1. Free Market Environmentalism Free Market Environmentalism By: Terry L. Anderson & Donald R. Leal By: Terry L. Anderson & Donald R. Leal Presented By: Ben & Jill Presented By: Ben & Jill May 15, 2002

2. Learning Objectives: To present the basic ideas of Free Market Environmentalism To present the basic ideas of Free Market Environmentalism To cover the main ideas associated with Free Market Environmentalism To cover the main ideas associated with Free Market Environmentalism To look at the positive and negative aspects of Free Market Environmentalism when applied to real world problems To look at the positive and negative aspects of Free Market Environmentalism when applied to real world problems

3. What is Free Market Environmentalism? Free Market Environmentalism is the idea that Free Market principles should be used to solve and prevent environmental problems. Free Market Environmentalism is the idea that Free Market principles should be used to solve and prevent environmental problems. Free Market Environmentalism is a process not a prescription to all environmental problems. Free Market Environmentalism is a process not a prescription to all environmental problems.

4. Core Ideas: Free Market Environmentalism is based on four concepts. Political Inefficiencies Political Inefficiencies Property Rights Property Rights Incentives Incentives Market Solutions Market Solutions

5. Political Inefficiencies: The Government is not able to effectively manage environmental policy due to multiple inefficiencies inherent in its existence. The Government is not able to effectively manage environmental policy due to multiple inefficiencies inherent in its existence.

6. Why is Government Inefficient in Environmental Matters? Politicians tend to choose actions with short-run payoffs. Politicians tend to choose actions with short-run payoffs. Politics can and does override sound science. Politics can and does override sound science. Politicians and governmental decision makers are not held personally accountable for their decisions. Politicians and governmental decision makers are not held personally accountable for their decisions. *Taken from “Free Market Environmentalism” *Taken from “Free Market Environmentalism”

7. Case Study: Canada’s Atlantic Fishery Collapse For centuries, a prosperous fishing industry sustained Canada’s east coast. For centuries, a prosperous fishing industry sustained Canada’s east coast. In the 1970’s the government adopted programs to increase the number of fishing boats, encouraging economic expansion. In the 1970’s the government adopted programs to increase the number of fishing boats, encouraging economic expansion.

8. The program encouraged commercial fishing through tax breaks, loan guarantees, and insurance subsidies to fishers, boat owners and processors. The program encouraged commercial fishing through tax breaks, loan guarantees, and insurance subsidies to fishers, boat owners and processors. The government set catch limits above sustainable levels of fish stock. The government set catch limits above sustainable levels of fish stock. These actions caused fish stock to collapse. These actions caused fish stock to collapse. Ultimately the industry was ruined, thousands lost their jobs. Ultimately the industry was ruined, thousands lost their jobs.

9. Canada’s east cost cod stocks before and after the government intervention:

10. Government Inefficiencies: Short-run Payoffs Politicians chose expanding employment in the fishing industry as a way to garner votes for the next election, even though such actions proved to be ecologically, economically, and socially disastrous in the long run (p. 54). Politicians chose expanding employment in the fishing industry as a way to garner votes for the next election, even though such actions proved to be ecologically, economically, and socially disastrous in the long run (p. 54).

11. Government Inefficiencies: Politics Overrides Sound Science An internal government document critical to management of the Canadian fishing industry charged that scientific information was “gruesomely mangled… to meet political ends” (p. 55) An internal government document critical to management of the Canadian fishing industry charged that scientific information was “gruesomely mangled… to meet political ends” (p. 55)

12. Government Inefficiencies: No Personal Accountability for Law Makers Actions Since the 1992 moratorium on fishing, 40,000 fishers and processors have been thrown out of work, but no one in government has been fired, demoted, or even reprimanded (p. 55) Since the 1992 moratorium on fishing, 40,000 fishers and processors have been thrown out of work, but no one in government has been fired, demoted, or even reprimanded (p. 55)

13. Question: If government regulation and management is not effective in solving environmental problems, then what is? If government regulation and management is not effective in solving environmental problems, then what is?

14. Answer: Turning over responsibility of environmental issues to individuals under a Free Market system. Turning over responsibility of environmental issues to individuals under a Free Market system.

15. Property Rights: The Key to successful environmental policy is… The Key to successful environmental policy is… –Well Defined –Transferable –Protected –Defensible Property rights.

16. Property Rights: Importance to Environmentalism Provide a means for distributing liability. Provide a means for distributing liability. Gives owner a personal stake in the outcome of actions taken on a property. Gives owner a personal stake in the outcome of actions taken on a property. Ends the “Tragedy of the Commons.” Ends the “Tragedy of the Commons.”

17. Case Study: The “Tragedy of the Commons” Consider what happens when two people engage in a trade where one offers meat raised on private land in exchange for fish caught in the open sea (p. 12) Consider what happens when two people engage in a trade where one offers meat raised on private land in exchange for fish caught in the open sea (p. 12)

18. Case Study: Private Land Considerations Impact of grazing cattle on the future productivity of the land Impact of grazing cattle on the future productivity of the land If too many cattle are grazed one year there may be little or no grass the next year. If too many cattle are grazed one year there may be little or no grass the next year.

19. Case Study: Open Seas Consideration Catching fish this year means they will not have the opportunity to grow or reproduce. Catching fish this year means they will not have the opportunity to grow or reproduce. However, a fish not taken will be caught by someone else. However, a fish not taken will be caught by someone else. Taking the fish today imposes costs on all fishers because fish will be more scarce and smaller in the future, but, the costs will be shared by all. Taking the fish today imposes costs on all fishers because fish will be more scarce and smaller in the future, but, the costs will be shared by all. So the benefits still go to the individual who catches the fish today. So the benefits still go to the individual who catches the fish today.

20. Case Study: The “Tragedy of the Commons” The problem the person fishing faces is known as the “Tragedy of the Commons.” The problem the person fishing faces is known as the “Tragedy of the Commons.” If access to valuable resources are unrestricted, people entering the commons to capture its value will ultimately destroy it. If access to valuable resources are unrestricted, people entering the commons to capture its value will ultimately destroy it. Even if an individual recognizes their actions are destructive they will continue to fish because if they don’t someone else will. Even if an individual recognizes their actions are destructive they will continue to fish because if they don’t someone else will.

21. Question: How might the “Tragedy of the Commons” effect… Individuals or groups who set aside land for biodiversity? Individuals or groups who set aside land for biodiversity? As long as third parties can enjoy environmental amenities without paying for them, there is the potential for a free ride and the possibility that the amenities will be under produced (p.13). As long as third parties can enjoy environmental amenities without paying for them, there is the potential for a free ride and the possibility that the amenities will be under produced (p.13).

22. Defending Property Rights: Property rights evolve depending on the benefits and costs associated with defining and enforcing those rights. Property rights evolve depending on the benefits and costs associated with defining and enforcing those rights. The key to the “property right” approach is the ability to defend ones right in court. The key to the “property right” approach is the ability to defend ones right in court. –It may be easy to define land or water right but harder to establish and defend air rights. –This is an example of how Free Market Environmentalism is a process not a final solution.

23. Incentives: Individuals will undertake more of an activity if the benefits of that activity are increased or the costs reduced. Individuals will undertake more of an activity if the benefits of that activity are increased or the costs reduced.

24. Incentives: Importance to Environmentalism Provides a means for personal accountability. Provides a means for personal accountability. Stimulates human interest in areas that otherwise would be overlooked. Stimulates human interest in areas that otherwise would be overlooked. Encourages exploration of means that maximize available incentives. Encourages exploration of means that maximize available incentives.

25. Case Study: US Forest Service The US Forest Service is in charge of managing over 191 million acres of public land for a variety of uses such as… The US Forest Service is in charge of managing over 191 million acres of public land for a variety of uses such as… Timber production, livestock grazing, mineral production, wildlife protection, and public recreation. Timber production, livestock grazing, mineral production, wildlife protection, and public recreation.

26. Case Study: US Forestry Service’s losses for top land uses.

27. Case Study: Government Owned Timber Sales in Montana from 1988-1992 What is causing the drastic difference between the two?

28. Case Study: Why the Difference Between State and Federal Forest Sales? By law, state foresters must maximize returns from their land for public schools. If they do not do this their job is on the line. By law, state foresters must maximize returns from their land for public schools. If they do not do this their job is on the line. Forest Service personnel have no such requirement. Forest Service personnel have no such requirement.

29. Case Study: Conclusion The fact that ones job is on the line is a large incentive to make a profit when selling publicly owned timber. The fact that ones job is on the line is a large incentive to make a profit when selling publicly owned timber. This principle would also carry over into the free market system. If a profit was not made by a company managing recourses, it would go bankrupt. This principle would also carry over into the free market system. If a profit was not made by a company managing recourses, it would go bankrupt.

30. Question: Do you believe that if incentives were increased for Forest Department employees to turn a profit on timber sales a profit could be reached? Do you believe that if incentives were increased for Forest Department employees to turn a profit on timber sales a profit could be reached? Do you believe a main goal of the Forest Department should be to make a profit? Do you believe a main goal of the Forest Department should be to make a profit?

31. Market Solutions: When individuals are given property rights they have an incentive to manage that property to gain its fullest potential. Thus individuals will turn to innovative and creative ways to solve environmental problems. These solutions can be called Free Market Solutions. When individuals are given property rights they have an incentive to manage that property to gain its fullest potential. Thus individuals will turn to innovative and creative ways to solve environmental problems. These solutions can be called Free Market Solutions.

32. Market Solutions: Importance to Environmentalism Provide solutions to environmental problems in the most efficient and effective way possible Provide solutions to environmental problems in the most efficient and effective way possible Allows for creative and innovative solutions many times hard to pass through governmental means. Allows for creative and innovative solutions many times hard to pass through governmental means. Allows individuals a personal stake in the environmental process by providing a means for personal gain as well as environmental prosperity. Allows individuals a personal stake in the environmental process by providing a means for personal gain as well as environmental prosperity.

33. Case Study: Audubon Oil Drilling In Louisiana the Audubon Society owns a 26,000- acre preserve. In Louisiana the Audubon Society owns a 26,000- acre preserve. Since the 1950’s the sanctuary had been producing natural gas and oil from 37 wells. Since the 1950’s the sanctuary had been producing natural gas and oil from 37 wells. These wells have produced more than $25 million in revenues for the Audubon Society. These wells have produced more than $25 million in revenues for the Audubon Society.

34. Case Study: Market Solutions Though the Audubon Society has made over $25 million they could have made more. However, they demanded strict environmental protection standards be put in place for the drilling. Though the Audubon Society has made over $25 million they could have made more. However, they demanded strict environmental protection standards be put in place for the drilling. Due to this, innovative and amazingly safe methods of drilling were used to protect the environment and at the same time providing revenue for the organization. Due to this, innovative and amazingly safe methods of drilling were used to protect the environment and at the same time providing revenue for the organization.

35. Case Study: Conclusion Just as Audubon was successful in working with industry to benefit both parties, other environmental groups should be allowed to do same. Just as Audubon was successful in working with industry to benefit both parties, other environmental groups should be allowed to do same. When a federally owned land is opened for energy leasing, environmental groups should be allowed to bid. The group may want to cut off development completely, or cooperate with Industry as Audubon did. When a federally owned land is opened for energy leasing, environmental groups should be allowed to bid. The group may want to cut off development completely, or cooperate with Industry as Audubon did.

36. Conclusion: Forming the Foundation When reviewing the main points covered: When reviewing the main points covered: –Government Inefficiencies –Property Rights –Incentives –Market Solutions

37. Conclusion: It is important to see how each of the main points covered represents different ideas, yet each builds upon the others to form the foundation of Free Market Environmentalism. It is important to see how each of the main points covered represents different ideas, yet each builds upon the others to form the foundation of Free Market Environmentalism.

38. Conclusion: Government Inefficiencies It is because of Government Inefficiencies that the concept for Free Market Environmentalism is viable. If governments proved capable to effectively manage and protect the environment there would be no need for a new system, unfortunately, this is not the case. It is because of Government Inefficiencies that the concept for Free Market Environmentalism is viable. If governments proved capable to effectively manage and protect the environment there would be no need for a new system, unfortunately, this is not the case.

39. Conclusion: Property Rights, Incentives, Market Solutions. Each of these main points continues to build upon each other. Each of these main points continues to build upon each other. Free Market Environmentalism says the best way to combat Government Inefficiencies is through Property Rights Free Market Environmentalism says the best way to combat Government Inefficiencies is through Property Rights Property Rights lead to Incentives for the owner, giving them a personal stake in the long term condition of the property. Property Rights lead to Incentives for the owner, giving them a personal stake in the long term condition of the property. Incentive then leads to Market Solutions as individuals do what is best for themselves and the environment at the same time. Incentive then leads to Market Solutions as individuals do what is best for themselves and the environment at the same time.

40. Conclusion: Putting it all Together Property Rights Incentives Market Solutions Government Inefficiencies

41. Conclusion: Final Review What is Free Market Environmentalism? What is Free Market Environmentalism? Government Inefficiencies Government Inefficiencies Property Rights Property Rights Incentives Incentives Market Solutions Market Solutions

42. Conclusion: Questions Do you believe Free Market Environmentalism to be a viable form of environmentalism? Do you believe Free Market Environmentalism to be a viable form of environmentalism? What do you believe its strong points to be? What do you believe its strong points to be? Weak Points? Weak Points?

43. The End *All pictures found using Google Image Search.