Environmental Protection: Is there a Better Way

Environmental Protection: Is there a Better Way

Smith Op-ed in Economic Witness
April 22, 1990

Earth Day 1990-22 April—marks twenty years since the first Earth Day and since the modern environmental movement became a force for politicians to reckon with. In that time, the terms of the environmental debate have hardly changed. Most environmentalists still assume that if environmental protection is needed, government should provide it. They seldom ask Is there a better way?

In this Economic Witness, Fred Smith argues that there is a better way. He looks at the world-wide failure of planned economies to deliver decent societies, and asks why we should expect them to do any better if we increase the complexity of the task by adding environmental protection to the list of objectives. He shows how little one can rely on the political process even in a democracy to give sustained, long term attention to environmental protection.

The 'better way' is free-market environmentalism, working with human nature rather than against it, using human diversity to protect natural diversity, and acting on the universally-recognised fact that private property tends to be better cared for than common property: 'a world in which voluntary arrangements and expanding property rights would better allow individuals to play a direct role as environmental stewards'.April 22nd 1990 is Earth Day. It's twenty years since the first Earth Day in 1970, which is widely credited with solidifying the political climate in the USA that produced the Environmental Protection Agency, the Clean Air Act and the other environmental legislation of the early 1970s.

Twenty million Americans are said to have participated in Earth Day events in 1970. Green organisations worldwide are making Earth Day 1990 a big deal. And perhaps they should. A lot has changed in those twenty years. But one thing has hardly changed: the terms of the en-vironnental debate today are very much what they were in 1970. Most environmentalists assume that if environmental protection is needed, government should act directly to provide it. They don't spend much time asking, Is there a better way of doing it? Is there a better way of handling pollution problems, of saving the elephant, of saving the globe, than the kinds of laws and standards and treaties we are becoming familiar with? We think there is, that we must debate how best to do things as well as what to do.

Let me first critique what now passes for environmental policy wisdom, then sketch an alternative environmental vision, one that I think is far more compatible with the traditional values of western society, and finally provide some examples. It will be a very tight sketch because environmental policy is in a sense the whole world. It takes time to explain classical liberal environmental policy, to explain how free market environmentalism would work.

The (Red) Green View

If you ask reasonable conservationists today to explain their vision of environmental policy, I think they would say something like this:

The market economy is a good thing. We enjoy many of its fruits, many of its victories, but markets unfortunately don't do everything. They leave out critical variables such as pollution. They fail to provide the optimal quantity of public goods. And of course markets are shortsighted, they fail to consider our children and our grandchildren. Since markets fail in these cases, political intervention is needed to correct the market failures. Of course such intervention is needed only for those parts of the economy having environmental consequences.

The problem of course is that every economic decision has environmental consequences, so we find ourselves trying to have a free market economy with every economic decision second-guessed by a central political authority. In the

United States, in much of western Europe and, I suspect, in Australia, the environmental protection agencies in many ways exercise more central economic control than has ever before occurred in peacetime.

We're now trying in much of the Western world to advance environmental quality, to produce environmental amenities, in the same way that the planned economies of Eastern Europe have tried to advance living standards by producing bread and automobiles. The results of that experiment have been on our television screens over the last several months. We've seen that centrally planned economies, organised to achieve the fair egalitarian society sought by the socialists and the Marxists, have been a disaster. Mr Gorbachev might still protest that Communism has not failed. But most of us think that there is some evidence that it has. Ecological central planning is, therefore, not an attractive solution. But is there an alternative?

The Case against Ecological Planning

What is the case against centralised planning for environmental purposes? Basically it's the case against any central planning. How does one obtain the information and then produce the incentives to encourage people to operate in a more ecologically sound way from the top down? How can one encourage decisions that would make the world ecologically better, when one depends on government bureaucrats and directives from above?

Attempts to plan economic growth and a fair society haven't worked; what reason is there to think that planning will work better if we increase the complexity of the task by adding environmental protection to the list of objectives?

Attempts to do everything are thwarted by the fact that government agencies rarely do anything very well. I've worked in the private sector and I've worked in government and the government pencils had erasers on the ends just like the private ones. Since mankind got thrown out of the Garden of Eden, all of us make mistakes, even if we work in government.

Moreover, there's no easy way for political agencies to decide what to do next. What we find is that, in the United States and I suspect in Australia, the environmental agency lurches from crisis to crisis. One day it's questions of timber policy, another time it's worried about nuclear power, another time it's worried about pesticides. Nothing much is finished because the headlines now switch to a new topic and it's off again running. The agency focuses on the sensational rather than the serious. There is no stability, no real consistency.

The Poisoned Chalice of Politics

Environmental policies cost real money. Over the last two decades, the United States has spent hundreds of billions of dollars on environmental programmes. When hundreds of billions of dollars are spent on anything, people try to influence that process. Lobbyists in Washington and no doubt Canberra spend large amounts of time and money trying to affect environmental policy. In Washington we call that rent-seeking or subsidy-seeking.

And of course politics works the way it always does. We 'grandfather' existing plants, assigning them easier environmental standards than new plants. This means we discriminate against the future, against our future industries, against any industry that wants to build anew in any part of the country.

We also discriminate against new technologies. Old technologies have defenders: companies, unions, the users of those products. The new technology, the hope of the future, has no such defenders. Thus, environmental policy closes the door to new technologies.

But it's not only economic groups that cause problems. Policy is also affected by ideological groups. Politicians look for ways of looking good, and right now it's very difficult to look bad if you are the greenest politician in the scene. As most of you know, President Bush brought in a kinder, gentler—but unfortunately dumber—administration, as demonstrated by his environmental policy. The Republicans rushed out ahead of the Democrats, not an easy thing to do, and as a result we've had a race towards insanity in our environmental policies. I understand that there's been a somewhat similar process in Australia.

Another change that results from the environmental policy having become bound up in political rent-seeking is that the environmental movement has now largely changed its leadership. Environmentalists were once people who believed deeply in the quality of the environment. They thought that we had forgotten something along the way. We were too quick to chop down trees, to kill animals. They believed in that deeply and they used their money, their time, their enthusiasm to persuade the rest of us that these things were worthy of more consideration, worthy of preservation. Largely they succeeded. Unfortunately, today those same groups have largely been taken over by power-brokers who want to use our time, our money and our enthusiasm to advance their agenda—a far more traditional political agenda than an ecological one. I think perhaps the same thing is happening in Australia.

Bootleggers and Baptists

More and more in the United States today we encounter an unholy coalition: vested economic interests seeking to protect themselves from competition, joined with anti-business ideological groups who use environmental considerations to advance their shared power agenda. We call this the 'bootlegger and the baptist' problem—a situation in which economic and ideological special interests join forces. In Australian, I believe that bootleggers and baptists are 'slygroggers' and 'wowsers'.

Only Diversity Can Protect Diversity

It's hard for a government to keep its mind on even one or two things, yet by politicising environmental policy, governments are charged with preserving bio-diversity and there are hundreds of thousands of plants and animals out there worthy of preservation. That task is going to be very very difficult if we limit it to 150 governments worldwide. In contrast, 5 billion people acting as individual owners might well find it possible to protect a much broader array of species. We need diversity if we are going to preserve diversity, and governments give us very little of that.

Political Instability

It is also important to realise the instability of political strategy. Former President Jimmy Carter gives us an example. He had very strong traditional environmentalists in his administration and was strongly concerned about the ecology and environmental quality. Then the energy crisis came along (a very important issue, at least as the media saw it). Suddenly it was to hell with the Furbish Lousewort! What really mattered was declaring the moral equivalent of war to maintain energy supplies. His administration created the Synfuels Corporation and poured something like eight billion dollars into building things that never worked. He wanted to open up everywhere to drilling with no consideration about environmental risks. His policies flipflopped 180 degrees. Yesterday's emphasis was the environment, today's was energy. Those who put their faith in politics seldom realise the fickleness of this process.

Empire-Builders

Another thing is that environmental agencies are led by bureaucrats and bureaucrats are entrepreneurs also. The environmental agency often finds its value not in solving problems, but in creating scares. Last year the United States EPA crippled the American apple industry, just on the possibility that small quantities of a pesticide, which hasn't been proved to have much health effects anyway, might cause cancer. Hundreds of millions of dollars were lost by one segment of the US economy, the apple growers in the northwest. An agency like the EPA finds it easier to get its budget approved if people are frightened. An agency whose actions are reported on page 17 of the newspaper is likely to receive low priority at budget time. But an agency that stands between western society and its imminent destruction has every chance of gaining money and power. Our EPA is Ied by a group of people who understand that game very well.

The Third World

Much of what the environmental movement is concerned about today is located neither in Australia nor the United States, but in the Third World. Western environmental policies are not applicable to that part of the world.

Consider four key elements of our current political approach to environmental policy. First, in the United States and Australia we spend very large sums, very inefficiently. In the United States we have spent about $350 billion over the last two decades and we've achieved some gains, but not many. Second, we depend heavily on a high-technology approach. We need armies of scientists and biologists and engineers and economists and modellers and statisticians, in government and in affected industries, to monitor this extremely complicated top-down planning program. Third, since an environmental agency's decisions can make or break a company, the company has every incentive to pay bribes to get a favourable decision or to have a blind eye turned. Thus, if this approach is to work, we need a relatively honest civil service. Finally, traditional environmentalists at least certainly believe it is vital to have an independent public interest movement monitoring, policing, fussing about the process and continuously asking that more be done better, that the environmental laws be tightened up.

Lots of money, lots of technologists, an honest civil service and a free and independent public interest movement. None of these exist in much of the third world. If they had money and technologists they wouldn't be the third world. You can hardly expect to find an honest civil service without decent pay and training. And then of course you have the question of independent groups. Independent groups who stand up and resist third world governments often find themselves lying down again very swiftly. Much of 

this goes too for the second world, the decommunising countries. In fact, in many of the places where environmental protection is most needed, these supposed prerequisites of environmental policy just don't exist.

Walking Over the Grass Roots

There's a lot of talk in the environmental movement about decentralisation, about giving people power and so on. But what role does the environmental movement assign the individual in the environmental area? In the United States it's quite clear: the only role for the individual is to lobby legislators to grant more power and more money to the environmental regulatory agencies. People are only lobbyists for the EPA. People can do nothing themselves. They have no direct environmental role. Australia has not yet gone so far down this road.

In the United States we have a cartoon character called Pogo, a marsupial, which we call a possum. Pogo was talking about pollution and said something that environmentalists have come to use as a major theme: 'We have met the enemy and he is us'. That statement suggests that environmental issues are pervasive, and that the things we do make the environment better or worse. Pogo was saying something very sensible. But current environmental policy doesn't really believe that. Instead it says, 'We have met the enemy, and it's somebody else'—typically corporations, big business, miners, timber industries. You and I aren't responsible, we don't do anything to pollute. Of course we do, but admitting that would eliminate the easy villains and would require individuals to play an active role in cleaning up the environment.

Free Market Environmentalism

With all that money being spent, all that power handed to the EPA, we've done a few things well. We've cleaned up many problems in the environment. In the United States the rivers no longer burn, the most visible forms of effluent have been strained out of the waters. Most of the air pollutants have been dropping rapidly over the last decade. We've handled the big, lumpy, haystack problems. But the environmental problems that remain aren't haystack problems, they're needles-in-the-haystack problems. They're the tiny things, trace contaminants, for instance. To take the ham-handed, crude approach we've used at great expense and great complexity so far and to try to extend it to these difficult ones won't work. Is there something better?

I think there is. We call it free market environmentalism. Where do we see environmental problems emerging in the world today? Do we see the trees and the flowers in our backyard being wiped out or being clear-felled? No. Do we see cats and dogs, or thickens or sheep and cows being exterminated or disappearing from the face of the earth? No. In these cases mankind has established a stewardship arrangement with nature. Where property rights exist in environmental resources the environment has done very well. It's the parts that we've left out of the market place that are doing badly, the things that are everyone's responsibility and therefore of course no-one's real concern.

Free market environmentalists suggest that we look at the world. When we do, we see that the freest economies in the world have the cleanest ecologies, not perfect, but far better than the environments of the planned economies of Eastern Europe and the Soviet Union. From that observation, we suggest that, if freer economies have better environments, the solution is to move further in that direction. We should extend property rights to wildlife, to the lands, to the waters, to the rivers, and find ways in which people can thereby play a direct environmental stewardship role. This will not be easy and I don't want to trivialise the problems involved, but let me give you one example.

Of Elephants and Men

Do you remember when elephants and ivory were front page news last year? The TV showed us pictures of tusks being burnt. Some of us were a little cynical about people burning $3 million worth of tusks when plywood would have served just as well for a television spot, but nonetheless a lot of play was made about the elephant issue. Elephants are noble animals. People like them—they're big, they're beautiful, they're scarce—at least they're scarce in Washington DC. And it occurred to me that, while greed was being blamed, none of my friends had personally killed an elephant recently.

The argument about the elephant epitomises much of the debate about environmental policy, and does it in a way that's easier to understand than some of the more complex issues—hazards, waste and so on. The conventional analysis is very clear. Western man, market forces, greed, and self-interest are so careless of precious environmental resources that ivory goes up in price, increasing the incentives for lawless poachers to go out and massacre these noble animals. African governments can't resist this sort of pressure, so the elephant is endangered. Market forces are so dangerous to the elephant that we have to find ways of separating the two, we have to wall off the African elephant from the world economy. We have to segregate nature from man. We have to segregate the ecology from the economy of the world.

Now that's an interesting approach and it's certainly something that most of the world's governments recently endorsed in CITES, the Convention on International Trade in Endangered Species. The CITES theory is that if something goes up in price you're likely to see less of it in the future. We see the price of elephant tusks going up and elephants are now disappearing from Africa. As prices have increased, about half the elephant population has been killed off in the last decade. So there's a plausibility to that argument.

On the other hand, however, we notice that when the price of wool or wheat goes up, farmers start growing more. If the price of oil goes up we Look harder and find more of it.

There seems to be a difference here. We argue that these facts suggest that rather than a segregationist approach, we need to consider an integrationist approach. Rather than walling off the ecology from the economy maybe we need to integrate these two sectors. In the United States, for example, and I'm sure in Australia, we had our poaching problems. We had cattle grazing on the great plains of the west, a very lawless region. People had guns and used them. And as the value of the cattle went up as Chicago and other cities grew, you could make more money by rustling cattle and selling them illegally on the black market. The pressures on the cattle herds of the west were not dissimilar from the pressures on the African elephant herds today.

What happened? As the value of cattle went up, poaching did become more profitable, but so also did cattle ranching. Cattle 9 owners had more resources and they could invest those resources in combating rustling. They could hire their own cowboys and give them bigger and better guns. As a consequence, rustling was a problem in the United States, but never a serious one.

So when you put things together, the problem isn't the higher price of ivory, it's the fact that the extra money ivory fetches isn't going to people who will do anything to benefit the elephants. What we've done to much of Africa, and this is partly the fault of Western intellectuals, is to give them a model of how society works, a model that said that markets weren't very good, and central planning was much better. So the African elephant is 'protected' by African governments. Some of us wouldn't want to be in that situation! Kenya is the leading model of this central planning form of elephant administration. That was where all the ivory was burnt. Indeed, recently, the Kenyan government hasn't done an especially good job of protecting its tourists, let alone its elephants.

We must find ways of making it worthwhile for African peasants to save the African elephant. They're the people who are on the scene. They are the ones who will either protect the elephant or call in the poacher. Americans and Australians share a common heritage and we both remember a folk hero who was a poacher. His name was Robin Hood. And why was Robin Hood a hero? Because he was poaching from the King's game parks. The local people got no value from the parks. In contrast, the elephant poachers came across on our television screens as bad guys. They were bad people. To the Africans, however, the poachers may not have been such villains. After all, like the King's game parks of England, the African wildlife are often reserved for the wealthy, the affluent. As in England, the average person was left to fend for himself. And one of the ways they fend is violating the royal prerogative and making their lives a little bit better.

If the African elephant is going to survive we've got to find ways of making the survival of the elephant consistent with the survival and the prospering of the African peasant. And that's possible. Experiments are going on right now. Zimbabwe and, to a much lesser extent, Zambia have in a very limited way allowed the local people own and sell elephants.

Incidentally, roving elephants are something you might worry about. Some people, after all, are upset when their neighbour's dog breaks into their backyard. Imagine if your neighbour's elephant broke into your backyard. You might well just decide to call the local poacher and collect a finder's fee on it. But you might not. Suppose rather than call in the poachers and the underground economy, you could sell a licence to hunt that elephant on the international hunting market for upwards of $20,000. This is a lot more money than you would earn from a poacher.

However, let's suppose that there's no hunting market at that time of the year, or the elephant isn't a trophy animal that a hunter would pay a fortune to kill. You might then think of just selling the ivory and meat and so on. But do you want to eliminate that potential income stream? Do you want to kill off the last of the elephants in your area? No, you want to have elephants harvested, but harvested in a sustainable way.

Let's compare two African countries. Zimbabwe is experimenting with this process of creating incentives for the survival of the elephant; its policy is to allow elephants to be killed in a controlled way. Kenya believes that elephants are so precious that they should never be killed. Ten years ago, Zimbabwe had about 30,000 elephants, now they have 49,000. Ten years ago, Kenya had some 65,000 elephants, now they have about 18,000. Zimbabwe has issued thousands of permits to kill elephants. In theory, Kenya hasn't let a single one be killed.

Markets can be very powerful ways to reconcile our concern about living in a quality environment and our concern about living in a quality economy. How do we integrate those two things? In the case of the elephants people often say, let's use tourism. The problem with tourism is, as economists would put it, the marginal value of an individual elephant isn't very high. There are 49,000 elephants in Zimbabwe. Let's suppose there were only 48,000. Tourism wouldn't drop very much? Tourists don't see 48,000 elephants. I saw 50 kangaroos here and I thought that was a lot of kangaroos. If you're only concerned with tourism, then you keep a herd of pet elephants and run them by the verandah around the time the suckers are sipping Chablis and eating brie. The rest of the time you don't need them. The National Zoo in Washington has, I think, 5 elephants and they attract an awful lot of tourists. The last elephant would be worth preserving for tourism. The question is, is the first elephant worthy of preservation? And here tourism unfortunately does not do very well.

Some Other Examples

Private Water

Water pollution problems are specially important to people in Australia and the Southwest of the United States, where there's not too much fresh water to start with. We aren't managing water very well in the United States, but in England where there are private fishing rights, the owners of the tights have some control over activity upstream that would pollute the water. There's a famous law-suit in England called The Pride of Derby case, where the local fishing club enjoined an upstream municipality because its effluents were harming the fishing streams. Now that happened when the fish got sick, not when things had got so bad that the river caught fire, as they have done in the United States and the Soviet Union.

The point is that even modest partial property rights have value. Fish and other Fox; species serve as tripwires for environmental quality. Property rights in such species enlis more of the population as pollution fighters Property rights empower people to address pollution, a powerful result.

State and Private Forests

About a third of forest land in the US is governent-owned and therefore subject to politica control. About two thirds is in private hands. The Northwest forests of the US are largely, although not totally, politically controlled. The Southeast forests are largely, but not totally, in private hands.

The government lands, the politically-controlled lands are being battled over constantly. When the economy falters, there's a tendency to encourage employment; so the Forest Service builds roads, subsidises timber harvesting and chops down lots of trees. When times are good and ecological values are on the ascendancy, the Forest Service closes forests. Then we worry about threatened environmental species: for instance the Spotted Owl, a species which has stopped all timber harvesting in a large section of old growth forest in Oregon. The Spotted Owl is important, but one thinks that it should be possible to cut down trees and still save the owls. It is, of course, but not in a political environment.

In the Southeast, where there is mainly private management, the debate is muted because private land owners and environmental groups have greater incentives to work together. The private land owner hopes to earn goodwill by being a good corporate citizen. The environmentalist must consider other economic values of forests.

When you grow forests you don't harvest the forest in a few years, you have to wait twenty or thirty years. So there's a tendency now to use the land in the intervening period as places for other forms of economic benefits. Private forests are not only yielding trees on a sustained basis, but are also now beginning to yield major recreational benefits. Hunting and fishing are very important now, but over time more and more of 

these forest recreational values will be in non-consumptive activities like bird watching and hiking and camping.

The private sector is doing a better job of forest management in the US than the government. For instance, there are more forests east of the Mississippi now than there were in 1850. There's more wildlife east of the Mississippi than there's been in decades.

Conclusion

What is going to happen in this area? In the short term I think the world will continue to be obsessed with environmental concerns. People believe there is nothing they can do, and they believe the ecology and the economy are at war and will always be at war. There's no real belief and no real interest at the moment in trying to find ways of reconciling our desire to live in a world that is affluent with our desire to live in a world that is clean.

But there will be such opportunities. Now, with the twentieth anniversary of Earth Day approaching, and the Australian economy in severe trouble with foreign debt and on the brink of a major recession, is certainly such an occasion. Now is the time to introduce free-market economics into environmental thinking, to work towards a world in which voluntary arrangements and expanding property rights would better allow individuals to play a direct role as environmental stewards.

This approach, after all, goes back to our basic traditions. If one looks at the Bible, which says many many things about environmental issues, one of them, the parable of the Good Shepherd, epitomises free market environmentalism. The Good Shepherd, you may remember, lays down his Life when the wolf (the threat to the environment) approaches, while the hireling runs away. Ownership is a powerful way of enlisting people in protecting critical environmental values.

Now is the time for dialogue and debate on environmental protection. We need this much more than another round of arbitrary, divisive, political action.