Tuesday, April 1, 2008

Introduction to Free-Market Environmentalism

As I said before, this blog is not intended to be the definitive source for information on free-market environmentalism. It is only a discussion of it from my non-expert perspective. Still, I'll give a brief introduction here. I'll try to avoid defending it too much for now--I'll have plenty of posts that try to do that later on. For now, I'll be satisfied to give an overview of what it means.

Before we understand what free-market environmentalism is, we must first understand conventional environmentalism. Most environmentalists who are activists for changing government policy have the opinion that the free market destroys the environment since it encourages businesses to think only of their bottom line and neglect other concerns. Therefore, regulations should be put in place that restrict businesses from causing environmental damage in their quest for more money. The typical environmentalist would view the free market as an economically successful system, but one with negative environmental consequences that must be mitigated through government intervention.

On the other hand, free-market environmentalism argues that government regulation is not the best way to address environmental concerns. Instead, the key is private property rights. When people and businesses own resources, they are more likely to take care of those resources. They will try to strike a balance between using those resources to make money and preserving them as an investment for the future. As a resource becomes more rare, the ownership of those resources becomes more valuable, so there is an incentive for economic players to invest in the future by preserving as much of the resources they own as possible, and creating more of those resources if possible.

A simple example to illustrate this principle comes in the forestry industry. There are many companies competing to produce lumber, which means they are looking for trees to cut down. If the forest is not owned by any individual company, and instead is loaned out to all of the companies, then there is an incentive for each company to cut down as many trees as possible to make into lumber. If one individual company doesn't cut them down, another one will, so there is no benefit to a company to try to limit forestation. On the other hand, if the land were bought and sold on the free market, companies then have to buy the land for a price that represents the value of the resources on that land. The company should now consider how to best make use of this land, and preserving it to some extent becomes a more attractive option compared to depleting it. If the company were to immediately cut down all of the trees, the land would then be worth much less than before. But if the company preserves the trees on the land, the lumber that can be produced from the trees might be worth more later. Now there is an incentive to take care of the resource, instead of deplete it. Surely some resource consumption will take place in order for the company to be profitable now, but the company will now have an incentive to minimize the consumption, and mitigate it's negative effects so that the land, and the resources on it, will be worth as much as possible in the future.

To the pure free-market environmentalist, every environmental problem can be mitigated by applying free-market principles, as opposed to government regulation. Certainly there are issues more complicated than the forestry example, but I'll leave those for another day.

To learn more about free-market environmentalism, google it (don't worry, this is an obscure enough field that you'll actually get real research from real experts on the first page of results, not just musings from random people like me). I'll add resources that I find helpful to my sidebar.

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