Bernie Jackson is an electrical engineer and freelance writer from California.
Imagine being a fly on the wall in an upscale auction house. You witness a parade of unique, priceless merchandise—items whose value cannot be explained by material usefulness alone. Their value arises from some combination of aesthetics, historical importance, pride of ownership, and a sense that they should be preserved for all to see. You might think such exquisite items must be rationed with care, lest they fall into unappreciative hands. Yet, auction houses merely sell to the highest bidder.
You watch as the bidding begins for an original Picasso. The room is packed, and the bids flow quickly. As the price begins to stabilize, a new bidder joins in. Gradually the others recognize him, and you see their shocked expressions as his identity registers. He is the notorious Mr. Big, a top executive for a giant multinational shoe company. As usual, he is here looking for canvas, an important ingredient for many models of his company’s shoes.
With corporate resources at his disposal, Mr. Big easily pushes the price beyond the other participants’ means. The others team up, pooling their resources to protect their beloved relic, but Mr. Big’s pockets are too deep. When the final gavel falls, the greedy executive makes off with the artwork, which to his perverted mind is nothing more than a patch of useful canvas covered by some annoying paint. He returns to his factory, where he pitches his latest acquisition onto the assembly line. In no time flat, the paint is stripped from the canvas, which becomes 2.7 pairs of shoes.
Absurd? Impossible? Ridiculous? You would think so; but fear of exactly that scenario is what drives governments all over the world to write regulations that attempt to conserve natural resources.
Imagine being a fly on the wall (or on the tree) as a precious tract of beautiful, ecologically valuable forest is put up for sale. This land’s true value is tremendous, far beyond its material usefulness. Its value arises from some combination of aesthetics, historical importance, pride of ownership, a sense that it should be preserved for all to see, and—of course—the overriding need to conserve a healthy environment for future generations. All over the world, the biggest fear of government regulators and conventional environmentalists is that precious ecological assets might be sold to the highest bidder, who will lay them to waste. For some reason, such fear is not widely considered absurd, impossible, or ridiculous.
The Price Mechanism
In most areas of life, we rely on a market force called the “price mechanism” to allocate resources. Any raw material or commodity has several uses for which it is uniquely suited, as well as countless incidental uses that could just as easily accommodate other materials instead. By selling materials on an open market to the highest bidder, we can rest assured that each material will tend to be allocated to those parties who appreciate it most. The party willing to outbid all others tends to be the party that most understands and values that material’s unique qualities.
In the case of fine art, aficionados (and their imitators) are the only group willing to pay dearly for paint-covered canvas. There are plenty of incidental uses for fine artwork: the canvas might be made into shoes, sails, or luggage; the paint might be reclaimed for oil-based products; the wood frame might be burned in a fireplace or made into doorstops; and one can imagine countless other appalling examples. Perhaps more believably, an unappreciative buyer might purchase artwork on a whim, only to neglect and mistreat it after losing interest. While some misfortunes are inevitable, it is really quite remarkable that fine art is routinely conserved for art lovers, without rules and regulations, simply by selling to the highest bidder.
In other areas of life, we see the same amazing system at work. Profit-seeking office-supply makers do not turn precious gold into paper clips. Dollar-hungry car manufacturers do not strip down antique autos for their parts and materials. Greed-motivated electric companies do not burn libraries of historic documents in their generators. There are no regulations preventing these tragedies from occurring, yet capitalists concerned only with the bottom line routinely steer clear of them.
Are these corporate profiteers motivated by a transcendent respect for beauty and rarity? If so, why wouldn’t they approach ecological assets the same way? If not, then their alleged tunnel vision will not spell destruction for the ecology any more than it has for these other resources.
Are Ecological Assets Different?
Notwithstanding all of this, we constantly hear tales of modern industrialists devouring priceless ecological assets for profit all over the world. How can this be, if the price mechanism is so effective at conserving and allocating everything else? Is this an example of “market failure,” caused by something fundamentally different about ecological values?
We have already noted the sources of value for artistic commodities: a combination of aesthetics, historical importance, pride of ownership, and the desire to preserve them for future generations. All of these sources of value are also present in ecological assets. Plus, a healthy ecology is vital to life itself! That certainly ought to add some value.
There is one important difference, though. Unlike most commodities, ecological assets are highly regulated by many of our world’s governments out of fear that markets will not allocate them properly. The typical modern nation’s regulatory system allocates precious forests to those who manage to wheedle a permit from the bureaucracy. These wheedlers are granted the right to buy or lease public land, or use it for free. Prices are determined either by fiat or by a sham of a bidding process restricted to a few players or a single industry.
Perhaps our world’s governments have caused ecological destruction by stifling the open markets that work so well at allocating our other resources. Logging companies and industrialists seek the cheapest resources they can find, whether they are buying canvas, steel, land, or timber. If loggers had to outbid nature lovers, environmentalists, wildlife foundations, ecological research groups, hunters, and quirky billionaires, they would quickly give up on such ecological gems as “old growth” forests, turning instead to less critical lands, renewable tree farming, synthetic materials, and currently unforeseeable innovations.
Unfortunately, the majority of citizens seem to take for granted the price mechanism that functions every day right under their noses. Those who fear market forces frequently object that the rich industrialist will always be able to defeat the price mechanism’s laissez-faire allocation strategy; with his deep pockets, he can outbid anyone on any resource. But the question is: why would he want to?
Remember the opening scenario. Even though Mr. Big could afford to buy that Picasso and turn it into 2.7 pairs of shoes, we would be astonished if he actually did so. The more “greedy” we imagine Mr. Big to be, the less we need to worry that he will blow money on such an inflated commodity.
Our species and our planet would be far better off if our ecological assets were sold on an open market—to the highest bidder, period.
Taking It Personally
On a vacation to the California beach town of Cambria some time ago, I encountered the price mechanism in a particularly striking form. While browsing the shelves of a used book store, I found a dingy old school text. It was in reasonably good shape, though dog-eared, yellowed, and dusty. By all physical appearances, it should have cost a few dollars.
It was a reading book for grade school from several decades ago. Being curious about the history of public education, I was intrigued and decided to buy it. Unfortunately, the price turned out to be a bit more than I had expected. The storeowner explained that it was a classic “Dick and Jane” primer, a collector’s item worth nearly $100! I decided it was not worth $100 to satisfy my idle curiosity.
Society should be glad that I did not buy that book. In my possession, it would have gathered dust in my closet or been carelessly mistreated. Instead, it will go to someone willing to pay its high price: someone who will treasure it, share it with other enthusiasts, and preserve that bit of history for future generations. The most remarkable part of this story, though, is not merely that the price mechanism peacefully prohibited me from owning an item I was not qualified to care for. More impressive is that this happened at a relatively low price and without a full-blown auction.
I easily could have afforded to pay $100 for that book. After all, I was on a vacation, already paying for a few days of food and lodging, gasoline, and even several hundred dollars for a painting at a local art gallery. Like Mr. Big, I had the cash to buy the collector’s item before me. I just didn’t want to. To keep scarce commodities away from those who do not appreciate them, prices need not be exorbitant. They need only be high enough that the unappreciative buyer would rather use that money for something else.
In addition, I did not need a room full of competitive bidders to keep the “Dick and Jane” reader away from me. The seller only needed to know that collectors were willing to pay far more than the few dollars I would have offered; knowing that, he could hold out for the higher price. Similarly, in the case of ecological conservation, there need not be a widely attended public auction every time a parcel of land is sold. In fact, an auction may be counterproductive, since the ecological values of those not present will not be reflected in the price. When environmental regulations allocate precious land to predetermined commercial uses, inviting select parties to participate in “competitive bidding,” it is not a case of market failure. It is market sabotage.
For the sake of our species and our descendants, we ought to remove our ecological resources from governmental stewardship. Let each individual seller research his market and hold out for a buyer willing to pay dearly. When selling a precious old-growth forest, leave the unregulated seller free to turn away the industrialist, the logger, and the homebuilder, who will be happy with cheaper and less remarkable tracts of land. Let him hold out for the nature lovers, environmentalists, hunters, quirky billionaires, wildlife foundations, and ecological research groups. They are uniquely qualified to conserve the land (or to hire those who are), and uniquely motivated to raise serious money for its purchase.
- The U.S. Bureau of Land Management’s 1997 Annual Report, in a section titled “Blueprint Goal: Serve Current and Future Publics,” under the heading “Provide Opportunities for Environmentally Responsible Commercial Activities,” states: “The public lands provide myriad opportunities for commercial activities. . . . Currently, BLM administers about 46,000 oil and gas leases, of which 19,650 are producing or producible leases. During the fiscal year, the Bureau processed 2,795 oil and gas applications for permit to drill. . . . The number of active mining claims, down in past years, has stabilized at about 300,000.”
- According to the BLM (ibid.), “Every year thousands of companies apply to the BLM to obtain right-of-way grants to use public lands for roads, pipelines, transmission lines, and communications sites. . . . As of the end of FY 1997, the BLM administered 77,643 rights-of-way grants for electrical transmission lines, communication sites, oil and gas pipelines, and other facilities nationwide and was processing 6,148 right-of-way actions.”
- U.S.C., Title 43, Section 1713d says, “Sales of public lands shall be made at a price not less than their fair market value as determined by the Secretary.” But in practice, the Secretary can only assess this “fair market value” after arbitrarily allocating the land to a specific legally authorized use and researching prices paid for that usage of similar parcels. This defeats the price mechanism, in which price-setting and allocation are synergistically intertwined.