Free Market Environmentalism

One of the first free market concepts to really catch my interest was “free market environmentalism.”  To most people, this sounds like an oxymoron.  Turning the environment over to the free market, so goes the conventional wisdom, would be like putting the fox in charge of guarding the henhouse, or putting Halliburton in charge of approving military contracts in Iraq.  Aren’t the biggest polluters those greedy capitalists?

It’s true that there have been many environmental issues related to private corporations.  McWane, for instance.  I remember watching an episode of Without a Trace when those greedy capitalists managing a foundry were pouring some toxic goo into a nearby waterway which underscores this widely held (and justified) belief.  And we can remember the problems of poor air and water quality associated with the Industrial Revolution.  So why would I believe in such a silly notion?

I submit the story is more complicated than it appears.  There is another player.  We often let him off the hook.  Governments have a hand in environmental policy in the U.S. and throughout the world. 

What is “free market environmentalism?”  One can think of it as “private property environmentalism,” for the bedrock is private property rights.  This is to say that no one is permitted to pollute anyone else’s property, including land, air, or water.  It’s a very strong and strict environmental standard.  How might this work?  How might it be enforced?  Let’s look at a few cases.

One environmental problem frequently pegged on the free market is poor land management.  For instance, look at what those hunters and traders did to buffalo population in the 19th Century.  Western bison and buffalo were almost totally decimated.  Wasn’t this the fault of capitalism, of markets too free?  True, individuals acting freely were largely to blame, and many had a profit motive at heart.  But who owned the buffalo?  Were property rights clearly established?  A responsible land-owner would protect their land from trespassers, and would especially guard against cattle and bison from being indiscriminantly killed.  So one can view this as a property rights issue.  Can reasonable minds disagree?  Of course.  But this is one legitimate way to view the issue.

Let’s take a more recent issue that definitely involved private enterprise, but perhaps less clearly property rights.  Remember the Exxon Valdez oil spill in the late 1980’s?  It caused a huge environmental problem for the area.  Exxon put in billions of dollars for clean-up efforts.  But the wildlife populations were devastated.  The local fishing industry has not recovered, and may not for some time.  No wonder that 30,000 Alaskan landowners and residents submitted a lawsuit for several billions more in damages to be rewarded.  This was their land!  We can see what happened: expensive Exxon lawyers kept appealing and delaying.  Nothing has yet been paid.  Exxon is still holding out.  How could the free market or property rights possibly aid a situation like this one?

Let’s think about the spill.  As it was, the spill occurred on publicly-owned Prince William Sound and affected many private and public lands.  But what if the spill had occurred on privately-owned Prince William Sound?  The government essentially owns it.  They could certainly auction it off (that’s what they did with the Old West, after all)!  A private owner would have a strong incentive to make sure the fish populations were sustainable, for instance, and that the environment was well kept.  After all, what are the biggest sources of income to Prince Willam Sound?  Fishing and tourism, which both require a pristine environmental condition.  Now consider the oil spill in context of a privately-owned sound.  Instead of the effects from a dump on publicly-owned space, there would now be a direct aggression against property rights.  We can imagine a privately-owned oceanic space requiring oceanic liners, tankers, cargo ships, etc., to sign strict contracts.  Should they be violated, (as in the case of an oil spill) then the issue is not just an aggression against property rights, and residual environmental damage, but it becomes a contractual breach as well.

Should such a problem occur, we can imagine the private oceanic owner immediately tightening restrictions on tankers: for instance, they must be double-hulled, or all crew members must submit to random sobriety and drug tests at the discretion of the oceanic owner.  Think of it: no bureaucratic red tape.  No need for congressional hearings.  Quick and immediate action: direct mediation and negotiation between a land owner and his patron. 

Of course, all of this costs money.  Who would pay?  The owner could charge a user fee for each ship travelling through the waters.  That way, the oil companies are forced to pay directly for the cost of resource management and environmental protection, as opposed to the taxpayer (you and me) who foot the bill today.

Idealistic and ridiculous?  That is certainly the conventional wisdom.  But we far too easily dismiss the positive prospects of private property playing a central role in environmental policy and resource management.  Let’s pick another thorny example: nuclear waste.

Pundits for nuclear energy frequently point to low emissions and low cost, proven technology, and admit that though there were and are safety risks, they have been largely mitigated and reduced.  Critics may or may not disagree with some or all of these points, but they will frequently point to the problem of nuclear waste disposal.  Utahns, for instance, are struggling with this now.  And these are legitimate concerns.  It seems that there have been health concerns ever since the U.S. government started tinkering around with atomic energy in a serious manner.

(Of course, the private property-minded supporter of free markets will notice that the atomic bomb and related atomic technologies came from a large government program, during a time of war, as opposed to a private sector program by those greedy capitalists, but this is perhaps a peripheral point.)

How can a private property-based free market come to the rescue here?  As it is now, the disposal of the nuclear waste is somewhat of a joint responsibility, shared between the government and the energy company.  If the disposal of nuclear waste is left entirely to the energy companies, then before they can even start to build a reactor, they must have a good plan in place to dispose of the waste.  Competing firms could bid out to construct a nuclear waste holding facility of some sort.  Cost would be important, but so would protecting the environment from nuclear waste, which would be the primary design consideration.  No taxpayer funds need be involved.  Again, the environmental aggressors (i.e. energy companies) would be compelled to pay in full.  The private land owner is paid to make sure the nuclear waste is contained and that the surrounding area is relatively safe from contaminants.  He knows that should an independent investigator discover nuclear material or radioactive effects on surrounding properties, huge damages are at risk.  And so there is every incentive to safeguard the property and contain the waste.  Again, if there are problems, there are clear individuals responsible: the energy company and the property owner that holds the waste.

Can the free market take care of such an issue?  Considering the problems we have had with our current government-regulated scenario (i.e. Three Mile Island, Davis Besse) and with the sketchy track record of centrally-planned Soviet Russia, isn’t it at least worth considering another approach?

Air and water pollution are perhaps the most common environmental issues.  How might private property rights come to the rescue here?  The principle, to restate, is that no one has a right to pollute their neighbor’s land.  Should someone have their land polluted from someone else, then that individual (the pollutee) could approach the polluter.  Perhaps if the number of parties are small, a mutual arrangement could be made (for instance, emissions at only certain times of the day).  If that does not work, the polluting company is taken to court.  It now becomes a tort issue.  The polluting company would be compelled to pay for clean-up costs, and for residual damages.  Other possible arrangements could include particulate or emission reductions, or pollutant entrapment technologies designed to contain harmful pollutants.  Once legal precedents have been set, one or more market solutions would be established.  For instance, should a factory want to open its doors in a community, nearby businesses and residents would require the polluting company pay for the cost of filtered air or water, plus residual convenience costs.

In any case, should there be any difficulties at any stage in the process, the court, or some other mediation process, would exist to redress such wrongs.

Of course, it is noted that a law system that follows cronyism or favors corporate or financial interests over the protection of private property rights would face some significant obstacles.  To be successful, there must be an easily-accessible legal or mediation apparatus that could handle cases of this magnitude and frequency, both thoroughly, fairly, and consistently.

This is a completely different way of thinking about environmentalism.  It is very traditional, even ancient, in its view of individuals, rather than a monolithic group (i.e. society, the government), as the best stewards of the land and its resources.  There are many benefits.  Some include:

  • The polluter is forced to be responsible for his own pollutants, both morally, environmentally, and financially
  • Individuals most strongly affected by environmental problems have the strongest say in the process, rather than distant bureaucrats
  • Taxpayers are not forced to foot the bill for onerous and burdensome environmental laws and regulations
  • With a reduction in restrictions and regulations on private property, barriers for entrepreneurs to start up and maintain businesses are removed or significantly reduced, thus leading to an increase in economic growth, new jobs, etc.

Of course, if you believe that the government is the best way to solve our environmental problems, and that private property management in the free market is fraught with all manner of evils and dangers, then this obviously is not for you.  But I encourage those who think governments are the best solution to environmental problems to consider the historical challenges of centrally-planned economies with weak private property rights, like Soviet Russia and China.  And we should also consider anew the role of private property rights in America and throughout the world, vis-a-vis government intervention and control.


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Filed under Austrian Economics, fiscal policy, Libertarian, Personal, politics, role of government

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