TCS Daily

The Free Market Says "Happy Earth Day"

By Max Borders - April 21, 2006 12:00 AM

Max Borders: Another year, another Earth Day. It's also the fifteenth anniversary of the publication of Free Market Environmentalism, the book that changed the way many people look at environmental issues. Joining us today is Terry Anderson, co-author with Don Leal of the book that defined a generation of newer environmentalists, a generation that is friendly to markets, to green values, and to the idea that these are not mutually exclusive. Welcome, Terry.

Terry Anderson: Great to be with you.

Borders: Word has it you have the decapitated heads of megafauna on the walls of both your home and office. Many defenders of wildlife might be repulsed if they knew this. But how, given certain property rights regimes, can hunters like you actually help their cause?

Anderson: Most of the heads hanging on my walls come from Africa where I have hunted extensively with bow and arrow. The hunting that I do there is on lands that would otherwise be occupied by Brahma cattle; lands that are barely capable of supporting even a few head, let alone many head of cattle.

Those lands have been converted to wildlife lands because hunters like myself are willing to pay a fee to the private landowners to hunt on their land. This is fair chase in every sense of the word, that is, it's not shooting a cow in a corral. But what this has done is changed the incentives for landowners to provide habitat for animals that otherwise would be competing with their cattle. Not only do these animals compete well with cattle, they make the returns to the landowner much higher. And that's why this land exists.

There was a very good book written by Raymond Bonner, a journalist with The New York Times, entitled, "At the Hand of Man." Bonner went to Africa to show how bad and evil hunting was. After being there a while, he discovered that his focus on a single animal detracted from understanding how it is that hunting and payments by hunters -- or people photographing for that matter -- really enhanced the overall survival of not just a single population of impala or zebra, but an overall ecosystem that is home to those.

So I think that hard-thinking environmentalists, clear-thinking environmentalists see a clear link between what hunters do -- or anyone who pays the fee for providing these services -- does for the animals themselves.

Borders: And this is contingent on underlying property rights being in place; is that right?

Anderson: Very much so. In fact, if you look at Zimbabwe, where those property rights have been undermined by a terrible regime under Robert Mugabe, you see an example of what happens when the property rights are taken away.

In Zimbabwe, there were several private reserves that were flourishing with literally hundreds of thousands of acres under wildlife management by private owners, in conjunction with state officials, and now those property rights have been eroded; taken away from the owners and given really to no one other than some bureaucrats who profited from short-term decimation of the populations. And the wildlife is disappearing.

The one place this isn't happening in Zimbabwe and throughout Africa is on the lands where the local people have control of their communal lands. And I'm told by a game warden from Zimbabwe that even Mugabe's thugs won't go on to those lands because those people profiting from wildlife -- from hunters like myself -- are not willing to let Mugabe take their valuable asset: their land and their wildlife.

So they are being protected there -- and it probably isn't a pretty sight to see how it's protected -- but nonetheless, it's protected.

Borders: Suppose that we're convinced that property rights and markets create these incentives for protection of species or other kinds of resources. How can they help keep, say, the sludge out of the air or the river or out of the ground?

Anderson: In thinking about free market environmentalism, I think it's important to make the transition from the easier problems to the tougher problems in the context of property rights -- not that wildlife is an easy problem -- but it's certainly easier than air.

If we ask what is it that makes property rights/market systems work for wildlife, it is that we can define the space. We can rectangularly survey -- or in this day-and-age use GPS -- to define a space that some individual or group has control of and can limit access to; so the communal lands in Zimbabwe that I mentioned earlier are, in effect, owned by the community.

And that's a well-defined space. They can keep people out. They can husband the resources that are held therein. And that's why it's an easier problem. I mean, take the next step to a little tougher one: water. Water flows across many different boundaries, both political and private, and in that process, it's more difficult, therefore, to define who owns the water.

Nonetheless, in the American West, for example -- and in other parts of the world -- we can define quantities of water owned by (and therefore available to be extracted by) the owner. That has to dovetail with downstream owners, so that if you have a superior right to my right, and you're downstream from me, I have to let the water go.

But throughout the American West, those rights are fairly well defined.

Now, if we take one step further from just averting the water to water quality, we can even define the rights and terms of quality. That is to say, you're upstream from me. I have a right to divert a bucket of water and that bucket of water has to have certain characteristics. It can't have sludge in it. It can't have mercury in it. It can't have you name it.

Then I can measure the quality of my water and hold you accountable for what you put into my water. So it's tougher than wildlife, but it's doable and it does happen. Now, if we move to air sheds... and I use that term to get you thinking about areas of air that may be somewhat better defined, but certainly not as well defined as water.

So we could imagine the L.A. Basin being an air shed. Now, if you have a right to clean air, and I put gunk into your air -- that is, suppose I light up a cigar and blow smoke in your face, it's pretty clear I violated some rights and you can hold me accountable.

However, if there are millions of automobiles spewing stuff into the air, and millions of people breathing that air, it's very difficult to think of a property rights system, per se.

Borders: Right.

Anderson: But it isn't impossible to think of making a market that could help, and here, the solution is to establish rights to the air for emission purposes. That is, I have a right to emit so many tons of SO2 into the air - and the government sets that right, so admittedly it's not a "pure" free market.

But then, if somebody wants to enter and dump more SO2 into the air, they have to buy my right. Or if somebody would like less SO2, they can buy my right and not exercise it. That kind of tradable permit system is working very effectively for relatively well-defined air-sheds like the L.A. Basin.

Now, if I can just jump now to the mother of all environmental issues today, global warming, it's virtually impossible to think about how one could establish property rights to some global atmosphere, or even some kind of tradable permit system, given that we don't have a single world government -- thank Heavens -- that can establish these levels and allow trading.

Borders: Yes. And the hope is that the cap-and-trade systems that have worked for stuff like sulfur dioxide or particulates in various cities might also work in a Kyoto-style form for global warming. But there are just a lot of associated problems with that, as I understand it.

Anderson: Yes. I used to be somewhat sanguine about the prospect of a cap-and-trade system for carbon. But I'm less so every day, for three important reasons: The first is that we don't have a political process whereby it's easy to set the caps. Kyoto would be that if everybody would agree.

The second problem is that even if people agree, then we don't have any mechanism for enforcement. So if we agree and China agrees but China doesn't abide by it, what are we going to do about it? In L.A., we can take the police force in and shut the factory down because it's within the sovereign domain of the United States. But that's not so easy worldwide. And thirdly, how do we even know what's going on everywhere? How do we measure people's actions?

So for example: Say I'll pay you to plant some forest and that will give me some credits for sequestering carbon. But then your forest burns down or you cut some of the trees. It's becomes an incredibly difficult monitoring process to know whether you're abiding by the contract.

So I'm just not very optimistic that that's a solution to global warming anymore.

Borders: Overall though, it seems that free market environmentalism is about aligning incentives and balancing both economic and environmental interests, which if we get right down to it, are one and the same. Given what we know about incentives and of the entire regulatory edifice in the US -- so we can come back home to the U.S. now -- what would you say is the single most wrong-headed piece of environmental legislation still on the books?

Anderson: Oh, that's a tough one. The single most? Boy, you're causing me to choose amongst so many evils, it's difficult to decide.

Borders: Well, give me two if that's easier.

Anderson: OK. Well, let me start with one that certainly gets as much press as almost any; the Endangered Species Act. Again, I'm not quite sure I'm willing to say the "single most," but the Endangered Species Act is a classic example of a piece of legislation that started out with some justification -- namely we're going to stop the Bald Eagle from going extinct. And no one thought it was a good thing to have Terry Anderson out there with his 12-gauge shotgun blasting at Bald Eagles, so it was easy to pass legislation that said: "Thou shalt not take a species."

What happened with that legislation, however, is that it became a mechanism whereby people who wanted to save any species, and I mean any -- even fungus, even wildflowers, even toads, even flies -- could utilize this to take other people's property rights. And that is why I think this is a particularly pernicious piece of legislation.

First, I don't like the idea of taking other people's property rights. But secondly, it flies in the face of getting the incentives right. If I know you're going to take my property if it harbors red-cockaded woodpeckers -- an endangered species in the Southeast -- then I'm going to make sure in the first place there aren't any red-cockaded woodpeckers there.

Maybe I'll do it -- as the people in the West are fond of saying -- the "shoot, shovel, and shut up" way. That's clearly illegal. But there are many things I can do short of that. I can go out and cut the trees that would be habitat to insure that the birds don't stay, or that they don't even come. And the data are clear on how this happens, where it happens, and why it happens. One logger said the Endangered Species Act has taken old growth timber in the Southeast and turned it into pulpwood.

That is: you don't want your trees to get old enough to be habitat for red-cockaded woodpeckers, so you cut them when they're very, very young; which may not be the best thing for the forest and it may not be the most profitable. But it's better than being told when the trees get old, you can't cut them at all.

So we have a piece of legislation aimed at saving species, but it has made species the enemy. I have a wonderful cartoon of this gopher with an army helmet and a bazooka on his shoulder. We have made that poor gopher the enemy of the landowner because we insist on taking landowner property rights. So that's a classic case.

I guess I think that another pernicious law -- not a piece of legislation per se, but a part of court-made law -- is one known as the Public Trust Doctrine. This was a doctrine used in California to stop Los Angeles from diverting its privately-owned water rights from Mono Lake in the Owens Valley.

It was utilized in the effort to restore the ecosystem of Mono Lake, with the argument being that California as a state had a public trust responsibility to do this. The result is that Los Angeles had its water rights taken, but in the litigation process -- which was very costly -- it took more than 15 years for Los Angeles to stop diverting water.

If we had simply used a market -- and some of the environmentalists involved now acknowledge this -- we could have purchased the water rights from L.A., done it on a willing buyer/willing seller basis, made it happen more rapidly, and done away with all the acrimony and litigation costs.

So there's another pernicious rule that flies in the face of getting the incentives right. And more importantly, it flies in the face of improving the environment.

As I said, it's hard to come up with a single example because there are so many. If you'll just let me touch on air for a moment, let's look at how we deal with air pollution.

In general, what we do is use technology-based requirements. We tell people with power plants: "you must put scrubbers that scrub the pollutants out of the emissions before they go into the air," (the gunk is then collected in ponds and so on).

We know quite well, on a scientific basis, that we could reduce sulfur emissions far more - and at a lower cost -- if we simply burned low-sulfur Western coal. We wouldn't have to have all this expensive technology, but the incentives -- once the technology rule is in place -- is to burn whatever coal is closest and cheapest, and that's high-sulfur Eastern coal.

That explains acid rain. A ridiculous regulation -- ridiculous from an environmental perspective, but understandable from a political one. For example, if you're Robert Byrd, and your constituents are miners, you want them burning high-sulfur Eastern coal. You don't care about the environment.

So, we have example after example of supposedly attractive-looking environmental laws; that is, attractive if you're an environmentalist. And you say, "Oh, boy, we're really making those evil polluters clean up the air." But it results in higher costs and more pollution than we would have had otherwise if we simply relied on the market process.

Borders: I'll ask you a final quick question: What do you think of this whole "Crunchy Cons" business?

Anderson: Well, let me just give a response in the context of what I have called being a conservative conservationist, and see if this doesn't get at the kind of thing that's in the book, which I will take a look at. Conservatives have long considered the environment to be their Achilles Heel.

When I was an advisor to then Governor Bush during the campaign, one of the advisors on the environment, it was very clear that the people with the political controls were not about to bring the environment up because they thought it would be a case where a conservative would have to lose to a liberal. That is, "you don't really care about the environment, Governor Bush."

"You just care about jobs and economic activity and the environment be damned." The fact of the matter is that free market environmentalism is the perfect way to be a conservative conservationist, that is, it's conservative in that it uses markets and requires less government.

But the evidence is just growing daily that free market environmentalism is the way to have conversation work. Aldo Leopold, the great conservation leader and icon for most conservationists, was fond of saying that conservation will ultimately boil down to paying the private landowner who supports the public interest. And I think therein is the conservative way to think about conservation, and it's what free market environmentalism gives us. It is a way to link a conservative idea of less government with a conservation idea of a healthier environment.

Borders: Terry Anderson, thank you very much for your time.

Anderson: My pleasure.

To listen to the podcast of this interview, click here.


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