- Free-market environmentalism
Free-market environmentalism is a position that argues that the
free market, property rights, and tortlaw provide the best tools to preserve the health and sustainability of the environment. This is in contrast to the most common modern approach of proactive environmental legislation.
Economics of environmental destruction
Some view environmental problems as arising from
market failures. In contrast, free marketenvironmentalists argue that environmental problems arise because of:
# Laws governing
property rightsthat fail to adequately protect or define those rights; and
# Laws governing class or individual
tortclaims that provide polluters with immunity from tort claims, or interfere with those claims in such a way as to make it difficult to legally sustain them.
Because free-market environmentalists believe these things, as a rule they further believe that the best way to protect the environment is to change laws governing property rights and tort claims so that those laws no longer suffer from the defects they believe give individuals and corporations perverse incentives not to guard the environment.
The market failure view
Some economists believe that the
marketis unable to correct the negative externalitiesof industrial production and excessive depletion of non-renewable resources. In this view, firms receive the full benefit of creating their products in a way that generates pollutants but do not bear the full social costs of the increased pollution. They have no economic incentive to create products in a way that minimizes pollution and absent targeted environmental regulations, will continue to do so. This activity would be rational, because it would be profitable for a firm to overpollute, while letting others absorb the costs of its effects and cleanup. Regarded this way, opponents of market solutions to the problem of pollution assert that market mechanisms left to their own devices contain built-in incentives for environmental degradation.
Robin Hahnelhas enumerated what he terms the four basic defects of a market economy with respect to the environment as: [Hahnel (2005), "pp"66-72 ]
# overexploitation of common property resources;
# too little pollution cleanup; and
The free-market environmentalist response
In response to these concerns, economists who prefer the free-market environmentalist approach argue that:
# Overexploitation occurs to the extent of the lack of ownership incentives to care for the property, and that this communalization effect occurs to the extent of multiplicity of ownership. Overexploitation reduces the intrinsic and retail value of the property, the effect of which is most clearly felt by individual owners or through limited co-ownership.
# Pollution occurs where and to the extent that victims are prevented or hindered from seeking
tort restitutionfor such aggression. Legislativeand Judicialauthorities have tended to favor heavy industries over individual or class actionin favor of " public property" and the " common good".
# Pollution cleanup also occurs naturally in a free market, because reducing the negative value of a property is a net gain, again leading to a higher intrinsic or retail value, and thus marketability.
# Overconsumption is a flawed concept, because it assumes that resources are nonrenewable. The market, through supply and demand, regulates consumption by adjusting it according to supply. For example, if a resource becomes more scarce, its value increases and thus also its cost. This forces consumers to redirect their purchases to alternate resources which are in more plentiful supply. In addition, the higher market value of the resource creates an incentive to create more of the commodity, and allows for a greater expenditure in doing so.
The prevalence of externalities would have serious implications for market efficiency in its static and dynamic dimensions. If negative externalities are unnaccounted for, it would imply that market prices will not accurately reflect true social opportunity costs, leading to misallocations of goods. As the elementary
economicstext book by Baumol and Blinder observes "When a firm pollutes a river, it uses some of society's resources just as surely as when it burns coal. However, if the firm pays for coal but not for the use of clean water, it is expected that management will be economical in its use of coal and wasteful in its use of water."
The standard approach to addressing negative externalities is governmental regulation proscribing polluting activities. This approach has been criticized by
free-marketeconomists and others as being inefficient and ineffective. Furthermore, the demands of regulation seldom appeal to the social conscience of industries or enterprise owners and violation is often seen as legitimate business practice. Critics have noted that studies sponsored by firms assessing their own activities are invariably biased and typically exemplify an illegitimately narrow focus that ignores a competitive market context and the prevalence of external effects throughout the supply chain. Amoco's attempts at voluntary measures have met with resistance from the four or five oil refining corporations with greater market share, who expressed a preference to be forced by state regulations before lowering their sulphur content. Following Amoco's gestures, prominent environmental groups were unimpressed. For example, the Earth Day 2000 report, "Don't Be Fooled" named Amoco as one the top 10 "greenwashers" of the year. [http://www.corpwatch.org/article.php?id=331]
While some environmentalists advocate compromises such as
carbon tradingschemes, most free-market environmentalists would prefer full accountibility as dictated by courts that respect the rights of property owners in absolute terms.
economistsargue from the Coase Theoremthat, if industries internalized the costs of negative externalitiesthey would face an incentive to reduce them, perhaps even becoming enthusiastic about taking advantage of opportunities to improve profitability through lower costs. Moreover, economistsclaim this would lead to the optimal balance between the marginal benefits of pursuing an activity and the marginal cost of its environmental consequences. One well-known means of internalizing a negative consequence is to establish a property rightover some phenomenon formerly in the public domain. This requires a little abstract thinking in the case of environmental problems as these Coasians are talking about a grant to pollute or to exploit some limited natural phenomenon. This is a sophisticated variant of the "polluter pays" principle. However, critics have charged that the "theorem" attributed to Coase is of extremely limited practicability because of assumptions, including that it was theorized to account for adjacent effects where transaction costs for bargaining agents are typically small, but is ill-suited to real world externalities which have high bargaining costs due to many factors.
A number of libertarians, such as Rothbardians, reject the proposed Coasian solution as making invalid assumptions about the purely subjective notion of costs being measurable in monetary terms, and also of making unexamined and invalid value judgments (i.e., ethical judgments). ( [http://www.cato.org/pubs/journal/cj2n1/cj2n1-2.pdf] PDF) The Rothbardians' solution is to recognize individuals' Lockean property rights, of which the Rothbardians maintain that "Wertfreiheit" (i.e., value-free) economic analysis demonstrates that this arrangement necessarily maximizes social utility. ( [http://www.mises.org/rothbard/toward.pdf] PDF)
Proponents of free-market environmentalism use the example of the recent destruction of the once prosperous
Grand Banksfishery off Newfoundland. Once one of the world's most abundant fisheries, it has been almost completely depleted of fish. Those primarily responsible were large "factory-fishing" enterprises driven by the imperative to realize profits in a competitive global market. [http://www.emagazine.com/view/?507] It is contended that if the fishery had been owned by a single entity, the owner would have had an interest in keeping a renewable supply of fish to maintain profits over the long term. The owner would thus have charged high fees to fish in the area, sharply reducing how many fish were caught. The owner also would have closely enforced rules on not catching young fish. Instead commercial ships from around the world raced to get the fish out of the water before competitors could, including catching fish that had not yet reproduced.
Another example is in the 19th century early gold miners in California developed a trade in rights to draw from water courses based on the doctrine of
prior appropriation. This was curtailed in 1902 by the Newlands Reclamation Actwhich introduced subsidies for irrigationprojects. This had the effect of sending a signal to farmersthat water was inexpensive and abundant, leading to uneconomic use of a scarce resource. Increasing difficulties in meeting demand for water in the western United Stateshave been blamed on the continuing establishment of governmental control and a return to tradable property rights has been proposed.
Many free-market environmentalists argue that the problem of
regulatory capturewhereby large companies play a large role in setting regulations has created a system where things are far too biased in favor of large companies. For instance, in the United Stateslands that could be more valuably used for tourismare often used for resource extraction because the many disorganized tourists cannot have the same impact on government as the few organized corporations. If the land was privately held the land owner would realize that tourism would make more of a profit than logging and nature would be preserved.
The implementation of
property rights provides governments with an opportunity to raise revenues. This has been illustrated by recent auctions of bands of the electromagnetic spectrumfor telephony, another example of an attempt to manage a scarce resource through property rights rather than regulation. Such auctions offer an alternative to conventional taxation for funding public spending, by capitalizing the expected rent earned by the privatized good. Some economists, most notably Henry Georgein the 1870s, have argued that taxes on income and profits represent taxes on productivity, innovation and creativity and that we should rather tax land rents and externalities such as pollution, consumption of fossil fuels and road congestion. Environmental property rightsoffer a means to shift taxation from "goods" to "bads" and rents.
One example of free market attempt to protect the environment is
The Nature Conservancyorganization. It has been successful in protecting many sensitive, ecologically important places by simply purchasing them, although this practice has met with controversy in some areas. In some cases the lands are donated or sold to government agencies for management, while in others the Nature Conservancy itself manages these preserves.
Ted Turnerhas a similar private program that has seen him buy up tens of thousands of acres of wilderness around the United States.
There are a number of arguments against free-market environmentalism:
*Not all aspects of the public domain are easily "privatisable" in practice. It may be impossible to establish property rights on things like air and water that circulate the globe, so stopping
air pollutionor global warmingwould be very difficult. Coasian environmentalists often support carbon tradingschemes advocated by other environmentalist movements. The US Clean Air Act of 1990, for instance, set up a system of emissions tradingfor sulfur dioxide. The Kyoto protocolalso seeks to establish a system of emissions tradingfor carbon dioxideand other greenhouse gases. Rothbardians reject government-imposed emissions tradingschemata, and instead maintain that pollution is by definition a matter of Lockean property rights being violated, and hence should be handled as a subject of individual or class action tort, as any other invasion of property.( [http://www.cato.org/pubs/journal/cj2n1/cj2n1-2.pdf] PDF) As long as there is an aggressor and a victim, there is a tort.
*The conservation of
endangered speciesis not necessarily achievable using the free market, especially where there is little economic value in the species in question. For example: there might be only limited profit to be made from a piece of land by maintaining it as the habitat of a rare beetle, whereas alternative economic uses for that land (which might be deleterious to the welfare of the beetle) - such as building a parking lot on it - might yield a greater profit. Regardless of the broader ecological importance of the beetle, it is much more likely that the landowner will prioritize short-term profits to be gained from development, rather than a long-term benefit which may be of comparably little (perhaps even imperceptible on the surface) benefit to himself. Thus, threatened or endangered species could be lost by relying on the willingness of individual landowners to take a loss in order to protect them. However, this view does not account for nonprofit organizations which would exist solely for the purpose of preserving rare species.
*A related philosophical objection is that free-market environmentalism is entirely
anthropocentricand ignores the "innate" value of nature outside of human perception. (see ecocentrism). But even in politics, someone must place a value on the environment in question.
* The principle of
limited liabilityprotects investors from the costs of the activities from which they benefit. In the U.S., there have been recent suggestions that, while limited liability towards creditors is socially beneficial in facilitating investment, the privilege ought not to extend to liability in tortfor environmental disasters or personal injury. [Hansmann & Kraakman (1991)] [Grundfest (1992)] In fact, most free-market environmentalists oppose limited liability in torts as a form of corporate welfareand a limitation of full property rights.
* Countering the
tragedy of the commonsclaim, Elinor Ostromhas studied a large number of empirical cases where common property resources have been managed successfully. Her work emphasizes neither private property/market arrangements nor government regulation but the successes of "communities" consciously designing institutional arrangements in response to particular common property dilemmas. The stress is on democratic institutions that allow the users of the common to govern the commons. [http://dlc.dlib.indiana.edu/archive/00000741/00/EOHO86AA.pdf]
Economistswho have written on free-market environmentalism include:
Terry L. Anderson
Donald R. Leal
Julian Lincoln Simon
Richard L. Stroup
Peter J. Hill
Roger E. Meiners
Laura Jones (Fraser Institute)
Murray N. Rothbard
Politicians who have supported free-market environmentalism:
Foundation for Research on Economics and the Environment
Property and Environment Research Center
* Anderson, T L & Leal, D R (1991) "Free-market environmentalism" ISBN 0-8133-1101-2
*cite journal |author=Grundfest, J.A. |title=The limited future of unlimited liability: a capital markets perspective |journal=Yale Law Review |volume=102 |pages=387 |doi=10.2307/796841 |year=1992
*cite book |author=Hahnel, R. |title=Economic Justice And Democracy: From Competition To Cooperation |publisher=Routledge |year=2005 |id=ISBN 0-415-93345-5
*cite journal |author=Hansmann, H. & Kraakman, R. |title=Toward unlimited shareholder liability for corporate torts |year=1991 |journal=Yale Law Review |volume=100 |pages=1879 |doi=10.2307/796812
* Stroup, Richard L. (2003) "Eco-nomics: What Everyone Should Know About Economics and the Environment" ISBN 1-930865-44-9
* Krugman, Paul (1999) " [http://www.slate.com/id/1919/ Earth in the balance sheet: economists go for the green] " and "Taxes and traffic jams" reprinted in "The Accidental Theorist" ISBN 0-14-028686-1
* Ridley, M & Low, B S (1993) " [http://www.theatlantic.com/politics/environ/selfish.htm Can selfishness save the environment?] ", "The Atlantic Monthly" vol. 272, pp. 76-86
* Simon, Julian (1998) "The Ultimate Resource 2" ISBN 0-691-00381-5
* [http://commonsblog.org/free_reading.php free-market Environmentalism Bibliography] on The Commons Blog
* [http://www.cato.org/pubs/journal/cj2n1/cj2n1-2.pdf "Law, Property Rights, and Air Pollution,"] 1.8 MB PDF Murray N. Rothbard, "Cato Journal", Vol. 2, No. 1 (Spring 1982), pp. 55-100.
* [http://www.cato.org/pubs/journal/cj1n2-1.html "Resolving the Tragedy of the Commons by Creating Private Property Rights in Wildlife,"] Robert J. Smith, "Cato Journal", Vol. 1, No. 2 (Fall 1981), pp. 439-468.
* [http://commonsblog.org/free_reading.php "Free-Market Environmentalism Reading List,"] The Commons Blog: Markets Protecting the Environment.
* [http://www.econlib.org/library/Enc/EnvironmentalismFreeMarket.html "Environmentalism, Free-Market,"] Richard L. Stroup, The Concise Encyclopedia of Economics: Library of Economics and Liberty
* [http://www.social-ecology.org/article.php?story=20031202111003557 Trading Away the Earth: Pollution Credits and the Perils of "Free Market Environmentalism"]
* [http://treesinstead.com The sale of trees for profit, Trees Instead]
* [http://www.ti.org/ The Thoreau Institute - a pro-free market environmentalism group]
* [http://www.nature.org/ The Nature Conservancy] has posted much information on [http://nature.org/aboutus/howwework/conservationmethods/privatelands/conservationeasements/ conservation easements] and other tools pertaining to free-market environmentalism
* [http://www.anthonares.net/2005/06/fighting-global-warming-free-market.html Fighting Global Warming–Free Market Style]
* [http://www.ecoworld.com/blog/2007/03/26/supply-side-environmentalism/ Supply Side Environmentalism: EcoWorld]
* [http://www.aere.org/ Association of Environmental and Resource Economists] (AERE).
* [http://www.elsevier.com/wps/find/journaldescription.cws_home/622870/description#description - JEEM: Journal of Environmental Economics and Management] (AERE's official "technical" journal).
* [http://reep.oxfordjournals.org/ - REEP: Review of Environmental Economics and Policy] (AERE's official "accessible" journal).
Wikimedia Foundation. 2010.
Look at other dictionaries:
Free-market anarchism — Part of a series on Libertarianism … Wikipedia
Free market — A free market is a market in which property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers. In a free market, individuals, rather than government, make the majority of decisions… … Wikipedia
Free — may refer to: Free will Political freedom Economic freedom Something given or supplied without payment (gratis) Gratis versus Libre, the distinction between the two meanings above Free may also refer to: Contents 1 Arts and philosophy … Wikipedia
Environmentalism — The historic Blue Marble photograph. Environmentalism is a concern for the planet as a whole. Environmentalism is a broad philosophy, ideology … Wikipedia
Market — For other uses, see Market (disambiguation). San Juan de Dios Market in Guadalajara, Jalisco … Wikipedia
environmentalism — en·vi·ron·men·tal·ism (ĕn vī rən mĕnʹtl ĭz əm, vī ərn ) n. 1. Advocacy for or work toward protecting the natural environment from destruction or pollution. 2. The theory that environment rather than heredity is the primary influence on… … Universalium
Eco-socialism — Green red redirects here. For other uses, see Red green (disambiguation). Socialism … Wikipedia
Wise use — The Wise use movement in the United States is a loose knit coalition of groups promoting private property rights and use of the natural environment as a natural part of human survival. This includes use by commercial and public interests, seeking … Wikipedia
New environmental policy instruments — New Instruments of Environmental Policy (NEPIs) have in begun to be adopted by advanced societies in recent years with increasing vigour. Although forms of environmental policy have been around for many decades, the idea of placing more market… … Wikipedia
Anarcho-capitalism — Part of the Politics series on Anarchism … Wikipedia