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Monday, February 1, 1999

Enviro-Capitalists: Doing Good While Doing Well by Terry A. Anderson and Donald R. Leal

Capitalism and Environmentalism Go Hand in Hand

Rowman & Littlefield Publishers, Inc. • 1997 • 189 pages • $52.50 cloth; $16.95 paperback

Writing about Austrian economics and the market process, Israel Kirzner explains how entrepreneurs play a crucial role in discovering products, markets, and processes for improving human welfare (Journal of Economic Literature, March 1997). The interesting aspect of all this is surprise. In Kirzner’s view, entrepreneurs identify profit opportunities that, once revealed, seem rather simple and obvious. An accompanying expression of surprise usually characterizes the outcome. The question “Why didn’t I think of that?” is more common than the statement “Boy, that surely is complicated; I can’t imagine how they came up with it.”

Paper clips with wrinkles, self-serve supermarkets, moving assembly lines applied to auto production, Post-It notes—all relatively simple things that reflect a combination of imagination and market savvy. This is the stuff that built America’s market economy. Is it possible for this same creative energy to provide improved environmental quality?

Readers of Enviro-Capitalists: Doing Good While Doing Well, by economists Terry Anderson and Donald Leal, will be convinced that the same unquenchable entrepreneurial spirit that delivers an abundance of food, clothing, communications, health, and other critical features of life can be relied on to deliver environmental quality—if only entrepreneurs could be encouraged rather than delayed and discouraged by government action.

The authors do not dwell on theories and assertions about free-market environmentalism. Instead, they recount fact-filled stories about past and present activities of enviro-capitalists. Those who erroneously cling to the idea that capitalism is inherently destructive to the environment will find their prejudices strongly challenged. This collection of stories about real people and their profit-making ventures in environmental production reminds us again that capitalism works.

We learn, for instance, about Joseph Crisafulli, a successful entrepreneur in Glendive, Montana, who established a paddlefish roe enterprise. He discovered that paddlefish roe would pass the market’s test for caviar. Sensing a profit opportunity, Crisafulli and other town business people began a paddlefish cleaning service for fishermen who prize the fish but dislike cleaning them; they obtained pounds of valuable roe in the bargain.

However, Crisafulli and his associates had to work through a deep political bureaucracy. They needed permission from both state and federal regulators before beginning their enterprise. Moreover, the regulators insisted that net proceeds go to “community improvements” including the preservation of the habitat of the fish. They consented to these dictates, which happened to largely coincide with their plans, but it is easy to imagine that bureaucratic red tape and micro-management could easily stifle other environmental projects.

Another case the authors discuss is International Paper’s realization that large amounts of its forestland produced more wealth when managed and maintained as wildlife habitat and recreational space than when used as a source for cut timber. This led the firm to allocate more than a million acres of land to those purposes. Why did International Paper do it? The same reason that causes the firm to search for lower-cost paper and timber products—profit. Market forces are delivering environmental quality.

What about Yellowstone, that paragon of America’s park system? Was it the unblemished foresight of government that preserved this collection of natural wonders? Hardly. Instead, we learn that “robber baron” railroad capitalists recognized the market value of the territory that became Yellowstone Park. Seeing a promising attraction for eco-tourism and rail traffic, railroad capitalists sought to purchase the land from the federal government, but were prevented from doing so by an egalitarian federal law limiting land ownership to only 160 acres. Frustrated in their attempt to purchase the asset they wanted, the railroaders then lobbied for Congress to establish Yellowstone National Park and once it had done so, they promptly built the rail lines and hotels.

Anderson and Leal also explain how entrepreneurs are finding market niches for protecting endangered species, such as the peregrine falcon. The common assumption that government action is the only means to protect species cannot survive a reading of this book.

Enviro-Capitalists should be read both by environmentalists and friends of liberty. True environmentalists, those who seek to protect the precious biological envelopes that support life and are not simply dedicated to the replacement of individual freedom with command-and-control regulation, will be encouraged to know that markets are on their side. Friends of liberty, who sometimes find themselves hard-pressed to defend markets in the face of attacks from environmentalists, will welcome the reinforcements provided by this excellent, if too-short book.

  • Bruce Yandle is dean emeritus of Clemson University's College of Business & Behavioral Science and alumni distinguished professor of economics emeritus at Clemson. He is a distinguished adjunct professor of economics at the Mercatus Center, a faculty member with George Mason University's Capitol Hill Campus, and a senior fellow emeritus with the Property and Environment Research Center (PERC).