This is the 15th anniversary of the publication of Free Market Environmentalism by Terry L. Anderson and Donald R. Leal, the magnum opus for those who view property rights, local initiative, and economic incentives as friends, not enemies, of the natural world. Max Borders of TCS Daily has said that this is “the book that changed the way many people look at environmental issues.” It is “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.”
For Anderson and Leal, “At the heart of free market environmentalism is a system of well-specified property rights to natural resources.”
“Whether these rights are held by individuals, corporations, non-profit environmental groups, or communal groups, a discipline is imposed on resource users because the wealth of the owner of the property right is at stake if bad decisions are made,” argued Anderson and Leal, who are part of PERC, the Property and Environment Research Center, in Bozeman, Montana, which is the vanguard of free market environmentalism.
They cite the Nature Conservancy (TNC) as “an excellent example of how free market environmentalism works.” TNC is the world’s largest land trust with a million members and supporters which has protected 117 million acres of land and 5,000 miles of rivers worldwide. Its primary mission is to protect the highest value expressions of biodiversity.
Anderson and Leal challenged the reigning paradigm of scientific management of public lands through the instrumentality of the federal government. This was the legacy of Gifford Pinchot, the first chief of the U.S. Forest Service (1905–1910), and the Progressive Movement which sought to rely on government experts to regulate and prioritize the multiple uses of land through an administrative or political process.
The insights of Anderson and Leal as they relate to the sausage making, which is public lands management, were revelatory:
There is good evidence that political land management has ignored important recreational and amenity values and that there is potential for providing them through markets in ways that promote harmony between development and ecology.
Incentives matter. That is a bedrock principle of free market environmentalism. There is also the appreciation for the inadequacies of information and the necessity of trade-offs, both of which make “political” management difficult. These realities can trump the best of intentions:
Even if the superintendent of national parks believes that grizzly bear habitat is more valuable than more campsites, his good intentions will not necessarily yield more grizzly bear habitat. In a political setting where camping interests have more influence over a bureaucrat’s budget, his peace and quiet, or his future promotion, intentions will have to override incentives if grizzly bear habitat is to prevail. But if a private resource owner believes that grizzly habitat is more valuable and can capitalize that value, then politics will not matter.
If you consider all the infamous battles over public land use, you can appreciate how “scientific management,” at least on federal lands, degenerates into the political equivalent of mud wrestling: owls versus logging, salmon versus irrigation and dams, snowmobiling versus cross-country skiing, grazing versus biodiversity.
There are, of course, countervailing arguments, based on equity and ecology, which point to the benefits of public lands. Access is one. Scale, in terms of watersheds, ecosystems, and vistas, is another. But as the TNC example proves, free market, private sector approaches can compensate for or overcome the disadvantages of political management of landscapes.
Free Market Environmentalism also emphasized the tendency of the political sector to externalize costs. The Holy Grail of most economists is to internalize costs, i.e., make those who benefit from the economic activity bear the costs or avoid the spillover effects, e.g., pollution, from their activities. This encourages efficiency and equity by discouraging waste and harm.
But government tends to externalize rather than internalize costs, because politicians and bureaucrats are rewarded for responding to political pressure groups. Thus, “there is no guarantee that the values of unorganized interests will be taken into account even if they constitute a majority of the population,” claimed Anderson and Leal. Voters are “rationally ignorant” because benefits can be concentrated and costs diffused.
If you consider all the environmental degradation, pollution, and over-exploitation resulting from subsidized water, agricultural subsidies, below-cost timber sales, below-cost grazing fees, and tariffs on sugar imports (to the detriment of the Everglades as well as consumers), they all benefit favored constituencies at the expense of the taxpayers and the environment.
Free Market Environmentalism was published in the wake of the collapse of the Berlin Wall, the dissolution of the Soviet Empire, and the revelations of environmental degradation at a scale unimaginable even during the height of the Industrial Revolution in the West. Absent a robust civil society bolstered by private property, a productive economy, and a democratic regime with an active feedback loop, the nations behind the Iron Curtain experienced untold health and environmental catastrophes with which they must cope for generations.
The Soviet Union’s environmental failure was Exhibit One relative to government failure as opposed to the traditional liberal complaints of market failure. This historical context was one reason for the receptivity of many readers to the lessons of Free Market Environmentalism.
Another timely development which encouraged readers to bring an open mind to Free Market Environmentalism was the passage of the Clean Air Act Amendments of 1990 which established the ambitious and, as it turned out, very successful, market-based cap-and-trade program to combat acid rain caused by sulfur dioxide emissions. The GAO has projected the long-term savings of this trading program to be as much as $3 billion per year—more than 50 percent—compared with a traditional command-and-control approach.
The arguments of free market environmentalists are quintessentially Lockean with their emphasis on well-specified, defendable, transferable property rights. These techniques can work very well for certain consumptive uses such as hunting for fee, or individual fishing quotas for marine fishing allotments. However, for a property rights approach to succeed environmentally in these and other areas such as air and water quality, it is often necessary to adopt some regulatory drivers or mandates to create mechanisms such as cap-and-trade programs which allow for the sale of credits generated by a discharger who can reduce pollution more efficiently than others.
To put it another way, while libertarians view free market environmentalism as an end in itself, many others will view it as a means of achieving community or ethical norms of environmental stewardship. Fred Smith of the Competitive Enterprise Institute describes the latter position as “free-market socialism,” but a Burkean conservative might be more forgiving.
But these are abstract questions which need not worry us. There is ample room to inject more freedom, incentives, and efficiency into our existing regulatory programs while pursing this new paradigm in numerous areas of resources management and protection, up to and including biodiversity or ecosystem protection. A concrete example illustrates this point.
Recently PERC’s website provided a link to an article in Orion Magazine (“Prairie Dreaming,” September/October 2006) by Hal Herring on the work of the American Prairie Foundation (APF) on the glaciated plains of eastern Montana cattle country.
Herring, who is a contributing editor at Field and Stream, describes the traditional divide between cattle ranching on the one hand and, on the other, grizzly bears, wolves, elk, prairie dogs as well as the swift fox, the ferruginous hawk, the mountain plover, the prairie rattlesnake, the badger, the black-footed ferret, and a complex web of plants.
At the same time, one in ten people have left the nearby town of Malta and the surrounding Phillips County since 1990. Ranching is tough despite the hardiness of the fourth-generation ranchers in the area. Evidently, a square mile of land can only support no more than six or eight cows.
Less than 1.5 percent of the native prairie landscapes in the United States are under any kind of long-term protection. The bison and prairie dog used to thrive in this region. “Native grasslands that once displayed a diversity as complex as 190 species of grasses and forbs per square meter now have an average of twelve,” says Herring.
Under the leadership of Sean Gerrity, a native of Great Falls, Montana, and a former business consultant in Silicon Valley, the Bozeman-based APF is trying to execute a plan called, simply, the Prairie Project. According to Herring it seeks “to create one of the largest and most innovative conservation projects on Earth, a grassland reserve replete with as many native species as can be sustained … it eventually could be half again as big as Yellowstone National Park.”
The big difference, though, is that the Prairie Project intends to implement their vision with private, rather than government money. Herring quotes Gerrity as to the project being “a place of vastness” where people will be able to find a “spiritual connection to our native grasslands that’s been lost.” Gerrity can imagine that someday visiting this place will be like visiting a coral reef.
This effort in free market environmentalism is able to leverage its dollars due to the structure of federal and state grazing laws, usually viewed as a negative by ecologists. Since these laws give landowners de facto control over vast tracts of public land, when APF buys land, the grazing leases come with the property acquired. Herring explains:
The APF simply wants to acquire private ranchlands and their accompanying federal grazing leases, and make conservation a priority on both. They’ll do so by paying ranchers market value for both the private land and the leases that they hold. “We don’t advocate for anything,” says Gerrity. “We have a single mission of acquiring land for conservation.”
APF, for instance, purchased the Wiederrick Ranch, some 4,700 acres of deeded land. With this purchase came 12,390 acres on Bureau of Land Management lands and 4,360 acres on state lands. It then converted the leases from cattle to buffalo. There are also grazing leases on 26,000 acres of the Charles M. Russell National Wildlife Refuge which were retired at the time of the sale of the ranch.
“Bottom line: By buying 4,700 acres, the American Prairie Foundation exerted de facto grazing control over nearly 48,000 acres altogether,” notes Herring.
Just as interesting is Herring’s descriptions of the varying reactions from some ranchers and environmentalists who are not thrilled about these developments. Besides fear of disease from the buffalo infecting their herds, some ranchers are skeptical that any good will come of this initiative. They express doubts that it is sustainable. Moreover, there is a fundamental attachment to the life of ranching which, despite the demographic and financial realities, is a strong pull on their hearts.
The environmentalists quoted seem to be equally suspicious since they appear to have more faith in the older model of government-controlled conservation. Private land can be sold. They blame the current political climate, i.e., the Bush administration, for making it more difficult to rely on government funding to any significant degree.
APF is giving a lot of thought to encumbering their newly acquired lands with conservation easements, presumably for land protection. However, it is reasonable to speculate that such easements would make it easier for low-impact ranching to continue thus providing for financial sustainability over the long run. That would be consistent with APF’s stated goals of creating “a fully-functioning prairie-based wildlife reserve” and “ensuring that the land remains productive in a way that contributes significantly to the local economy.”
But what appears to be certain, for now at least, is that APF has no plans to turn lands over to the federal government. This practice is sometime referred to in derogatory terms as “flipping” by some critics of the land trust movement. APF for its part appears to be conscious of the problems of “political” management of public lands as described by Anderson and Leal.
“We are happy to have so many good people to collaborate with … but the APF board will always make the decisions,” claims Gerrity. “There won’t be any kind of round table, like the UN, where sixty-five different people have to agree on every-thing before anything gets done.”
We may not all be free market environmentalists yet, but the movement is still young and there is much to be gained by studying the insights of Anderson, Leal, and the other visionaries at PERC.
Reprinted with permission of The American Spectator and www.spectator.org.