Free-market environmentalism

Free market environmentalism is an ideology that argues the free market is the best tool to preserve the health and sustainability of the environment. This is in sharp contrast to the most common modern approach of looking to government intervention to help prevent excessive destruction of the environment.

Property rights

Economists argue from the Coase Theorem that, were industries compelled to internalize the costs of their negative externalities they would face an overwhelming incentive to reduce them, perhaps even becoming enthusiastic about taking advantage of opportunities to improve profitability through lower costs. Moreover, this would strike the optimal balance between the benefits of pursuing an activity and its environmental consequences. One well-known means of internalizing a negative consequence is to establish a property right over some phenomenon formerly in the public domain. This requires a little abstract thinking in the case of environmental problems as we are talking about a right to pollute or to exploit some limited natural phenomenon. This is a sophisticated variant of the polluter pays principle. There are a number of problems for which such solutions have already been proposed or implemented.

Related Topics:
Economists - Coase Theorem - Externalities - Property right

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An example is the recent destruction of the once prosperous Grand Banks fishery off Newfoundland. Once one of the world's most abundant fisheries it has been almost completely depleted of fish. If the fishery had been owned by a corporation it would have had an engrained interest in keeping a renewable supply of fish to maintain profits over the long term. They would thus have charged high fees to fish in the area sharply reducing how many fish were caught. They also would have closely enforced rules on not catching young fish. Instead ships from around the world raced to get the fish out of the water before competitors could include catching fish that had not yet reproduced.

Related Topics:
Grand Banks - Newfoundland

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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. This was curtailed in 1902 by the Newlands Reclamation Act which introduced subsidies for irrigation projects. This had the effect of sending a signal to farmers 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 have been blamed on the continuing establishment of governmental control and a return to tradable property rights has been proposed.

Related Topics:
19th century - Prior appropriation - 1902 - Newlands Reclamation Act - Irrigation - Farmers - United States - Property right

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