time- and place-specific characteristics with the knowledge that each possesses. These parameters can vary widely, so it is imperative for survival that responses utilize the diffuse knowledge. Of course, the higher the level of communication among members of a species, the easier it is to accumulate and concentrate time- and place-specific knowledge. Again, however, it requires a giant leap of faith to assume that man’s ability to accumulate and assimilate knowledge is so refined that he can centrally manage the economy or the environment for himself and for all other species. Recent evidence from Eastern Europe underscores the environmental problems that can arise with centralized management.

Ecology is also the study of processes and interaction among species; it is not a scientific prescription for solutions to environmental changes. Like free market environmentalism, ecology focuses on the information and incentives that reach the members of a species. When a niche in an ecosystem is left open, a species can “profit” from filling that niche and other species can benefit as well. If an elk herd grows, there is additional food for bears and wolves and the number of predators will expand as they take advantage of this “profit” opportunity. Individual elk will suffer at the expense of predators, but elk numbers will be controlled. In the process, plant species will survive and other vertebrates will retain their place in the ecosystem. No central planner knows the best solution for filling niches; it is the individualistic process that rewards the efficient use of time- and place-specific information.

Comparing free market environmentalism with ecosystems serves to emphasize how market processes can be compatible with good resource stewardship and environmental quality. As survival rewards species that successfully fill a niche, increased wealth rewards owners who efficiently manage their resources. Profits link self-interest with good resource management by attracting entrepreneurs to open niches. If bad decisions are being made, then a niche will be open. Whether an entrepreneur sees the opportunity and acts on it will depend on his ability to assess time- and place-specific information and act on his assessment. As with an ecosystem, however, the diffuse nature of this information makes it impossible for a central planner to determine which niches are open and how they should be filled. If the link between self-interest and good resource stewardship is broken because good stewards cannot reap the benefits, do not bear the costs of their decisions, or receive distorted information through political intervention, then the efficacy of free market environmentalism will be impaired in the same way that the efficacy of an ecosystem would be impaired by centralized planning.

Visions of what makes good environmental policy are not easily changed; if they are to change, it will be because we recognize that our visions are not consistent with reality. We must ask ourselves whether well-intentioned individuals armed with sufficient information dominate the political decisions that affect natural resources and the environment. Environmentalist Randal O’Toole answered this question in the context of the U.S. Forest Service:

While the environmental movement has changed more than the Forest Service, I would modestly guess that I have changed more than most environmental leaders. … In 1980, I blamed all the deficiencies in the markets on greed and big business and thought that government should correct these deficiencies with new laws, regulatory agencies, rational planning, and trade and production restrictions. When that didn’t work, I continued to blame the failure on greed and big business.

About 1980, someone suggested to me that maybe government didn’t solve environmental or other social problems any better than markets. That idea seemed absurd. After all, this is a democracy, a government of the people, and what the people want they should be able to get. Any suggestion that government doesn’t work was incomprehensible.

But then I was immersed in the planning processes of one government agency for ten years (sort of like taking a Berlitz course in bureau-speaking).

I learned that the decisions made by government officials often ignored the economic and other analyses done by planners. So much for rational planning. Their decisions also often went counter to important laws and regulations. So much for a democratic government.

Yet I came to realize that the decisions were all predictable, based mainly on their effects on forest budgets. …

I gradually developed a new view of the world that recognized the flaws of government as well as the flaws in markets. Reforms should solve problems by creating a system of checks and balances on both processes. … The key is to give decision makers the incentives to manage resources properly.⁷

This book provides a “Berlitz course in free market environmentalism.” It also challenges entrenched visions. The development of free market environmentalism has progressed from an examination of the relatively easy problems of land and energy development to the tougher problems of water quality and quantity. The evolution of land and water rights on America’s frontier illustrates how the creation of property rights responds to scarcity. Massive r...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• CONTENTS
• List of Tables and Figures
• Acknowledgments
• 1 Visions of the Environment
• 2 Rethinking the Way We Think
• 3 From Free Grass to Fences
• 4 From Barbed Wire to Red Tape
• 5 Bureaucracy Versus Environment
• 6 Inside Our Outdoor Policy
• 7 Ecology and Energy: Prospecting for Harmony
• 8 Going with the Flow: Expanding Water Markets
• 9 Homesteading the Oceans
• 10 Marketing Garbage: The Solution to Pollution
• 11 Tackling the Tougher Problems
• Bibliography
• Index
• About the Book and Authors
• Series Page