Free Market Works to Save Forest

An investment group purchased wetlands in order to make money by conserving the resources:

The group, called Ecosystem Investment Partners, is at the tip of a paradigm shift that is turning one of the bedrock notions of free market economics on its head. “The fundamental pattern has to do with supply and demand,” says Adam Davis, a business sustainability consultant and one of EIP’s principals. “There used to be very few of us people out here on Earth compared to the size of natural systems. But with 6.5 billion of us, and with our consumption and production of resources per person going up and up, there’s a new relationship of supply and demand. Ultimately, it’s that new relationship that creates the financial value of natural systems.”

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Some environmentalists balk at the new approach, arguing that moral suasion should be enough. They also object to the commoditization of nature and are repelled by the idea that the same sector of society that has historically destroyed the environment, the business sector, will now be the primary beneficiary of efforts to restore it. Proponents, however, say they are just being practical. “From a pragmatic point-of-view, all the indicators are going to continue to go down in terms of planetary health unless you price things into our economic system,” says BSR’s Stewart. “It is scary,” says Gretchen Daily. “It’s economic forces that have taken us to the brink. But we need a force that powerful to bring us away from that brink.”

The heart of environmentalism is the idea that nature is valuable. It turns out it is not only valuable in the "priceless" sort of way, but sometimes in real dollars. Businesses and environmental groups are finding that preserving nature is in the interest of their bottom line. The article above is just one example. The company I work for bought a huge plot of land that the city wanted to preserve. Instead of restricting growth, the city sold it for cheap, with the agreement that the company would only develop a small percentage of the land. This was also in the interest of the company, who estimated that the unique work environment they could create would attract better workers, and the land would pay for itself in a matter of years in increased productivity. This company also put in geothermal heating that not only protects the environment but also will be a good long-term investment.

While the issue of carbon credits that this article also brings up is complicated, that will have to be a post for another day. I agree with the basic premise that since the environment is valuable, it is in the interest of the free market to preserve it.

I'll bring up one more point that the article didn't get to. If we truly are facing a situation were natural resources are going to become scarce in the future, that means that those resources will become more valuable. Scarcity increases value. Considering that, wouldn't it be a great business move to buy up a whole lot of natural resources, and then do nothing with them? They will be worth a lot more in the future, right? Although the article left it to our imagination to figure out exactly how they planned to make money, it seems to me this is just what the Ecosystem Investment Partners did.

This is the first of many posts I plan to write how free-market environmentalism is, or could be, at work to save our environment. All of these posts will have the label, in the news.

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.

Introduction: Why This Blog?

Welcome to green². This blog discusses free-market environmentalism (FME), but first a personal introduction is in order.

I am a conservative, republican-leaning independent, free-market believer, striving free-thinker, and self-proclaimed environmentalist. I am not an expert on economics or the environment, so my blog is not intended to be the definitive source for information on FME. Nor do I claim to have all of the issues related to FME figured out for myself, but I do believe the free-market approach has more potential than the command-and-control approach that dominates the current environmentalism discussion.

While there have been a number of books and articles related to FME, I created this blog because I feel there is a lack of discussion and understanding in this area among average Joes and Janes. This blog will be a journey for me, and I hope it will be for you whether you agree with my view or not. Either way, I welcome your participation and hope to facilitate a constructive dialogue on a very important issue.