by Fred L. Smith, Jr.
December 1, 2001

FREE-MARKET ENVIRONMENTALISM

Protecting the Environment via Private Property

Excerpts from Solutions for an Environment in Peril

by Fred L. Smith Jr., President, Competitive Enterprise Institute

www.cei.org

·        There is an alternative to the traditional approach to environmentalism that must initially strike many readers as foreign, paradoxical, or counterintui­tive — the idea that the environment is protected best if it is protected privately. And yet that approach continues to draw serious attention, and it has demonstrated some significant successes.

·        I worked at the EPA in the 1970’s, and many of the issues being debated then — pollution prevention, recycling, emission permits, haz­ardous waste management, pollution taxes — are still of great concern to the agency. But while many of the questions have remained the same, the answers to which I now subscribe are very different. When I was at the EPA, I was a strong environmentalist. I still am today. At that time, however, I had a deeper faith in the efficacy of government than I do now. That broad philosophical turn has influenced my thinking on environ­mental issues also.

·        Tragedy of the Commons: Garrett Hardin’s 1968 article in Science, “The Tragedy of the Com­mons,” serves as a useful template for examining many environmental problems. Hardin demonstrated that where there is open access to a commonly held resource, incentives for responsible stewardship will be weak and the quality of the environmental resource will deteriorate. To Hardin, the tragedy of the commons could be resolved either polit­ically or privately. The first approach requires that one establish a politi­cal agency with the authority to devise and enforce the rules necessary for wise range management. The private alternative requires that the rangelands be privatized, that the pasture be divided into plots, with a plot deeded to each herdsman, and the rights then enforced through various mechanisms — fences, branding, legal recourse for trespass.

·                     Despite Hardin’s balanced treatment, few environmentalists are aware of the role private property constraints already play in environ­mental protection. Fewer still are aware of how this private environmen­tal stewardship role might be expanded.

·                     Benefits of Capitalism: Capitalism demands efficiency, and efficiency is an important environ­mental strategy. Wherever in the world we have had freer markets, we have also had a better managed ecology. Wherever we have had more political control, we have experienced greater ecological problems. To free-market environmentalists, the conclusion is clear: those who favor ecological protection (and I assume we all do) should seek to expand the role of private stewardship arrangements to those resources that have historically been denied its protection. We believe that those who take environmental values seriously should seek to transfer the world’s wild­life, forest and grazing lands, streams and lakes, beaches and shore areas, even air sheds, to private groups who would be better able to assume stewardship responsibility for them.

·                     Challenging the Status Quo: Everyone wants a world that is both free and clean. Most people are concerned with both the house of humankind (the “econ­omy”) and the house of nature (the “ecology”). Our challenge is to find ways to integrate our growing emphasis on ecological values with our more established economic values. That integration must take account of the fact that many people in the world remain far poorer than we in the West. Free-market environmentalists suggest that ecological central planning is no more likely to advance ecological values than economic central planning was to advance economic values.

·                     In the last century—the century in which environmental values became salient—America came to view resource management as a political, not a private, issue. Private ownership of resources — as a way of advancing the public interest in environmental and other resource management areas — was and has continued to be neglected. Rather than allowing newly valued or discovered resources to pass quickly into private hands via homesteading and privatization, the tendency has been to manage such resources collectively via political rules and regulations. Resources that came into public prominence prior to the Progressive Era (around the onset of the twentieth century) re­mained largely in private hands; newer resources came under state control. Thus, underground oil reserves are largely in private hands, while underground water supplies (aquifers) are typically managed politically.

·                     Most environmentalists seem to believe that environmen­tal priorities can be determined objectively and carried out effectively by the EPA. The EPA is a political agency, and its priorities are determined politically: professional input has little weight in this pro­cess. The agency is, to some extent, at the mercy of its interest groups.

·                     Global Environment: While our EPA is not responsible for the global en­vironment, it does concern us greatly. And here the tragedy of America’s sole reliance on political means of environmental protection is perhaps most explicit. We have adopted an environmental policy that does not export very well. Our approach has required that we spend hundreds of billions of dollars over the last three decades and that we mobilize large numbers of highly skilled tech­nocrats, engineers and scientists in industry and  government agencies, federal and state EPA. This clearly could not work in most of the third world. Third world coun­tries do not have hundreds of billions of dollars to spend on anything, much less the environment. They do not have a surplus of highly trained technical people. And the dangers of requiring civil servants in the third world to resist the financial temptations involved in pollution control should be considered very carefully. Thus, those con­cerned about protecting all of “Spaceship Earth,” rather than just its first-class cabins, must find more creative ways of addressing environ­mental issues. Fortunately, there is an effective alternative — free-market environmentalism based on private property rights.

·                     Rainey Wildlife Refuge: An excellent example of how private property better reconciles en­vironmental and economic values is that of the Rainey Wildlife Refuge. This z8,6oo-acre bird sanctuary, owned by the National Audubon So­ciety, is in the extensive wetlands of coastal Louisiana, located above a natural gas and oil field. Interestingly, oil companies approached the Audubon Society, declaring their interest in drilling on their refuge. The society rejected the proposal at first but then elected to permit drilling under careful guidelines so as to minimize environmental impact. Both parties were able to reconcile an economic and an environmental goal, because as private property owners they had every incentive to do so. If the Audubon Society had taken the purist path, they would have forgone the royalty payments of a producing hydrocarbon field, and thus been less able to address their many other concerns. Had the oil company ignored environmental values, they would not have gained the right to drill.

·                     Free-market strategies should become a part of the tool chest of any serious environmentalist. How else can we escape the current di­lemma in which the environment is everyone’s problem, in which we continue to chatter fecklessly about the need to preserve humankind’s common heritage? Protecting our common heritage does not result in effective action and does not tap very much into our available daily energies.

·                     Free-market ideas have done much to advance economic welfare around the world. Free-market environmentalism might similarly free the entrepreneurial energies and creativity of the people of the world to advance ecological goals. It is time to explore that option further.