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  • Writer's pictureMariana Trujillo

A Free Market Approach to Environmentalism Part 1

Earth is getting hotter every year. This is a huge problem, no one should deny it. How to solve it is the real debate. However, even though this is a very complex situation, we often see only two sides to this discussion. One wants to deny science and progress and say that we should focus on their vision of economic development by ignoring the problem. The other one says that we should tax corporations and put heavy laws prohibiting ownership of natural resources.

Both of them are extremely flawed and destructive. Both will destroy what is left of earth and its economy. This is not a debate over what is more important: the economy or the environment. This is a debate over property rights.

This will be a series of 2 articles. One will be talking about preserving current resources and allocating them the most efficient way possible and the other one talking about preventing pollution. Both issues will be solved in a similar way but they deserve their own space.

Today we are approaching the first one: how to use current natural resources. Who should decide what and how to use it. Is it corporations, is it the government? How about neither?

Let’s start from the beginning. Why do people use natural resources in an “exploitative” way in the first place? Why would “money-hungry” corporations kill and destroy the thing that they are profiting off of?

Simple. They have no incentive to protect it. Why? Because they don’t own it. Let me explain.

If you own something, let’s say a parcel of land, you have incentives to take care of it the most profitable way. If you destroy it you will kill your source of income. If you own valuable natural resources, you would try to use it in the most responsible way possible. You will try to preserve your property. If you are completely motivated by profit, you will try to preserve these resources and explore them responsibly.

But let’s imagine another scenario. Let’s imagine that you only have the right to use the property, but you don’t own it. You can explore this parcel of land, but you can’t call it yours. Then, your only incentive is to explore it as much as you can. You will take from it as much as you can because, if you don’t, you will be wasting money. You will not profit from the preservation of this resource. If you were a company and, you not only had no economic incentive to preserve a natural resource, but also had incentives to exploit it to the fullest, would you still preserve it?

Unfortunately, this is exactly the system that we have today, very common all over the world. Governments will often sell the right to exploit a land, but they won't sell the land itself.

“This association should not be surprising. Using private property as a tool for resource conservation and management works because it empowers landowners to act as managers of environmental resources and facilitates conservation efforts in the private sector.

The concept behind this is simple. As land values ​​generally increase over time, landowners have an incentive to maintain the quality of the land and improve it in order to preserve or increase its value.

Those who have secured private ownership of a particular property have no interest in destroying the value of the land or its environmental qualities because they would not benefit from this degradation.

For example, if wood producers are able to own and exploit their land resources for production, they will have the incentive to maintain that land and replant trees as they are harvested.

After all, without investing in sustainable wood production, these companies would run out of feedstock and would pay taxes on the ownership of unproductive land.” [1]

Do you want empirical proof that more structured and secured property rights as well as a freer market guarantees more environmental conservation?

“The Environmental Performance Index (EPI), published by the World Economic Forum, the Center for International Earth Science Information Network (CIESIN), and the Yale Center for Environmental Law and Policy, provides “a composite index of current national environmental protection efforts.” Levels of economic freedom and the EPI are positively correlated at a statistically significant level. The freer the economy, the higher -- and more sustainable -- the level of environmental protection.

Also, “Policy efforts aimed at imposing stricter environmental standards through a global regulatory body run at great risk of being not only fruitless but counterproductive as well. They undercut the economic growth necessary for greater efforts to protect the environment. Such regulations only serve as feel-good actions, without generating real “change” that could mitigate climate change and its possible negative impacts. Countries in general -- but developing countries in particular -- are able to protect their environment only if their economies prosper and the standard of living of their citizens improves.” [1]

“Environmental problems, whether uncontrolled pollution or the unsustainable use of natural resources, result when resources are left outside of the market institutions of property rights, voluntary exchange, and the rule of law. Libertarian environmentalists note that privately-owned resources are typically well maintained. In contrast, resources that are unowned or politically controlled are more apt to be inadequately and poorly managed. “ [2]

In the next article: pollution, externalities, and why people wanted to regulate the environment in the first place. Follow on Instagram or Facebook stay updated.



Photo by ANGELA BENITO on Unsplash

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