Economics and the Environment: A Reconciliation

352 Pages·2004·5.89 MB·English

.....
:
Edited b\f
Walter E. Bloc
Contributors: Edwin Dolan
Terry Anderson Donald McFetridge
John Baden Murray Rothbard
Walter Block Douglas Smith
Thomas Borcherding Jan e Shaw
John Chant Richard Stroup
www.fraserinstitute.org
Economics and the
Environment
A Reconciliation
Edited by
Walter Block
Contributors:
Terry Anderson
John Baden
Walter Block
Thomas Borcherding
John Chant
Edwin Dolan
Donald McFetridge
Murray Roth bard
Douglas Smith
Jane Shaw
Richard Stroup
www.fraserinstitute.org
Canadian Cataloguing in Publication Data
Main entry under title:
Economics and the environment
Includes bibliographical references.
ISNB 0-88975-067-X
1. Environmental policy — Economic aspects.
I. Block, Walter, 1941- II. Fraser Institute
(Vancouver, B.C.)
HC79.ESE22 1989 363.7 C89-091582-2
Copyright © 1990 by The Fraser Institute. AH rights reserved. No part of
this book may be reproduced in any manner whatsoever without written
permission except in the case of brief quotations embodied in critical
articles and reviews.
Printed in Canada.
www.fraserinstitute.org
CONTENTS
Preface vii
About the Authors xvii
Chapter 1
The Economics of the Conserver Society
John F. Chant, Donald G. McFetridge, and Douglas A. Smith 1
Chapter 2
Natural Resources and Transgenerational Equity
Thomas E. Borcherding 95
Chapter 3
Natural Resource Scarcity, Entrepreneurship, and
the Political Economy of Hope
John Baden and Richard L. Stroup 111
Chapter 4
The Market Process and Environmental Amenities
Terry Anderson 137
Chapter 5
Global Warming and Ozone Depletion
Jane S. Shaw and Richard L. Stroup 159
Chapter 6
The Economics of Protecting the Ozone Layer
Douglas A. Smith 181
Chapter 7
Chemophobia and Activist Environmental Antidotes:
Is the Cure More Deadly than the Disease?
Richard L. Stroup 193
Chapter 8
Controlling Acid Rain
Edwin G. Dolan 215
www.fraserinstitute.org
Chapter 9
Law, Property Rights, and Air Pollution
Murray N. Rothbard 233
Chapter 10
Environmental Problems, Private Property Rights
Solutions
Walter E. Block 281
VI
www.fraserinstitute.org
Preface
The title of this book is Economics and the Environment: A Reconciliation. On
the face of it, two more irreconcilable perspectives could hardly be found.
Economists are presumably concerned with the bottom line, with profit and
loss, and with matters commercial and financial; "Let the environment watch
out for itself is the attitude attributed to economists by many people. Environ-
mentalists, in sharp and dramatic contrast, want to promote ecologically sound
policies, ones that leave the earth's resources unsullied, that preserve its land,
water, and air in pristine form for the generations to come. At least in the popular
conception, they are supposed to be blissfully unconcerned about the economic
implications of such a stance.
Nevertheless, it shall be the burden of this volume to argue that despite these
differences, the two very different concerns can be reconciled. How can this be
done?
The essence of the reconciliation is that it is possible to use economic means
in order to obtain environmental ends. The various authors in this book argue,
each in his own way, that by using such economic building blocks as free market
prices, private property rights, and, most important, a legal system that carefully
defines, delineates, and protects such rights, the goals of the environmentalists
can be achieved. They argue, also, that using these building blocks is a better
and more effective way of attaining an ecologically sound environment than is
directly and explicitly attempting to promote this end. A strict adherence to
private property rights, in other words, will do more to secure air and water
purity and sound resource management than will centralized control over the
economy, even if done with this purpose in mind.
This motif of using free market means for ecological ends is analogous to
the attempt to use capitalist means in order to attain socialist goals.
New Zealand
The Honorable Roger Douglas, former Finance Minister of the Labour govern-
ment of New Zealand, uses this insight to explain why his social democratic
government employs such techniques as large-scale privatization of state-
owned assets, banking and market deregulation, tax cutting, reducing the public
VII
www.fraserinstitute.org
Economics and the Environment
sector deficit, and eliminating wage, interest, import and export controls. States
Douglas, "This government is more interested in ends than it is in means. We
are hungry for results and not obsessed with process. There is nothing socialistic
about high inflation, nor about high levels of foreign debt, about an economy
that does not grow for a decade and a half (Fraser Forum, July 1988, p. 4).
Of course, this economist-ecologistreconciliation now being attempted will
be impossible for those who use environmental concerns merely as a stick with
which to beat the free-enterprise system. All that can be said to such people is
that much of the environmental despoliation in the western nations stems from
the public sector (e.g., municipal authorities dumping raw sewage into the
ocean), not the private, and that in any case, no matter how badly the ecosystem
has been treated by the capitalist countries, communism has a far worse record
in this regard. One need only contrast Three Mile Island, the worst nuclear
disaster in the U.S., where not one person died, with Chernobyl, its Soviet
counterpart, which caused the deaths of hundreds and laid waste to thousands
of square miles of our precious spaceship earth.
Similarly, a reconciliation is also impossible for some fanatical anti-en-
vironmentalists—those concerned only with the immediate short-run bottom
line, who feel that technology, virtually any technology, is per se beneficial.
One sometimes supposes that the ideal vision of such people is an earth where
all forests and fields have been plowed under and paved over with cement,
forming one single gigantic parking lot, or one with smokestacks run riot, where
the air is almost blackened with pollution. One can only reply that such a spectre
represents a very narrow perspective. Not only would this scenario be an
absolute ecological disaster, but the implications for a growing and prospering
economy would also be highly problematic, to say the very least.
Moderation
Fortunately, however, most people concerned with economics and ecology fall
into neither of these extreme categories. It is to the vast number of people who
are open-minded on this issue—and thus fall into an intermediate or more
moderate category on this spectrum—that this book is addressed. But even
these people will question our attempted reconciliation. After all, it does sound
paradoxical, not to say somewhat quixotic: aren't economic growth and en-
vironmental protection supposed to be incompatible? All that can be said at this
point is that there is certainly no more contradiction between economics and
ecology than between socialism and capitalism, and that if the New Zealanders
can harmonize the latter pair, then we are at least justified in attempting to do
so with the former.
Some of the paradoxical nature of the enterprise can be banished at the
outset, however. Much of the seeming incompatibility stems not from any
intrinsic opposition between the free marketplace and a sound environment, but
VIII
www.fraserinstitute.org
Preface
rather from a mis-specification of the former. That is, it is commonly assumed
that the system now operating in North America, Western Europe, and parts of
Asia is one of capitalism. Most people in these countries suppose that free
enterprise is the system now in operation.
Nothing could be further from the truth, however. At present, we have a
mixed economy. It is partially free, but also partially controlled by government.
In a pure free market, there would be no public sector to control or conduct
purely economic activities. Government would instead be limited to providing
for defence against external enemies, and for protection against internal
criminals. As a last resort, it would provide a "safety net" in order to guard
against the effects of dire poverty, if private charity were somehow unequal to
the task, given the more highly productive society entailed by such arrange-
ments.
A Legal System
But laissez-faire capitalism, if it is to function, needs far more than economic
freedom. It also needs a legal system based strictly, and rigidly, on the rights
of private property. It is thus government's job, too, to organize a body of law
based on these principles. It is only if the economic system is embedded in
legislation deriving from such principles that a full free market can be said to
exist.
It is the contention of this volume that the seeming contradictions between
the market and ecological concerns are not due to the free-enterprise part of the
mixed economy. Rather, they are caused by government's failure to live up to
the role it and only it can play in a truly capitalist system. It is impossible to
overemphasize the importance of this claim; it is absolutely crucial to an
understanding of our attempted reconciliation.
A statement of this principle, as it applies to the environment, has been
expressed as follows by Martin Anderson:
Fortunately, there is a simple, effective approach available—
long appreciated but underused. An approach based solidly
on... private property rights.
At its root all pollution is garbage disposal in one form
or another. The essence of the problem is that our laws and
the administration of justice have not kept up with the refuse
produced by the exploding growth of industry, technology
and science.
If you took a bag of garbage and dropped it on your
neighbor's lawn, we all know what would happen. Your
neighbor would call the police and you would soon find out
that the disposal of your garbage is your responsibility, and
IX
www.fraserinstitute.org
Economics and the Environment
that it must be done in a way that does not violate anyone
else's property rights.
But if you took that same bag of garbage and burned it
in a backyard incinerator, letting the sooty ash drift over the
neighborhood, the problem gets more complicated. The
violation of property rights is clear, but protecting them is
more difficult. And when the garbage is invisible to the naked
eye, as much air and water pollution is, the problem often
seems insurmountable.
We have tried many remedies in the past. We have tried
to dissuade polluters with fines, with government programs
whereby all pay to clean up the garbage produced by the few,
with a myriad of detailed regulations to control the degree of
pollution. Now some even seriously propose that we should
have economic incentives, to charge polluters a fee for pol-
luting—and the more they pollute the more they pay. But that
is just like taxing burglars as an economic incentive to deter
people from stealing your property, and just as uncon-
scionable.
The only effective way to eliminate serious pollution is
to treat it exactly for what it is—garbage. Just as one does
not have the right to drop a bag of garbage on his neighbor's
lawn, so does one not have the right to place any garbage in
the air or the water or the earth, if it in any way violates the
property rights of others.
What we need are tougher clearer environmental laws
that are enforced—not with economic incentives but with jail
terms.
What the strict application of the idea of private property
rights will do is to increase the cost of garbage disposal. That
increased cost will be reflected in a higher cost for the
products and services that resulted from the process that
produced the garbage. And that is how it should be. Much of
the cost of disposing of waste material is already incor-
porated in the price of the goods and services produced. All
of it should be. Then only those who benefit from the garbage
made will pay for its disposal (The Christian Science
Monitor, January 4, 1989, p. 19).
Alternative Perspective
It must be acknowledged, however, that within what might be called the broadly
based free-enterprise camp, there is an alternative perspective. While adherents
www.fraserinstitute.org