Freeman

CLICHÉS OF PROGRESSIVISM

#15 - We Are Destroying the Earth and Government Must Do Something

JULY 25, 2014 by SANDY IKEDA

Filed Under : Environmentalism, Property Rights, Cliches


The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

The antecedents to this collection are two classic FEE publications that YAF helped distribute in the past: Clichés of Politics, published in 1994, and the more influential Clichés of Socialism, which made its first appearance in 1962. Indeed, this new collection will contain a number of essays from those two earlier works, updated for the present day where necessary. Other entries first appeared in some version in FEE’s journal, The Freeman. Still others are brand new, never having appeared in print anywhere. They will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org until the series runs its course. A book will then be released in 2015 featuring the best of the essays, and will be widely distributed in schools and on college campuses.

See the index of the published chapters here.


#15 - We Are Destroying the Earth and Government Must Do Something

People often complain that mankind is destroying the earth: that insatiable consumption and relentless production have laid waste to irreplaceable swaths of our planet, and that these activities have to stop or someday it will all be gone.

Which raises the question: What does it means to “destroy” something?

When you burn a log, the log is destroyed, but heat, light, smoke, and ashes are created. It’s in that sense that physics tells us that matter is neither created nor destroyed.  Similarly, cutting down a forest destroys the forest, but in its place are houses and furniture and suburbs.

The real question is: Is it worth it?

What people usually mean when they say mankind is destroying the earth is that human action causes a change they don’t like. It sounds odd to say that my wife, by eating a piece of toast for breakfast, is “destroying” the toast. But if I wanted that toast for myself, I might well regard her action as destructive. It's the same action, but the interpretation depends on purpose and context.

When a missile obliterates a building and kills the people in it, it may serve a political purpose, even though the friends and family of those killed and the owners of the building are harmed. The perpetrator’s gain is the victim’s loss. In the political realm, one person’s gain is necessarily another person’s loss. You rob Peter to pay Paul; you kill Jack to appease Jill. It’s a “zero-sum game.”

In the economic realm, however, a thing is destroyed to the extent that it loses its usefulness to somebody for doing something. Someone may want to bulldoze my lovely home just for fun. If she pays me enough I may let her do it and be glad she did. When not physically coerced, a trade won’t happen unless each side expects to gain. If it does happen, and if the people who traded are right, then all do in fact gain. Each is better off than before. The trade has created something: value. If they are wrong, they destroy value and suffer a loss, which gives them an incentive to avoid making mistakes.

In free markets, gains manifest themselves in profit, either monetary or psychic. (In the short run, of course, you can sustain a monetary loss if you think there’s a worthwhile non-monetary aspect to the trade that will preserve the profit.) Now, the free market is not perfect, despite what some economics professors say about the benefits of so-called “perfect competition.” People don’t have complete or perfect knowledge and so they make mistakes. They trade when they shouldn’t, or they don’t trade when they should. Fortunately, profits and losses serve as feedback to guide their decisions.

There’s another source of market imperfection. People may be capable of making good decisions but they don’t trade, or trade too much, because the property rights to the things they would like to trade aren’t well-defined or aren’t effectively enforced. In such cases their actions or inactions create costs they don’t bear or benefits they don’t receive. The result is that their decisions end up destroying value.

If I free-ride off the ocean—if, for example, I don’t pay for dumping garbage into it—then the ocean will become more polluted than it should be. If there is a cleaner, more efficient source of energy than fossil fuels, but no one can profitably use it because the State prevents anyone from doing so (for example by prohibitions or excessive taxation), then the value that would have been created will never appear.

Our aesthetic sense is part of what makes us human. If we wish to protect a lake or a valley from development because we think it beautiful, how do we do that?

To some extent it’s possible to do what the Nature Conservancy does and purchase the land that we want to protect. But that’s not always possible, especially when the land is controlled not by private persons but by the State, which makes special deals with crony capitalists in so-called public-private developments. In any case, even the free market is not perfect. Economic development and material well-being mean that some beautiful landscapes and irreplaceable resources will be changed in ways not everyone will approve of.

Remember, though, that economics teaches us that an action is always taken by someone for something. There are no disembodied costs, benefits, or values. In a world of scarcity, John believes saving rainforests is more important than saving the whales. Mary believes the opposite. If we are to get past disagreements on aesthetics—essentially differences of opinion—that can turn into violent conflict, we need to find some way to settle our differences peacefully, some way to transform them into value-creating interactions.

Imperfect though it may be, the free market has so far been the most effective method we know of for doing that.

Sandy Ikeda
Associate Professor of Economics
Purchase College, SUNY

Summary

  • Physics teaches us that matter is not really destroyed but rather transformed, so the ever-present question is, “Is it worth it?”

  • Market transactions transform resources, as well as ownership of them, and if enhanced value doesn’t result from those transactions, the resulting losses tend to minimize future mistakes.

  • For further information, see:

“Government Versus the Environment” by Russell Madden: http://tinyurl.com/ndc96h2

“The Problem of Environmental Protection” by Dwight R. Lee: http://tinyurl.com/nub9uet

“Economists and Scarcity” by Steven Horwitz: http://tinyurl.com/mztsuf4

“Remembering Julian Simon” by Paul Cleveland and Erin Hagert: http://tinyurl.com/ngchvyo

ABOUT

SANDY IKEDA

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

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