by Fred L. Smith, Jr.
March 8, 2006

fIn CEI’s view, current environmental policy suffers from many faults—a bureaucratized approach to issues, a sensationalist response to scare stories, and an obliviousness to the human and monetary costs of overregulation.  Some of these problems, such as administrative tunnel vision, were wonderfully analyzed by Justice Stephen Breyer in his 1993 book, Breaking the Vicious Circle—Toward Effective Risk Regulation.  Two essential steps toward reforming this approach would involve expanding property rights, so that resource owners might be better empowered to protect those resources, and increasing the opportunity for local experimentation with alternative approaches.

Unfortunately, two decisions by the Supreme Court in its last term dealt severe setbacks to the likelihood of such reforms.  The Kelo decision, Kelo v. City of New London, Conn., 126 S.Ct. 326 (2005),  severely undermined property rights, and the medical marijuana ruling, Gonzales v. Raich, 125 S.Ct. 2195 (2005), seemed to remove all limits to congressional authority under the Commerce Clause.  Nothing is likely to happen very soon to cut back these decisions, though the more recent Oregon assisted suicide ruling, Gonzales v. Oregon, 126 S. Ct. 904 (Jan 17, 2006), suggests that indirect trimming is still a possibility. 

It’s an open question whether the two new justices will produce any improvement here.  I draw some comfort from Chief Justice Robert’s dissent, as a circuit judge, from the denial of rehearing en banc in the desert toad endangered species case, Rancho Viejo v. Norton, 334 F.3d 1158, 1160  F.3d 1062, (D.C. Cir. 2003), in which he expressed concerns over broadening federal power under the Commerce Clause.  And I draw a bit of comfort from Justice Alito’s dissent, on similar Commerce Clause grounds, as a circuit judge in U.S. v. Rybar, 103 F.3d 273, 286 (3d Cir. 1996) (federal ban on machine guns).   Some comfort, but not very much.

Our environmental policy has remained largely untouched by the findings of law and economics.  I like to think that the Constitution envisioned a world in which the insights of evolutionary common law would gradually expand to incorporate resources as they became increasingly valued – wildlife, ground and surface waters, the electromagnetic spectrum, and even air quality. All would be incorporated into a system of meaningful property rights as institutions developed to make this possible.  Certainly the Louisiana Purchase was easily incorporated into this scheme. 

Property rights ought to obey the three Ds: be definable, divisible, and divestible.  The economist Ronald Coase demonstrated how the broadcast spectrum went through this evolutionary process.  Entrepreneurs found that this new resource had value, began to homestead it, and found ways of addressing such conflicts as overlapping bandwidths and frequency interferences.  As we gained experience, trespass law evolved to encompass this field.  At the same time, trespass itself was reduced as parties found ways to create mutually advantageous arrangements such as “fences” and monitoring schemes.  In time, these new resources were integrated into the broader system of marketable exchange values.  The airwaves today may suffer from some politicization, but it’s nothing compared to the trouble we might have had without property rights in the electromagnetic spectrum.

Unfortunately, this evolutionary process was not universal.  Water law evolved in one direction; air pollution law in another.  Wildlife became a special type of property subject to still other legislative rules.  For the most part, we have mostly political institutions, rather than markets, to handle conflicts in these areas.  As a result, environmental problems are usually resolved on the basis of the relative political strengths of the parties.  In the early part of the Industrial Revolution, this led to favoring development over protection; today the opposite is the more likely result.  Neither encourages rational economic or environmental policies. 

How can we restart the process of integrating human concerns about the environment with human concerns about jobs and health and wealth?  The decentralization of environmental decision-making and the expansion of property rights are necessary first steps.  Second, laws are needed to allow contracting out as an option among disputing parties.  Fishermen, for example, should be allowed to negotiate directly with upstream polluters to decide what control policies (including monetary payments) will be permitted.

Third, the law should create rules under which common property resources might be privatized.  Consider groundwater.  Rights in underground mineral deposits such as oil and gas are today viewed as private property.  Property owners are allowed to sell their rights to these assets separately from surface rights.  Moreover, the subsurface rights owners are allowed to merge their distinct rights to create physical “units” which allow more efficient management policies. 

Why shouldn’t permissive legislation of this sort be allowed for aquifers?  The law need not mandate that such units be created, but by clarifying ownership rights and recognizing these units as property, it would expand the range of experiments permitted in this area.  Similarly, animal shelters currently have quasi-ownership rights over wounded wildlife.  Expanding such rights to wildlife in general might be a huge advance in assuring their long-term survival.

Now, much of this sounds like pure policy, totally inappropriate for Supreme Court adjudication.  On the other, it’s the Constitution that lays out the framework for both federal policymaking and for property-based markets.  That framework, I believe, suffered two blows last term.  Whether it recovers is an open question.