Free-market environmentalism

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Free-market environmentalism argues that the

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. 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 failures, free market environmentalists argue that environmental problems arise because:

1. The state encodes, provides and enforces laws which override or obscure property rights and thus fail to protect them adequately.
2. 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.
3. 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.^{[citation needed]}
• 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).^{[citation needed]} 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.^{[citation needed]} The government's strategy is that of anticipation, to hide from danger through regulations. A healthier society would use resilience, facing and overcoming risks.^[1]
• Perverse subsidies – Governments offer cross subsidies that distort price systems
  . 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.

• 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 – 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 – 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.^{[citation needed}
  ]
• Common law – 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

The Coase theorem 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.^[3]

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.^[4] But if there are opportunities for property rights to evolve, entrepreneurs can find them to create new wealth.^[5]

Geolibertarianism

Libertarian

Rothbardian anarcho-capitalists 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 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

• Terry L. Anderson
• Jonathan H. Adler
• John Baden
• Ralph Borsodi
• Bolton Hall
• Laura Jones (Fraser Institute)
• Gary Libecap
• Preston Manning
• Bruce Yandle

Notable free-market environmentalist groups

Organizations support free-market environmentalism:

• Property and Environment Research Center (PERC) (United States)

Criticisms

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

Notes