Free-market environmentalism argues that the

free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...

property rights The right to property, or the right to own property (cf. ownership) is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typically h ...

, and

tort law A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that are punishab ...

provide the best means of preserving the

environment Environment most often refers to: __NOTOC__ * Natural environment, all living and non-living things occurring naturally * Biophysical environment, the physical and biological factors along with their chemical interactions that affect an organism or ...

, internalizing pollution costs, and conserving resources. Free-market environmentalists therefore argue that the best way to protect the environment is to clarify and protect property rights. This allows parties to negotiate improvements in environmental quality. It also allows them to use torts to stop environmental harm. If affected parties can compel polluters to compensate them they will reduce or eliminate the

externality In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...

. Market proponents advocate changes to the legal system that empower affected parties to obtain such compensation. They further claim that governments have limited affected parties' ability to do so by complicating the tort system to benefit producers over others.

Tenets

While environmental problems may be viewed as

market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indiv ...

s, free market environmentalists argue that environmental problems arise because: # The state encodes, provides and enforces laws which override or obscure property rights and thus fail to protect them adequately. # Given the technological and legal context in which people operate, transaction costs are too high to allow parties to negotiate to a solution better for the environment. # Laws governing class or individual tort claims provide polluters with immunity from tort claims, or interfere with those claims in such a way as to make it difficult to legally sustain them. Though many environmentalists blame markets for many of today's environmental problems, free-market environmentalists blame many of these problems on distortions of the market and the lack of markets. Government actions are blamed for a number of environmental detriments. * A misunderstanding of the tragedy of the commons, which is seen as a fundamental problem for the environment. When land is held in common, anybody may use it. Since resources are consumable, this creates the incentive for entrepreneurs to use common resources before somebody else does. Many environmental resources are held by the government or in common, such as air, water, forests. A claimed problem with regulation is that it puts property into a political commons, where individuals try to appropriate public resources for their own gain, a phenomenon called

rent-seeking Rent-seeking is the act of growing one's existing wealth without creating new wealth by manipulating the social or political environment. Rent-seeking activities have negative effects on the rest of society. They result in reduced economic effic ...

. * Tenure – Renters do not benefit from value accrued during their tenure and thus face an incentive to extract as much value as possible without conservation. * Political allocation – Political information does not have the incentives that markets do to seek superior information (profit and loss). Though many participants provide input to governments, they can only make one decision. This means that governments create rules that are not well crafted for local situations. The government's strategy is that of anticipation, to hide from danger through regulations. A healthier society would use resilience, facing and overcoming risks. * Perverse subsidies – Governments offer cross subsidies that distort

price system In economics, a price system is a system through which the valuations of any forms of property (tangible or intangible) are determined. All societies use price systems in the allocation and exchange of resources as a consequence of scarcity. Even ...

s. This means that underconsumers and overconsumers are paying the same rates, so the underconsumer is overpaying and the overconsumer is underpaying. The incentive leads to more overconsumers and fewer underconsumers. * Increased transaction costs – Governments may create rules that make it difficult to transfer rights in ways that benefit the environment. For example, in the western United States, many states have laws over water rights that make it difficult for environmental groups to purchase in-stream flows from farmers.

Market tools

Markets are not perfect, and free-market environmentalists assert that market-based solutions will have their mistakes. Through strong feedback mechanisms such as risk, profit and loss, market-driven have strong incentives to learn from mistakes. * Individual choice Consumers have the incentive to maximize their satisfaction and try to find low cost, high value options. Markets allocate resources to the highest bidder. Producers make purchases on behalf of the consumer. Due to many actors in the market, there is no one-size-fits-all solution and entrepreneurs will seek to fulfill many values of society, including conservation. *

Entrepreneurship Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...

– Entrepreneurs seek value, problem-solve, and coordinate resources. * Price system – When resources become scarce, prices rise. Rising prices incentivize entrepreneurs to find substitutions for these resources. These resources are often conserved. E.g. as prices for coal rise, consumers will use less and higher prices will drive substitution for different energy sources. *

Property rights The right to property, or the right to own property (cf. ownership) is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typically h ...

– Owners face a strong incentive to take care of and protect their property. They must decide how much to use today and how much to use tomorrow. Everybody is trying to grow value. Corporate value and share price is based on their anticipated future profits. Owners with the possibility of transferring their property, either to an heir or through sale want their property to grow in value. Property rights encourage conservation and defend resources against depletion, since there is a strong incentive to maximize the value of the resource for the future. *

Common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omniprese ...

– In order to have working property rights, you need a good system to defend them. When rights are weak, people will violate them. By creating a strong system, where common resources can be homesteaded, transferred, and defended against harm, resources can be protected, managed, allocated with the results that aggregate and balance humanity's needs and wants. The market is a non-political allocation device. Many environmentalists proposals call to return resources from markets to become political problems.

Issues

Coasian bargaining

Some

economists An economist is a professional and practitioner in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this field there are ...

argue that, if industries internalized the costs of negative externalities, they would face an incentive to reduce them, perhaps even becoming enthusiastic about taking advantage of opportunities to improve profitability through lower costs. Moreover, economists claim this would lead to the optimal balance between the marginal benefits of pursuing an activity and the marginal cost of its environmental consequences. One well-known means of internalizing a negative consequence is to establish a

property right The right to property, or the right to own property (cf. ownership) is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typically ...

over some phenomenon formerly in the public domain. The

Coase theorem In law and economics, the Coase theorem () describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem states that if trade in an externality is possible and there are sufficiently low tra ...

is one extreme version of this logic. If property rights are well defined and if there are no transaction costs, then market participants can negotiate to a solution that internalizes the externality. Moreover, this solution will not depend on who is allocated the property right. For example, a paper mill and a resort might be on the same lake. Suppose the benefits to the resort of a clean lake outweigh the benefits to the mill of being able to pollute. If the mill has the right to pollute, the resort will pay it not to. If the resort has the right to a pollution-free lake, it will keep that right, as the mill will be unable to compensate it for its pollution. However, critics have charged that the "theorem" attributed to Coase is of extremely limited practicability because of its assumptions, including no transaction costs, and is ill-suited to real world externalities which have high bargaining costs due to many factors. More generally, free-market environmentalists argue that transaction costs "count" as real costs. If the cost of re-allocating property rights exceeds the benefits of doing so, then it is actually optimal to stay in the status quo. This means the initial allocation of property rights is not neutral and also that it has important implications for efficiency. Nevertheless, given the existing property rights regime, costly changes to it are not necessarily efficient, even if in hindsight an alternative regime would have been better. But if there are opportunities for property rights to evolve, entrepreneurs can find them to create new wealth.

Geolibertarianism

Libertarian Georgists (or

Geolibertarians Geolibertarianism is a political and economic ideology that integrates libertarianism with Georgism. It favors a taxation system based (as in Georgism) on income derived from land and natural resources instead of on labor, coupled with a minima ...

) maintain a strong essential commitment to free markets but reject the Coasian solution in favor of

land value tax A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...

ation, wherein the

economic rent In economics, economic rent is any payment (in the context of a market transaction) to the owner of a factor of production in excess of the cost needed to bring that factor into production. In classical economics, economic rent is any payment ...

of land is collected by the community and either equally distributed to adult residents in the form of universal

basic income Universal basic income (UBI) is a social welfare proposal in which all citizens of a given population regularly receive an unconditional transfer payment, that is, without a means test or need to work. It would be received independently of ...

, called the ''

Citizen's Dividend Citizen's dividend is a proposed policy based upon the Georgist principle that the natural world is the common property of all people. It is proposed that all citizens receive regular payments ( dividends) from revenue raised by leasing or taxin ...

'', or used to fund necessary functions of a minimal government. Under the LVT system, only landholders are taxed and on the basis of the market value of the earth in its unimproved state, that is to say, apart from the value of any structures or products of human labor. Geolibertarians regard the LVT as just compensation for a legal

land title In property law, title is an intangible construct representing a bundle of rights in (to) a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different ...

granting exclusive access to that which logically precedes and generates

private capital In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. At the macroeconomic level, "the nation's capital stock includes buildings, eq ...

, whose supply is inelastic, which properly belongs to all, and to which all have an equal right because it is vital to human existence and economic activity—the ground itself—and thus consider land value capture both morally imperative and a natural source of revenue. Taxation of land values has been advocated by many classical economists and theorists of

classical liberalism Classical liberalism is a political tradition and a branch of liberalism that advocates free market and laissez-faire economics; civil liberties under the rule of law with especial emphasis on individual autonomy, limited government, e ...

, but this approach was popularized as the ''

Single Tax A single tax is a system of taxation based mainly or exclusively on one tax, typically chosen for its special properties, often being a tax on land value. The idea of a single tax on land values was proposed independently by John Locke and Bar ...

'' by

political economist Political economy is the study of how economic systems (e.g. markets and national economies) and political systems (e.g. law, institutions, government) are linked. Widely studied phenomena within the discipline are systems such as labour m ...

and public intellectual

Henry George Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the eco ...

in the late 19th century. Geolibertarians generally also support Pigouvian taxes on pollution and fees as compensation for natural resource extraction,

negative externalities In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...

which adversely affect land values in particular. Many argue the monopolization of land promotes idle

land speculation In finance, speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline in value.) Many ...

real estate bubble A real-estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real-estate markets, and typically follow a land boom. A land boom is the rapid increa ...

urban sprawl Urban sprawl (also known as suburban sprawl or urban encroachment) is defined as "the spreading of urban developments (such as houses and shopping centers) on undeveloped land near a city." Urban sprawl has been described as the unrestricted growt ...

and artificially severe

wealth inequality The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or economic heterogeneity. The distribution of wealth differs from the income distribution in that ...

, while violating the

Lockean proviso The Lockean proviso is a feature of John Locke's labor theory of property which states that whilst individuals have a right to homestead private property from nature by working on it, they can do so only "at least where there is enough, and as g ...

and denying others rightful access to the earth.

Anarcho-capitalism

Rothbardian Murray Newton Rothbard (; March 2, 1926 – January 7, 1995) was an American economist of the Austrian School, economic historian, political theorist, and activist. Rothbard was a central figure in the 20th-century American libertarian ...

anarcho-capitalists Anarcho-capitalism (or, colloquially, ancap) is an anti-statist, libertarian, and anti-political philosophy and economic theory that seeks to abolish centralized states in favor of stateless societies with systems of private property enfor ...

also reject the proposed Coasian solution as making invalid assumptions about the purely subjective notion of costs being measurable in monetary terms, and also of making unexamined and invalid value judgments (i.e., ethical judgments).
Wayback Machine
PDF) The Rothbardians' solution is to recognize individuals'

Lockean John Locke (; 29 August 1632 – 28 October 1704) was an English philosopher and physician, widely regarded as one of the most influential of Enlightenment thinkers and commonly known as the "father of liberalism". Considered one of ...

property rights, of which the Rothbardians maintain that ''Wertfreiheit'' (i.e., value-free) economic analysis demonstrates that this arrangement necessarily maximizes social utility.
Toward a Reconstruction of Utility and Welfare Economics
PDF) Murray Rothbard himself believed the term "free-market environmentalism" to be oxymoronic. On his view the unimproved natural environment, undeveloped and unowned, can in no sense be considered property until it is transformed via Lockean homesteading. Unlike geolibertarians and many classical liberals, however, Rothbard emphatically rejected Locke's proviso as inconsistent with his theory of property acquisition. Against

environmentalism Environmentalism or environmental rights is a broad Philosophy of life, philosophy, ideology, and social movement regarding concerns for environmental protection and improvement of the health of the environment (biophysical), environment, par ...

Rothbard said: "The problem is that environmentalists are not interested in efficiency or preserving private property....The environmentalists are acolytes and prisoners of a monstrous literally anti-human philosophy. They despise and condemn the human race, which by its very nature and in contrast to other creatures, changes and transforms the environment instead of being passively subjected to it....I have come to the conclusion that a 'free-market environmentalist' is an oxymoron. Scratch one and you get...an environmentalist."

Markets and ecosystems as spontaneous orders

Recent arguments in the academic literature have used

Friedrich Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Hayek ...

's concept of a

spontaneous order Spontaneous order, also named self-organization in the hard sciences, is the spontaneous emergence of order out of seeming chaos. The term "self-organization" is more often used for physical changes and biological processes, while "spontaneous o ...

to defend a broadly non-interventionist

environmental policy Environmental policy is the commitment of an organization or government to the laws, regulations, and other policy mechanisms concerning environmental issues. These issues generally include air and water pollution, waste management, ecosystem ma ...

. Hayek originally used the concept of a spontaneous order to argue against government intervention in the market. Like the market, ecosystems contain complex networks of information, involve an ongoing dynamic process, contain orders within orders, and the entire system operates without being directed by a conscious mind. On this analysis, species takes the place of price as a visible element of the system formed by a complex set of largely unknowable elements. Human ignorance about the countless interactions between the organisms of an ecosystem limits our ability to manipulate nature. Since humans rely on the ecosystem to sustain themselves, it is argued that we have an obligation to not disrupt such systems. This analysis of ecosystems as spontaneous orders does not rely on markets qualifying as spontaneous orders. As such, one need not endorse Hayek's analysis of markets to endorse ecosystems as spontaneous orders.

Others

Proponents of free-market

use the example of the recent destruction of the once prosperous

Grand Banks The Grand Banks of Newfoundland are a series of underwater plateaus south-east of the island of Newfoundland on the North American continental shelf. The Grand Banks are one of the world's richest fishing grounds, supporting Atlantic cod, sword ...

fishery off

Newfoundland Newfoundland and Labrador (; french: Terre-Neuve-et-Labrador; frequently abbreviated as NL) is the easternmost province of Canada, in the country's Atlantic region. The province comprises the island of Newfoundland and the continental region ...

. Once one of the world's most abundant fisheries, it has been almost completely depleted of fish. Those primarily responsible were large "factory-fishing" enterprises driven by the imperative to realize profits in a competitive global market. It is contended that if the fishery had been owned by a single entity, the owner would have had an interest in keeping a renewable supply of fish to maintain profits over the long term. The owner would thus have charged high fees to fish in the area, sharply reducing how many fish were caught. The owner also would have closely enforced rules on not catching young fish. Instead commercial ships from around the world raced to get the fish out of the water before competitors could, including catching fish that had not yet reproduced. Another example is in the 19th century early gold miners in California developed a trade in rights to draw from water courses based on the doctrine of

prior appropriation Prior appropriation: In water rights, the legal doctrine of prior appropriation holds that the first person to take a quantity of water from a water source for "beneficial use" (agricultural, industrial or household) has the right to continue to ...

. This was curtailed in 1902 by the Newlands Reclamation Act which introduced subsidies for

irrigation Irrigation (also referred to as watering) is the practice of applying controlled amounts of water to land to help grow crops, landscape plants, and lawns. Irrigation has been a key aspect of agriculture for over 5,000 years and has been devel ...

projects. This had the effect of sending a signal to

farmers A farmer is a person engaged in agriculture, raising living organisms for food or raw materials. The term usually applies to people who do some combination of raising field crops, orchards, vineyards, poultry, or other livestock. A farmer mig ...

that water was inexpensive and abundant, leading to uneconomic use of a scarce resource. Increasing difficulties in meeting demand for water in the western

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

have been blamed on the continuing establishment of governmental control and a return to tradable property rights has been proposed.

Notable free-market environmentalists

* Terry L. Anderson *

Jonathan H. Adler Jonathan H. Adler is an American legal commentator and law professor at the Case Western Reserve University School of Law. He has been recognized as one of the most cited professors in the field of environmental law. His research is also credite ...

John Baden John A. Baden is founder and chairman of the Foundation for Research on Economics and the Environment (FREE) based in Bozeman, Montana. In addition to FREE. he cofounded the Property and Environment Research Center (PERC), the Environmental Manag ...

Ralph Borsodi Ralph Borsodi (December, 1888 – October 27, 1977) was an American agrarian theorist and practical experimenter interested in ways of living useful to the modern family desiring greater self-reliance (especially so during the Great Depression) ...

* Bolton Hall * Laura Jones (Fraser Institute) *

Gary Libecap Gary Don Libecap (born 1946) is a Distinguished Professor of Corporate Environmental Management at the Bren School of Environmental Science & Management and Distinguished Professor of Economics at the University of California Santa Barbara. Lib ...

* Preston Manning *

Bruce Yandle Bruce Yandle (born August 12, 1933) is Dean Emeritus of Clemson University's College of Business and Behavioral Science and Alumni Distinguished Professor of Economics Emeritus at Clemson. He is a Distinguished Adjunct Professor of Economics at t ...

Notable free-market environmentalist groups

Political parties that have supported free-market environmentalism: *

Property and Environment Research Center The Property and Environment Research Center (PERC), previously known as the Political Economy Research Center, is a free market environmental think tank based in Bozeman, Montana, United States. Established in 1980, PERC is dedicated to original ...

(PERC) (United States) * Liberal Democratic Party (Australia) * Libertarian Party (United Kingdom) * Libertarian Party (United States)

Criticisms

Critics argue that free-market environmentalists have no method of dealing with collective problems like

environmental degradation Environmental degradation is the deterioration of the environment through depletion of resources such as quality of air, water and soil; the destruction of ecosystems; habitat destruction; the extinction of wildlife; and pollution. It is defin ...

and

natural Nature, in the broadest sense, is the physical world or universe. "Nature" can refer to the phenomena of the physical world, and also to life in general. The study of nature is a large, if not the only, part of science. Although humans ar ...

resource depletion Resource depletion is the consumption of a resource faster than it can be replenished. Natural resources are commonly divided between renewable resources and non-renewable resources (see also mineral resource classification). Use of eith ...

because of their rejection of collective regulation and control.Friedman, Jeffrey, "Politics or Scholarship?", ''Critical Review'', Vol. 6, No. 2–3, 1993. pp. 429–445. They see natural resources as too difficult to privatize (e.g.

water Water (chemical formula ) is an inorganic, transparent, tasteless, odorless, and nearly colorless chemical substance, which is the main constituent of Earth's hydrosphere and the fluids of all known living organisms (in which it acts as ...

), as well as legal responsibility for pollution and degrading

biodiversity Biodiversity or biological diversity is the variety and variability of life on Earth. Biodiversity is a measure of variation at the genetic ('' genetic variability''), species ('' species diversity''), and ecosystem ('' ecosystem diversity'') ...

as too hard to trace.Partridge, Ernest. "With Liberty and Justice for Some." ''Environmental Philosophy'' edited by Michael Zimmerman, Baird Callicott, Karen Warren, Irene Klaver, and John Clark, 2004

/ref>

Notes

Bibliography

* Anderson, T L & Leal, D R (2001) ''Free-market environmentalism'', 2nd ed., * * * * Stroup, Richard L. (2003) ''Eco-nomics: What Everyone Should Know About Economics and the Environment'' * Krugman, Paul (1999
"Earth in the balance sheet: economists go for the green"
and "Taxes and traffic jams" reprinted in ''The Accidental Theorist'' * Ridley, M & Low, B S (1993

''The Atlantic Monthly'' vol. 272, pp. 76–86 * Simon, Julian (1998) ''The Ultimate Resource 2''

External links

A Hayekian Defense of Free-Market Environmentalism

The sale of trees for profit, Trees Instead

The Thoreau Institute – a pro-free market environmentalism group
*

The Nature Conservancy The Nature Conservancy (TNC) is a global environmental organization headquartered in Arlington, Virginia. it works via affiliates or branches in 79 countries and territories, as well as across every state in the US. Founded in 1951, The Nat ...

has posted much information o
conservation easements
and other tools pertaining to free-market environmentalism
Association of Environmental and Resource Economists
(AERE).
''JEEM: Journal of Environmental Economics and Management''
(AERE's official "technical" journal).
''REEP: Review of Environmental Economics and Policy''
(AERE's official "accessible" journal). {{Libertarianism, state=autocollapse Environmental economics Environmentalism Green politics Libertarian theory Free market