Environmental Problems; E. B. Asmus and D. Billings

In that discussion, environmental ists, with very few exceptions, have assumed government to be the nec essary custodian of the natural enDr. BarryAsmus is an economist and national speaker living in Phoenix, Arizona. Dr. Don Billings is Pro fessor of Economics at Boise State University. This article is taken from their book, Crossroads: The Great American ExperIment, published in 1984 by University Press of America. Reprinted by per mission of the publisher. vironment, since capitalism, in the name of profits, will exploit the min erals, forests, wildlife, and other nat ural values to the detriment of the environment. The idea that self-in terest and the market economy are at fault has been shown to be in error by the biologist Garrett Hardin in his classic description of the envi ronmentally destructive implica tions of the commons. (See "The Tragedy of The Commons," Science, December, 1968.) The promise that government will manage the natu ral environment in the "public in terest" remains to be challenged.

In contrast to the private sector of the economy, where the quality of managerial decisions is brought to light by the signals of profit and loss, managers in the _public sector are seldom totally accountable for their 749 750 THE FREEMAN December decisions. When resources are not held privately, and therefore are not transferable to others by those in control, the public bureaucrat is rarely held accountable for any wasteful and exploitive use. Effi ci~nt resource allocation in the gov ernment sector requires informed voters and legislators. Unfortu nately, existing political institutions guarantee neither. Good intentions and good people are not enough. The problem is not one of bad people run ning the Bureau of Land Manage ment, the U.S. Forest Service, or the National Parks Department. Natu ral resource economists Richard Stroup and John Baden have iden tified the fundamental dilemma: "Even with good intentions and ex pertise, public servants are likely to generate environmental problems because they lack the feedback and reality checks inherent in the price system and markets." (See Natural Resources: Bureaucratic Myths and Environmental Management, Pacific Institute, 1983.) .

Competing Special Interests Guarantee Conflicts Government stewardship of natu ral resources guarantees bitter con flict over the use of the "public do main." As the mountain valley, lake, river, forest, or desert become pop ular due to rising incomes and grow ing population, a political struggle is the inevitable consequence of public ownership. Irresolvable conflict among competing users leaves the government bureaucrat in the mid dle of the argument. Hearings are held, special interests lobby their legislators, but almost inevitably good intentions produce poor results. One group lobbies to save the wild horses in the American West; con sequently the horses multiply in great numbers and consume the for age which supports other wildlife species dear to the hearts of other special interest groups. . Bureau of Land Management grazing policies, determined in the political arena by special interests, destroy the land. Federal irrigation projects subsidize farmers at the ex pense of free flowing rivers. "Mul tiple use" policies guarantee politi cal confrontation over access to "public lands" and necessarily pro duce inefficient results. Quality in the management of natural re sources, whether in the public or pri vate domain, is largely determined by the structure of the property rights in force. When resources are treated as common property, the ten dency of fast depletion and environ mental destruction is assured. How ever, when resources are exclusively under the control of a private owner who has an absolute right to the cap ital value of the assets, the owner will have a direct interest in con serving and protecting those values.

In addition, the profit motive as1985 ENVIRONMENTAL PROBLEMS 751 sures that the resources will be moved to their highest valued use. Stroup and Baden in Natural Re sources persuasively argue that an efficient management of natural re sources involves three interrelated issues. First, the authority to control resources must be coupled with the personal responsibility for actions taken. Decision makers must have a personal stake in the consequences of their decisions. The public sector inevitably breaks this link and therefore inhibits accountability. Second, it must be recognized that we live in an imperfect world, and while the market system is not ideal, it does not follow that government solutions are preferable. The com petitive market process, even when not operating perfectly, has other wise unobtainable beneficial effects. Finally, it must be recognized that individuals respond to the incen tives they face. Unfortunately, insti tutions in the past have encouraged wasteful exploitation of publicly owned property. For emotional and philosophical reasons the assign ment and enforcement of private property rights have been falsely condemned as a surrender to "big business" and the profit motive.

The fact of the matter is that in dividuals conserve, husband, save, protect, and expand their stocks of valuable resources if they have ex clusive claims on the proceeds re sulting from their sale. Black Angus cattle on private ranches thrive, while the wolf nears extinction. Lion populations in private game re serves flourish, while their numbers are threatened in the wild. Hawk populations on public lands dwindle, but domesticated chickens, turkeys, and geese are harvested in great numbers in the private sector. The private forests in the southeastern United States are much more pro ductive than the public forests in the Pacific Northwest. The contrast has been starkly stated by Stroup and Baden: "Private ownership allows the owner to capture the full capital value of his resource, and thus eco nomic incentive directs him to main tain its longterm capital value ... In contrast when a resource is owned by everyone, the only way in which individuals can capture its economic value is to exploit the resource be fore someone else does."

Problems of Interventionism A profound illustration is provided by the National Audubon Society's management of its privately owned Rainey Wildlife Sanctuary in Loui siana where environmental values of preservation and wildlife protec tion exist in harmonious partner ship with gas wells and grazing cat tle. Nevertheless, in stark contrast to their practice at Rainey, the Au dubon Society continues to advocate public ownership of federal lands to prevent mineral exploitation and de752 THE FREEMAN December velopment. At Rainey, "reality checks" that produce management decisions in which opportunity costs must be squarely faced are available to the Society. In the political arena, bureaucratic managers produce out comes which are pleasing to no one because they are faced with ill-de fined multiple use mandates and have no personal stake in decisions. The environmental movement's preference for government owner ship of natural resources has the po tential of producing results opposite of what they desire for yet another reason. Government can both give and take away. The reliance on gov ernment for environmental protec tion is a double-edged sword which can just as easily swing in the di rection of environmental destruc tion. The election of President Rea gan in 1980 and his appointment of James Watt as Secretary of the In terior should remind us of how ra pidly political circumstances can change and how the reins of govern ment power can be shifted to those who would oppose our favorite in terest. Given the speed and degree by which governments can change their mind, depending on which in dividuals occupy power, the ultimate security for places of beauty rests with secure and enforceable private property rights.

There are many examples of how the environment can be sacrificed on short notice because of emergencies Crossroads is an important and comprehensive presentation of the rise, decline, and restora tion of freedom and the market economy. The authors do an outstanding job of introducing readers to the history and na ture of the American free mar ket experiment. Copies can be ordered from the American Studies Institute, 3420 East Shea, Suite 266A, Phoenix, Ar izona 85028: Paper $14.95, Cloth $26.75. Please add $1.50 for shipping and handling. declared by government. For exam ple, the oil embargo by the OPEC countries in November 1973 quickly produced a suspension of the Na tional Environmental Protection Act by a Congressional vote so that the Alaskan Pipeline might be built. The Wilderness Society's court action was quickly circumvented. And this was the same government which held energy prices down during the 1970s and thereby stimulated en ergy use in the U.S. While spending billions to encourage energy conser vation with their right hand, gov ernment simultaneously "encour aged" consumption, through price controls, with their left hand.

In the summer of 1979, largely as a result of the government created "energy crisis," President Carter and important members of both par1985 ENVIRONMENTAL PROBLEMS 753 ties in Congress advocated a new Federal Energy Mobilization Board which would have had broad powers to override all existing environmen tal legislation. A little emergency here, another there, and the political atmosphere shifts to a stance which argues that the environment must be sacrificed to the latest political difficulty. The Private Property Alternative The essence of politics is compro mise, which hardly assures confi dence that environmental concerns will have priority. The government limits the liability of private power companies from nuclear accidents under the Price-Anderson Act, and thereby contributes to the prolifer ation of nuclear power stations like the Diablo operation on the coast of California. This is the very same government that most environmen talists wish to assign the responsi bility of conserving, preserving, and protecting our physical environ ment. To a degree, fortunately, the Ruth Shallcross Maynard environmental movement is coming to recognize the risks associated with government's stewardship of the land and wildlife. Audubon's expe rience with the Rainey Wildlife Sanctuary is difficult to ignore. Na ture Conservancy and Ducks Unlim ited have demonstrated their rec ognition of the importance of private ownership and, therefore, control of valuable wilderness and other en vironmental treasures.

Capitalism and the profit-moti vated capitalist are not fundamen tally to blame for the various classes of environmental decay witnessed on spaceship earth. Indeed, private ownership for profit generates an in credibly powerful incentive to con serve and cultivate resources in or der to increase their value to other users. It is our conviction that the best hope for the long run conser vation of natural resources and the environment rests with privatiza tion and the enforcement of private property rights in a free-market setting. i IDEAS ON LIBERTY NATURAL resources are best utilized and conserved where they meet spe cific economic requirements in the most efficient way as determined by competition in the free market .... Conservation will take place in the best sense where individuals are allowed to seek solutions to their own personal problems as they arise.

To the Editor Last month we inaugurated our "To the Editor" feature. Each month we will share with readers the most interesting and provocative let ters we receive regarding Freeman articles. Since FEE's activities encompass more than just publishing The Freeman, we will also in clude, from time to time, comments about other FEE undertakings. In short, we want this to be the space in which our readers share their opinions. Limited space will preclude our printing all the thoughtful letters we receive. Letters may be edited for purposes of clarity or space. Send your comments to: To the Editor The Freeman Foundation for Economic Education Irvington, New York 10533 On Equal Rights To the Editor: I find it strange that Michael Bor delon in his "A Conservative Dec laration" (September, 1985) finds that the Declaration of Indepen dence gives no content to its famous equality clause, "that all men are created equal." That clause is fol lowed immediately by the equally famous one which declares: "That they are endowed by their Creator with certain inalienable rights .... "

If the language means anything, the two cIa uses are linked and the thought expressed very clearly im plies that the equality of all men lies 754 in their equal possession of natural rights. Dr. Bordelon also ignores the prin ciple of equality of all before the law. While not explicit in the Declara tion, it was certainly an operative principle in most American consti tutions, with the regrettable excep tion of women and slaves. It is noteworthy that Kenneth McDonald in "Routing the Fabians" (October, 1985) fixes on the principle of equality before the law as the rem edy for fending off the special inter est groups who demand special priv ileges of an economic character. This was precisely the approach used in the days of Jefferson and Jackson to TO THE EDITOR 755 break the privileges of groups seek· ing economic advantages through government-granted monopolies, subsidies, tariffs, licensing, and reg ulation of businesses.

The brilliant Jacksonian editor, William Leggett, used the slogan "Equal Rights" to challenge those who sought economic advantage through government privileges. He used the principles of laissez-faire, the free market, and equal rights, to rally the people against the new ar istocracy arising through their en joyment of government-granted privileges. Those searching for a new rhetoric to rally the forces offreedom in today's statist society would profit from reading Leggett's defense of equal liberty in his Democratik Ed itorials: Essays in Jacksonian Polit ical Economy, edited by Lawrence White (Indianapolis: Liberty Press 1984). JOSEPH PEDEN New York, NY The Moral Battle To the Editor: It is encouraging to see articles extolling "The Morality of Capital. ism" (September, 1985). More arti· cles illuminating the moral superi· ority ofthe free exchange of property, ideas, and services need to be writ ten and widely publicized.

The connection between the pri vate property order and individual choice, with its basis in morality, is the arena in which the battle be tween the socialist ideology and that of free men must be fought. The arena is not "which system is more efficient." The free market wins the efficiency contest hands down. This article stands in stark con trast to the pronouncements of the Bishops' pastoral letters or the Na tional Council of Churches who see little moral virtue in the free mar· keto The defense of the free market has to be made in the arena of the "permanent things" -of morality or the battle is lost. PAIGE MOORE Houston, TX And Thank You! To the Editor: When I was a young man, still wet behind the ears, spending my time playing instead of learning, I never had time to notice what was hap pening to my country. So I and many others like me stared blindly about as the dreams of Jefferson, Washington, and Pa trick Henry were being buried under a mountain of Marxist nonsense.

And never was heard an opposing word. Well, fortunately for me, al most never. For, even then, there was FEE keeping the truth alive. Through The Freeman and other publica tions, it gave us the intellectual am756 THE FREEMAN munition to do battle with the ene mies of freedom. The Freeman offered rational antidotes to the day to-day poison we were being taught. It has passed the torch to new gen erations of Americans. That is an in credible job, one still unknown to most people and yet one of the most courageous and admirable under takings of the twentieth century. So let me take this opportunity to say, thank you, to all of the people at FEE, past and present, for being there and raising a standard for all to see. Keep up the good work. HERB GROSSMAN New City, NY Sharing Profits To the Editor: I have always admired Henry Haz litt. His books-among them Eco nomics In One Lesson, his book on inflation, and The Great Idea-are all superb. Nevertheless, I was sur prised by his article on "The Limi tations of Profit-Sharing" (Septem ber, 1985).

My basic motivation for becoming a profit sharing consultant has little to do with profit sharing as such-to me profit sharing is a means to an end. By making employees partners through profit sharing, one is laying the foundation for trust and mutual interest on which to build an effective program of education on the eco nomic facts of business life. Fur thermore, if businessmen in America were successful in meeting this'chal lenge, there would be no trade imbalance. A few years ago, attending the An nual Conference of the Profit Shar ing Council of America, I heard the extraordinary story told by Mr. John McConnell, Chairman of Worthing ton Industries in Columbus, Ohio. In the 14 years since cash profit shar ing was installed, some $22.5 mil lion have been paid out. In 1978, $6.4 million were distributed to some 800 individuals. The average production worker received just under $10,000 on top of a salary of $12,000.

The results? Whereas productivity as measured by sales per employee attained a median level of about $60,000 in the metal manufacturing business, and $58,000 for all indus tries, at Worthington productivity averaged $176,000 per person in 1978. As regards profits, Worthington's total return to investors-price ap preciation plus cash dividends-for the past ten years of 34 per cent an nually ranked as second among For tune's 1000 largest companies in 1978. I enthusiastically support incen tive profit sharing. SARTELL PRENTICE, JR. Pasadena, CA A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Reality and Rhetoric THE Labor peer in Britain, ap pointed to the House of Lords by La bor governments, is a twentieth-cen tury phenomenon. Now, as the twenty-first century approaches, we are witnessing the creation of a Free Market peerage. Ralph Harris, now Lord Harris of High Cross, takes in finite delight in promoting the be liefs of Friedrich Hayek and the Mont Pelerin Society from a back bench. And P.T. Bauer, now Lord Bauer, a 1982 life peer appointment of Margaret Thatcher, makes it a one~two succession of punches for a classical liberalism that has long been out of fashion even among Tory lordships.