|
Core topics
|
|
Related topics
Conservation movement
Eco-capitalism Eco-fascism Ecology movement Ecocentrism Environmentalism Free-market environmentalism Environmental issues |
Free-market environmentalism is a position that argues that the free market, property rights, and tort law provide the best tools to preserve the health and sustainability of the environment. This is in contrast to the most common modern approach of legislation by which the state intervenes in the market to protect the environment.
Contents |
While environmental problems may be viewed as market failures, free market environmentalists argue that environmental problems arise because:
As a rule, therefore, free-market environmentalists believe that the best way to protect the environment is to allow tort and contract laws governing and protecting property rights and tort claims to emerge naturally, so that the protection of property no longer suffers from the defects that give governments, individuals, and corporations perverse incentives to spoil the environment.
Externalities are costs or benefits of an activity incurred by a party who does not agree to accept them.[1] Economic activity produces positive externalities, such as the information freely available on the Internet, and negative externalities, such as pollution and depletion of non-renewable resources.
Free market environmentalists believe that if affected parties can compel producers to compensate them, producers will reduce or eliminate the externality. Absent such a mechanism, producers have no economic incentive to minimize such effects. For example, if someone sells clothing from their home, one negative externality might be the additional traffic the business attracts. If the neighbors can compel the vendor to compensate them, the vendor might move to a commercial area.
Market proponents advocate changes to the legal system that empower affected parties to obtain such compensation. The further claim that governments have limited affected parties' ability to do so by complicating the tort system to benefit producers over others. In some cases, the externalities are diffuse, making it difficult to identify the affected parties.
Ecological economist Robin Hahnel has enumerated what he terms the four basic defects of a market economy with respect to the environment as:[2]
In response to these concerns, economists who prefer the free-market environmentalist approach argue that:
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 economics text 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-market economists 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.[3]
While some environmentalists advocate compromises such as carbon trading schemes, most free-market environmentalists would prefer full accountibility as dictated by courts that respect the rights of property owners in absolute terms.
Some free-market proponents, particularly those influenced by the Austrian economic school, such as B.J. Lawson claim that sustainability is fundamentally impossible when the money supply exhibits secular inflation.
Some economists argue from the Coase Theorem that, if industries internalized the costs of negative externalities they would face an incentive to reduce them, perhaps even becoming enthusiastic about taking advantage of opportunities to improve profitability through lower costs. Moreover, economists claim 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 right over 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). ([1] 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. ([2] PDF)
Proponents of free-market environmentalism use the example of the recent destruction of the once prosperous Grand Banks fishery 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.[4] 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 Act which introduced subsidies for irrigation projects. This had the effect of sending a signal to farmers that water was inexpensive and abundant, leading to uneconomic use of a scarce resource. Increasing difficulties in meeting demand for water in the western United States have been blamed on the continuing establishment of governmental control and a return to tradable property rights has been proposed.
According to Richard L. Stroup, markets in the environmental field, in order to function well, require "3-D" property rights to each important resource — i.e., rights that are clearly defined, easily defended against invasion, and divestible (transferable) by owners on terms agreeable to buyer and seller. The first two rights prevent property owners from being forced to accept pollution, and the third right provides an incentive for owners to be good stewards.[5]
Many free-market environmentalists argue that the problem of regulatory capture whereby large companies play a large role in setting regulations surrounding public or common property has created a system where things are far too biased in favor of large companies. For instance, in the United States lands that could be more valuably used for tourism are 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 spectrum for 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 George in 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 rights offer a means to shift taxation from "goods" to "bads" and rents.
One example of free market attempt to protect the environment is The Nature Conservancy organization. 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.
Billionaire Ted Turner has 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:
Economists who have written on free-market environmentalism include:
Lawyers who have written on free-market environmentalism include:
Politicians who have supported free-market environmentalism:
Political parties that have supported free-market environmentalism:
For more information, please see the review of this Wikipedia article at: http://www.fraserinstitute.org/Commerce.Web/product_files/CanadianStudentReview_Summer2007.pdf
|
||||||||||