Freeman

ARTICLE

Environmental Problems and Private Property

DECEMBER 01, 1985 by DONALD BILLINGS, E. BARRY ASMUS

Dr. Barry Asmus is an economist and national speaker living in Phoenix, Arizona. Dr. Don Billings is Professor 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 permission of the publisher.

Self-interest aside, the environmental movement has appropriately focused our attention on environmental degradation and the importance of our natural surroundings in general. The issue, however, is not whether conservation and pollution are important. The crucial problem is how to develop institutional arrangements to protect our planet’s physical and social habitability in the most efficient and equitable way. In that discussion, environmentalists, with very few exceptions, have assumed government to be the necessary custodian of the natural environment, since capitalism, in the name of profits, will exploit the minerals, forests, wildlife, and other nat ural values to the detriment of the environment. The idea that self-interest 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 environmentally destructive implications of the commons. (See “The Tragedy of The Commons,” Science, December, 1968.) The promise that government will manage the natural environment in the “public interest” 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 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. Efficient resource allocation in the government sector requires informed voters and legislators. Unfortunately, existing political institutions guarantee neither. Good intentions and good people are not enough. The problem is not one of bad people running the Bureau of Land Management, the U.S. Forest Service, or the National Parks Department. Natural resource economists Richard Stroup and John Baden have identified the fundamental dilemma: “Even with good intentions and expertise, 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 natural resources guarantees bitter conflict over the use of the “public domain.” As the mountain valley, lake, river, forest, or desert become popular due to rising incomes and growing population, a political struggle is the inevitable consequence of public ownership. Irresolvable conflict among competing users leaves the government bureaucrat in the middle 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; consequently 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 expense of free flowing rivers. “Multiple use” policies guarantee political confrontation over access to “public lands” and necessarily produce inefficient results. Quality in the management of natural re sources, whether in the public or private domain, is largely determined by the structure of the property rights in force. When resources are treated as common property, the tendency of fast depletion and environmental destruction is assured. However, when resources are exclusively under the control of a private owner who has an absolute right to the capital value of the assets, the owner will have a direct interest in conserving and protecting those values. In addition, the profit motive assures that the resources will be moved to their highest valued use.

Stroup and Baden in Natural Resources persuasively argue that an efficient management of natural resources 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 persona] 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 competitive market process, even when not operating perfectly, has otherwise unobtainable beneficial effects. Finally, it must be recognized that individuals respond to the incentives they face. Unfortunately, institutions in the past have encouraged wasteful exploitation of publicly owned property. For emotional and philosophical reasons the assignment 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 individuals conserve, husband, save, protect, and expand their stocks of valuable resources if they have exclusive claims on the proceeds resulting from their sale. Black Angus cattle on private ranches thrive, while the wolf nears extinction. Lion populations in private game reserves 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 productive 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 economic incentive directs him to maintain its long- term 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 before 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 Louisiana where environmental values of preservation and wildlife protection exist in harmonious partnership with gas wells and grazing cattle. Nevertheless, in stark contrast to their practice at Rainey, the Audubon Society continues to advocate public ownership of federal lands to prevent mineral exploitation and development. 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 outcomes 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 ownership of natural resources has the potential of producing results opposite of what they desire for yet another reason. Government can both give and take away. The reliance on government for environmental protection is a double-edged sword which can just as easily swing in the direction of environmental destruction. The election of President Reagan in 1980 and his appointment of James Watt as Secretary of the Interior should remind us of how rapidly political circumstances can change and how the reins of government power can be shifted to those who would oppose our favorite interest. Given the speed and degree by which governments can change their mind, depending on which individuals 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 declared by government. For example, the oil embargo by the OPEC countries in November 1973 quickly produced a suspension of the National 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 energy use in the U.S. While spending billions to encourage energy conservation with their right hand, government simultaneously “encouraged” 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 parties in Congress advocated a new Federal Energy Mobilization Board which would have had broad powers to override all existing environmental 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 compromise, which hardly assures confidence 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 proliferation of nuclear power stations like the Diablo operation on the coast of California. This is the very same government that most environmentalists wish to assign the responsibility of conserving, preserving, and protecting our physical environment. To a degree, fortunately, the environmental movement is coming to recognize the risks associated with government’s stewardship of the land and wildlife. Audubon’s experience with the Rainey Wildlife Sanctuary is difficult to ignore. Nature Conservancy and Ducks Unlimited have demonstrated their recognition of the importance of private ownership and, therefore, control of valuable wilderness and other environmental treasures.

Capitalism and the profit-motivated capitalist are not fundamentally to blame for the various classes of environmental decay witnessed on spaceship earth. Indeed, private ownership for profit generates an incredibly powerful incentive to conserve and cultivate resources in order to increase their value to other users. It is our conviction that the best hope for the long run conservation of natural resources and the environment rests with privatization and the enforcement of private property rights in a free-market setting.



Crossroads is an important and comprehensive presentation of the rise, decline, and restoration of freedom and the market economy. The authors do an outstanding job of introducing readers to the history and nature of the American free market experiment. Copies can be ordered from the American Studies Institute, 3420 East Shea, Suite 266A, Phoenix, Arizona 85028: Paper $14.95, Cloth $26.75. Please add $1.50 for shipping and handling.

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December 1985

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