Linking Liberty, Economy, and Ecology; J. Baden and R. Ethier

To some Greens, economic progress im plies planetary suicide. Instead, environ mental groups offer eco-empathy, altruism, and socialism as guides for environmentally correct behavior. However, some are find ing that environmental causes fostered through self-interest and property rights are more likely to succeed than appeals to environmental values and bureaucratic micro-management. Even the environmen tal newspaper High Country News finds "a growing free-market attitude toward envi ronmental protection." Let's see why. Prosperity and Ecology For years environmentalists ignored or discounted the strong correlation between economic prosperity and environmental concern. But when prosperity is at risk, John A. Baden is Chairman of the Foundation for Research on Economics and the Environ ment. Robert Ethier, a F.R.E.E. research assis tant, contributed to this paper. people willinglytrade environmental quality for economic gain. This occurs even in wealthy nations. In our political campaigns environmental themes are crowded out by economic issues. As Michael R. Deland, former chairman of the President's Council on Environmental Quality, observed: "in a recession there is an increased sensitivity to the job side of the equation."

This is because wealth fosters both envi ronmental concern and the capacity to ex ercise that concern in a concrete way, e.g., with sewage treatment plants. The 1992 World Bank World Development Report shows that less than two percent of sewage in Latin America is treated. Worldwide more than. one billion people have no safe water. In China, two-thirds of rivers near large cities are too polluted for fish. These are problems that require capital, not prom ises and Green pretenses. Given that wealth enhances environmen tal quality, environmental policy can be based upon three fundamental principles: (1) private property and markets create wealth; (2) government management re sponds to political pressures in ways that decrease environmental quality; and (3) government's constructive role is to provide environmental monitoring. These principles can direct the environmental debate in a positive direction, avoiding wasteful efforts 340 that advance only interest groups seeking political power and wealth transfers. These principles provide the basis for both an environmental vision and a sound policy direction.

International Trade Fosters Environmental Quality The best way to spread free markets and create wealth in less developed nations is free trade. The U. S. has urged the removal of trade barriers in the Uruguay round of the General Agreement on Tariffs and Trade (GATT) talks. This has been opposed by some environmentalists who fear that trade, and its resultant economic growth, will bring degradation. They are misinformed. Envi ronmental quality and prosperity are com plementary. Evidence shows that wealthier is usually healthier; longevity is correlated with per capita income. Free trade would increase global income levels while speeding the dissemination of pollution-control technologies. Research by Gene Grossman and Alan Krueger of Prince ton indicates that economic growth also promotes a cleaner environment. For exam pie, above a per capita income level of $4,000-$5,000, air quality improves. This is because wealth and efficiency go together the U.S. emits almost 30 percent less CO2 per $1,000 of GNP than the world average.

Improved efficiency and pollution control technologies, coupled with increased envi ronmental awareness, allow production to rise while emissions fall. Poor nations typically have low environ mental standards and enforcement. Some environmentalists argue that free trade en courages the migration of polluting indus tries to these poor countries. However, a 1987 World Resources Institute study finds that environmental factors have not played a major role in determining international capital allocations. And as increased envi ronmental concern, regulation, and enforce ment in Mexico show, the prosperity ac companying trade speeds the adoption of shared higher standards among nations. Senior economist Peter Emerson of the 341 Environmental Defense Fund writes, "pov erty and economic autocracy are the hand maidens of environmental degradation." Only by attacking poverty can we effec tively address environmental destruction and promote long-term stewardship abroad.

We must loosen the stranglehold of the command-and-control approach to regula tion, introducing markets and private man agement as the solution to environment problems. Ending Command and Control at Home As the U.S. works to promote free mar kets in Eastern Europe, the costs of its own environmental autocracy are ignored or heavily discounted. Many of the govern ment's resource agencies, such as the For est Service, the Bureau of Land Manage ment, and the Bureau of Reclamation, operate. in a perverse world in which they have incentives both to degrade the envi ronment and to lose money. Bureau of Land Management lands are among the most degraded and eroded in the west. Yet the agency continues to encour age, even require, overgrazing. Ranchers, who pay far below market rates for grazing rights, have little incentive to invest in soil conservation or water storage. If they at tempt to rest an area through reduced use they are threatened with revocation of per mits for underuse.

Many of the National Forests lose money while hurting the environment. They build roads whose costs are not covered by the revenues from the timber sales they facili tate, while the environmental costs are un accounted for. Far more is invested in replanting than would be in a private forest, where natural revegetation is a realistic option. Budgets are maximized while the environment and the taxpayer suffer. It is essential that environmental groups realize the negative effects of command and-control policies on the environment. While politics may seem to be the cheapest route to environmental control, recent con flicts over preserving old growth timber for 342 THE FREEMAN • SEPTEMBER 1993 spotted owl habitat show that environmen talists cannot count on the political process. By replacing political-bureaucratic manage ment with market forces, property rights, and private management, we promote con servation and economic progress.

Innovation for Biodiversity Much of the current environmental de bate centers on endangered species preser vation and biodiversity. This conflict is reduced to "jobs versus the environment," an unholy tradeoff. Many environmental ists feel that government must mandate species preservation. This approach has been both unsuccessful and has infringed upon private property rights. Environmental and wildlife groups could buy conservation easements in the areas where disturbances might harm species listed as endangered. The North American Elk Foundation, Trout Unlimited, and Ducks Unlimited have each done this on private lands and waters with private funds. Such organizations could also pay "boun ties" to land managers if an endangered species successfully breeds on their land. The Montana chapter of Defenders of Wild life has recently announced such a program to facilitate wolf reintroduction.

A rancher in Dubois, Wyoming, has of fered to pay the Forest Service $300,000not to log a pristine canyon. This move was supported by many local citizens who value it as a recreation area. Some outfitters and guest ranches also benefit from its natural state because they use it for paying custom ers. But the Forest Service returned the $100,000down payment to the rancher be cause it was not allowed to create "a de facto wilderness area," even though the sum was almost certainly greater than any income the Forest Service would have re ceived from timber sales. Only in a world as perverse as that of the Forest Service bu reaucracy would a decision be made to lose money while at the same time harm the environment. Because wildlife and their habitat are "public goods," some believe there is a theoretical case for government involve ment. But a system encouraging private initiative is likely to be far more efficientand effective than federal mandates for species recovery. Costs would become explicit, not unevenly imposed upon landowners by the Endangered Species Act. This also allows comparisonsand trade-offsto be made among competing species and habitats in a way that is impossible under the current Act.

Preserving Propert~ Rights In terms of our future environment, it is important that property rights be protected. The current Endangered Species Act has resulted in an attenuation of property rights and begun to provoke a backlash fueling the "wise-use" movement. In contrast, land and ecological trusts are founded upon pri vate property rights. They preserve species by using, not sabotaging, property rights. With proper incentives we can expect private land owners to support the listing of new species. Under the Endangered Species Act, if a landowner improves habitat on his own property to encourage an endangered species, he could lose control of that prop erty. For example, Dayton Hyde, a rancher in Eastern Oregon, created a lake out of wilderness and attracted a variety of species including the American bald eagle. He was then told by the Forest Service that he could no longer access his property by truck because he might disturb the eagles. This is a perversity of monumental proportions.

A sound economy fosters environmental protection. We must eschew conventional Green wisdom with its appeals to command and-control mechanisms. Environmental quality will be enhanced via markets and secure property rights, an approach that is consistent with America's intellectual heritage. Government must be the modera tor, not the manager. In this way we can have both environmental quality and prosperity. D THEFREEMAN IDEASON LIBERTY SCIENCE AND THE ENVIRONMENT by Bruce N. Ames I t is popular these days to espouse an apocalyptic vision of the future of our planet. Pollution is being blamed for global warming and ozone depletion, pesticides for cancer. Yet these and many other purported environmental causes are based on weak or bad science. The reality is that the future of the planet has never been brighter. With the bankruptcy of Communism, a hopeful world is on the path to democracy, free markets, and greater prosperity. Science and tech nology develop in a free society, and free markets bring wealth, which is associated with both better health and lower birth rates.