As Earth Day approaches I think that it is important to revisit the concept of private property rights, since it plays a seminal role in determining the type of environmental policy that a society is likely to adopt.
The following was penned 3 years ago but is still vey timely. Obviously the ideas in this article are essentially coloured by a very "conservative" view.
There is an Earth Day poster in the elevator down the hall from my office that says: "Someone Is Killing the Earth."
Underneath this caption, my friend and colleague
Mike Hammock wrote, "It was Art Carden!"
This
inspired me to think hard about the relationship between economics and
the environment, and I wrote a short essay entitled "
Economic Calculation in the Environmentalist Commonwealth."
That
essay inspired the article you're now reading. I consider myself an
"anthropocentric environmentalist," which is a fancy way of saying that I
care about environmental issues because I care about human flourishing.
This doesn't come at the expense of economic reasoning, though,
and economics leads us to surprising and often counterintuitive
conclusions. Economics shows how appearances can be deceiving, and I
find a lot of environmental initiatives are like rotten Granny Smith
apples: They're green on the outside, but they're brown on the inside.
Here's how and why.
Private property is essential to a
well-functioning social system because it allows that system to generate
prices. Prices provide the crucial information people need to make
rational decisions, but prices do not mediate all environmental
conflicts because some things are not owned. When resources are not
owned and therefore outside the price system, the information we would
need to evaluate the costs and benefits of different environmental
initiatives literally does not exist.
I stress that it is not
just that environmental issues are difficult or complex. The problem is
that--given the absence of prices, profits and losses--we do not have
the information we need to articulate what responsible environmental
stewardship would mean, much less exercise it.
Endless debates
about land use illustrate this principle. Development is opposed by
people saying that we owe it to our children to conserve our precious
natural resources, but University of Rochester economist
Steven Landsburg
asks the right question. Who are we to say that our children will
prefer an old-growth forest to the income produced by a parking lot or
high rise?
Without private property rights, the information we would need
to make a judgment cannot exist. If it is more profitable to build a
high rise, then we can reasonably infer that our children, on net, would
prefer the income from a high rise. If virgin wilderness is more
profitable, we can reasonably infer that our children would prefer the
income from a forest.
Even if we're repulsed by this reasoning,
who are we to substitute our judgment for that of our friends and
neighbors? I borrow an insight from Sheldon Richman at the Foundation
for Economic Education: If we don't think others can be trusted with
liberty, on what basis do we expect them to trust us with power?
Land-use
restrictions also have unintended consequences that have to be
considered. Harvard economist Ed Glaeser cites California as an example.
Restrictions on land use in California drive up the price of housing
there, causing people to move to less energy-efficient places--Houston's
suburbs, for example.
A great irony of land-use restrictions is
that they encourage people to take land that is much more wisely used
for housing and grow crops on it--and vice versa, inducing people to
take land used to grow crops and build housing on it. Ironically,
probably the "greenest" thing we could do is totally eliminate building
restrictions.
We can also reevaluate what we think about
recycling. If there's a problem, it's that something valuable exists but
isn't owned or priced. A quick
Google
(
GOOG -
news
-
people
) search turns up endless debates about the merits and demerits
of recycling, and it is an argument that will never be resolved as long
as it is outside the price system.
Where recycling is worthwhile,
people earn profits doing it. Just because it is unprofitable now does
not mean that it is not worthwhile, but the information we would need to
evaluate recycling literally does not exist because the act of
recycling is mediated by politics rather than prices.
The Energy
Information Administration reports that using recycled aluminum uses 95%
less energy than mining aluminum from raw bauxite. The fact that firms
aren't falling over themselves to use recycled aluminum suggests that
something in the accounting is incomplete. After all, what greedy
capitalist wouldn't jump at the chance to save 95% on a key input? It
may be that using recycled aluminum uses less energy but is more
expensive on other margins.
We recycle because we assume we will
run out of our finite resources if we don't--but the problem isn't that
our planet isn't made up of a finite number of atoms. The problem is
that a lot of those atoms are not owned by anyone. Therefore, we have no
incentive to use them wisely. People have incentives to conserve that
which is privately owned, and rising prices that result give people
incentives to develop substitutes.
Just because it's been thrown
away doesn't mean it is lost forever. Non-biodegradability can be a
virtue: disposable plastics sequester carbon for centuries and may even
someday provide a source of energy. My friend and co-blogger
Michael Munger
hypothesizes that, someday, people will be mining old landfills for
petroleum products that can be turned into fuel. We aren't yet there
technologically. But if you're looking for earth-friendly ways to use
your time, finding ways to turn garbage into energy is probably more
effective than badgering your friends about whether they are using too
many napkins.
Private property rights also allow us to solve
problems of environmental justice. To use another example, environmental
amenities are capitalized into real estate prices. Harm can be
identified--and blame can be assigned--when rights are clearly defined.
Finally,
when measuring costs and benefits, we must always ask, "Compared to
what?" It is true that smog is noxious, but it's a great improvement
over the pulverized horse manure that filled city air just a few
generations ago.
Economic analysis is indispensable to sensible
environmental policy. It shows that a lot of what we think is "green"
really isn't. We have the opportunity to better the world for ourselves,
our friends and our neighbors by seriously considering what careful
economic analysis can teach us about the importance of private property
rights and prices.
Art Carden is an assistant professor of economics and business at
Rhodes College in Memphis, Tenn., and an adjunct fellow with the
Oakland, Calif.-based Independent Institute. He is a regular contributor
to Mises.org, Lifehack.org a
nd Division of Labour.
Sep 15th 2012
Sep 8th 2012
Sep 1st 2012
Aug 25th 2012
