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Economists in the Wild

Friday, April 22, 2011

Far from damaging brains and killing seals, applying basic economics to the environment preserves it.

The industrial revolution that began about 200 years ago has changed humanity’s relation to, and attitudes about, nature completely—and sometimes it has generated new views about God and nature, such as from the Transcendentalists of the 19th century. In the first half of the 19th century, Alexis de Tocqueville reflected that in America, civilization ended where the wilderness began; life along the frontier was one of “wretchedness,” and the wilderness itself generally “impenetrable.” To de Tocqueville, the scattered frontier settlers represented “an ark of civilization in the middle of an ocean of leaves.”i How different from the Puritans’ “errand into the wilderness” of the 17th century, or de Tocqueville’s rendering of the American frontier, is the Transcendentalist attitude toward the wilderness that quickly emerged along with industry, as best expressed in William Wordsworth’s poem:

One impulse from a vernal wood
May teach you more of man,
Of moral evil and of good
Than all the sages can.ii

Perry Miller, the great scholar of American Puritanism, reflects on the implications of the Transcendental view of nature:

From vernal wood (along with Niagara Falls, the Mississippi, and the prairies) [America] can learn more from that source more conveniently than from divine revelation? Not that the nation would formally reject the Bible. On the contrary, it could even more energetically proclaim itself Christian and cherish the churches; but it could derive its inspiration from the mountains, the lakes, the forests. There was nothing mean or niggling about these, nothing utilitarian. Thus, superficial appearances to the contrary, America was not crass, materialistic: it is Nature’s nation, possessing a heart that watches and receives.iii

In practical terms, we can see that in wealthy industrialized nations, it became no longer necessary for the vast majority of people to be “tillers of the soil,” securing a tenuous existence through sweaty labor over “cursed” ground. Indeed, in the United States and Europe over the last century, the proportion of the population engaged in farming has fallen from more than 75 percent to less than 5 percent.

The central insight of environmentalism is that humanity’s great leap in material progress has come at a high cost to nature.

The rapid material advance of the last 200 years has provided more comfortable lives in several meaningful ways: It has led to longer lifespans, conquest of diseases, and the ability of the human population to grow more rapidly and securely than at any time in previous history. (It also has provided the means of transforming social and family relations, liberating women from historically “women’s work” on the farm or in the home.) In other words, human ingenuity, technology, and innovation have largely succeeded, in wealthy nations at least, in approximating the abundance of the Garden of Eden.

However, no exertion on humanity’s part, and no conceivable innovation in technology, can succeed in re-creating the original innocence of humans in the Garden of Eden. There is perhaps a corollary here: This approximation of Eden still partakes fully of human sin.

The central insight of environmentalism is that humanity’s great leap in material progress has come at a high cost to nature: we tear down entire mountains for their minerals; divert rivers and streams and drain swamps to provide water for modern agriculture and urban use; clear large amounts of forests for other uses, often disrupting crucial habitat for rare animal species; and too often dump our waste byproducts thoughtlessly into the air, water, and land.

Human ingenuity, technology, and innovation have largely succeeded, in wealthy nations at least, in approximating the abundance of the Garden of Eden.

But this insight contains a paradox. Environmentalism arose precisely because we have mitigated the material harshness of human life through the Industrial Revolution; as Aldo Leopold, author of the classic environmental book A Sand County Almanac, put it: “These wild things had little human value until mechanization assured us of a good breakfast.”iv It is no coincidence that environmental sensibility arose first and has its strongest influence in wealthy nations. The affluent society does not wish to be the effluent society. Meanwhile, the poorest and most undeveloped nations of Africa, Asia, and Latin America today suffer the worst environmental degradation and have the least public support for environmental protection. The wealth and technological innovation (spurred more by markets than government dictates) of industrialized nations provides the means for environmental improvement and remediation.

Air and water pollution in the United States and Europe, for example, have fallen substantially over the last 40 years (and will continue to abate in the coming decades), although they are still worsening in most underdeveloped nations. Forestlands, according to recent United Nations (UN) data, are expanding in the United States, Europe, and parts of Asia, but are still contracting in underdeveloped nations.

The point is that our conquest of nature through technology and material progress has enabled our increasing appreciation and concern for it. “The wilderness” is now regarded not as an inhospitable realm to avoid or conquer, but as a source of wonder to be celebrated and preserved. This change in outlook, however, extends beyond just our attitudes and sentiments: prosperity has also become the foundation for improving our environment.

The Revolution in Environmental Economics

At first sight, the connection between rising material standards and environmental improvement seems a paradox, because for a long time many considered material prosperity and population growth the irreversible engines of environmental destruction. Paul Ehrlich, the famous author of The Population Bomb, which predicted that runaway population growth would lead to mass starvation and ecological devastation, offered a seemingly scientific formula for this relationship: I = PAT, where I = impact on the planet, P = population, A = affluence, and T = technology. In other words, to minimize our impact on the planet, there need to be fewer humans, we need to be poorer, and we need to have less technology.v

Our conquest of nature through technology and material progress has enabled our increasing appreciation and concern for it.

In the 1970s, the common theme was that the world was in danger of running out of key natural resources perhaps as soon as the year 2000. The 1972 Limits to Growth study, for example, predicted that the world would run out of gold, zinc, mercury, and oil before 1992;vi the U.S. government’s1980 Global 2000 report predicted that the world would face an oil shortage of 20 million barrels a day by 2000 and that oil would cost $100 a barrel. As recently as 1993, David Brower published a full-page ad in the New York Times featuring a headline that read, “Economics is a form of brain damage.” Not long before, at the 1992 Earth Summit in Rio de Janeiro, environmental activist Hazel Henderson suggested that economists should be sent to re-education camps.vii

Today, the “population bomb” looks very different than in 1968, and there has been a revolution in thought about how to regard resource scarcity. Far from experiencing runaway population growth, fertility rates have fallen so fast around the world that the UN now forecasts global population will peak sometime after mid-century—within the lifetime of young adults alive today—and then probably begin declining by the end of the century. There are many factors in the fertility rate decline, but the most powerful correlation appears to be the spread of individual freedom and democracy.

Population growth is still the chief driver of serious environmental problems in the developing world, but it no longer appears that planet is fated to experience runaway population growth and mass starvation because of the simple fact that we have been able to expand food production much more quickly than population over the last two generations. Mass famines—once a regular occurrence in the human story—now seldom occur, and when they do chiefly result from wars or political disruptions rather than an intrinsic shortage of foodstuffs or basic resource constraints. In the light of this experience, the Evangelical Environmental Network’s “Declaration on the Care of Creation” strikes an obsolete note by saying that “these [environmental] degradations are signs that we are pressing against the finite limits God has set for creation. With continued population growth, these degradations will become more severe.”viii

The role of markets and property rights in promoting environmental protection is conspicuously missing from most evangelical literature about the environment.

Environmental economics has undergone a revolution over the last generation as well, such that almost no environmentalist today would repeat Brower’s slogan that “economics is a form of brain damage.” To the contrary, one of the most widely accepted ideas in the field today is a concept known as the “Environmental Kuznets Curve” (EKC), named for Nobel laureate Simon Kuznets, who postulated in the 1950s that income inequality first increases and then declines with economic growth as nations develop and grow. Over the last two decades, more and more economists have come to recognize and provide empirical support for applying Kuznets’s concept to the environment.

The EKC holds that the relationship between economic growth and environmental quality is an inverted U-shape, according to which environmental conditions deteriorate during early stages of economic growth, but begin to improve after a certain threshold of wealth is achieved. For example, not a single American city ranks among the World Bank’s ranking of the 50 most polluted cities in the world, and only one European city—Athens—makes the top 50. It is possible to observe the EKC in action in some developing nations where pollution is now falling after decades of growing worse. Air pollution in Mexico City, for example, has been falling for the last decade, though Mexico City still has a long way to go to match the progress of American cities.

Recently surveying this new thinking, University of California physicist Jack Hollander concluded that “the essential prerequisites for a sustainable environmental future are a global transition from poverty to affluence, coupled with a transition to freedom and democracy.”ix Both the World Bank and the UN Environment Program recognize the applicability of the EKC in their latest thinking about sustainable development. The Evangelical Environmental Network’s “Declaration on the Care of Creation” gets this point right in its statement that “We recognize that poverty forces people to degrade creation in order to survive; therefore we support the development of just, free economies which empower the poor and create abundance without diminishing creation’s bounty.”x

Property Rights Preserve Nature

It is no coincidence that environmental sensibility arose first and has its strongest influence in wealthy nations.

At the heart of this economic development rest secure property rights. Just as environmentalists now more widely appreciate the role of economic incentives, the key role of property rights—often very insecure in undeveloped, undemocratic nations—is coming into sharper focus as well. Owning parts of nature—whether habitat or actual rare species—sounds counterintuitive to the secular mind (though plainly not to the Old Testament fathers), but more and more case studies demonstrate the effectiveness of property rights approaches to protecting the environment, from ocean fisheries to African and South American forests and even elephants. The role of markets and property rights in promoting environmental protection is conspicuously missing from most evangelical literature about the environment.xi

A simple thought experiment explains the logic of extending property rights to environmental goods. Suppose our beef cattle industry were organized the same way our ocean fishing tends to operate—a world in which ranchers did not have ranches surrounded by fences, but instead roamed the plains and shot or rounded up as many cows as they wanted. Obviously, we would run out of cows fairly soon because the incentives would be wrong; anyone who left a cow behind would be risking that someone else would get to it next. This is a well-known concept known as the “tragedy of the commons,” arising from the medieval practice in England of allowing anyone to graze as many animals as they wished to on public land. The land quickly became overgrazed. Yet this is exactly how we manage ocean fisheries—fish are a “common pool” resource in the ocean owned by no one, such that the perverse incentive for every individual fisher is to catch as many fish as possible. A fish left behind is a fish for someone else. This is the chief cause of the collapse of so many ocean fisheries.

Air and water pollution in the United States and Europe have fallen substantially over the last 40 years, although they are still worsening in most underdeveloped nations.

Some nations—Iceland and New Zealand are the best examples—have effectively preserved and expanded their fisheries through a property rights system known as “catch shares.” Essentially, this means designating ownership of territorial waters to individual fishers, who can buy, sell, and trade the rights to catch fish in the area. It is the oceanic equivalent of fencing ranchland for the private ownership and cultivation of cattle and sheep on land. In the United States, Maine’s once-threatened lobster industry adopted this approach, and today the lobster beds and lobster fishing industry are both thriving. Nations that have attempted to manage their fisheries through centralized bureaucratic management have been much less successful. Canada, for example, tried to prevent its Atlantic cod fisheries from collapse, starting 25 years ago with a bureaucratic regulatory program; yet the cod fisheries have continued toward catastrophic collapse.

One can find many examples of property rights’ beneficent effects on other areas of environmental concern, such as endangered species and reforestation—often in less-developed nations. While Africa is still experiencing net deforestation, according to the UN’s most recent Global Forest Resources Assessment, significant reforestation is taking place in one African nation: Niger. New studies show that Niger is now greener than it was 30 years ago. “Millions of trees are flourishing,” New York Times reporter Lydia Polgreen noted; more than 7 million acres of land have been reforested “without relying on the large-scale planting of trees and other expensive methods often advocated by African politicians and aid groups for halting desertification.” What explains this turnaround? Polgreen outlines the role of property rights:

Another change was the way trees were regarded by law. From colonial times, all trees in Niger had been regarded as the property of the state, which gave farmers little incentive to protect them. Trees were chopped for firewood or construction without regard to the environmental costs. Government foresters were supposed to make sure the trees were properly managed, but there were not enough of them to police a country nearly twice the size of Texas.

But over time, farmers began to regard the trees in their fields as their property, and in recent years the government has recognized the benefits of that outlook by allowing individuals to own trees. Farmers make money from the trees by selling branches, pods, fruit and bark. Because those sales are more lucrative over time than simply chopping down the trees for firewood, the farmers preserve them.

Far from damaging brains and killing seals, applying basic economics to the environment preserves it.

Steven F. Hayward is the F.K. Weyerhaeuser Fellow at the American Enterprise Institute. This article is adapted from his book Mere Environmentalism: A Biblical Perspective on Humans and the Natural World.

FURTHER READING: Hayward writes “Save the Filibuster!” “Dump the Bipartisan Mush: Here’s How You Do It for Real,” and “Two Cheers for the Clean Air Act.” He also discusses “Saving Species as the Climate Changes: Blame Partisan Environmentalists” and “The Gas Revolution.” He recently released the “2011 Almanac of Environmental Trends.”

Image by Darren Wamboldt/Bergman Group.

Notes

i. Alexis de Tocqueville, Journey to America, ed. J.P. Mayer, trans. George Lawrence (London: Faber, 1959), 341.
ii.  William Wordsworth, “The Tables Turned,” (1798), lines 21–24.
iii.  Perry Miller, Errand into the Wilderness (Harvard University Press, 1956), 209.
iv.  Aldo Leopold, A Sand County Almanac: And Sketches from Here and There (Oxford University Press, 1949), vii.
v.  Paul R. Ehrlich and John P. Holdren, “Impact of Population Growth,” Science 171 (1971): 1212–17.
vi.  Donella H. Meadows, Dennis L. Meadows, Jorgen Randers, and William W. Behrens III, The Limits to Growth (New York: Universe Books, 1972).
vii. See where Reason magazine science editor Ron Bailey reports: “In 1992, at the first Earth Summit in Brazil, I listened to environmentalist dim bulb, Hazel Henderson, declare to a crowd of activists that ‘economics is brain damage.’ Henderson went on to suggest to the hooting and hollering delight of the crowd that all economists be rounded up and put into re-education camps.”
viii.  See here.
ix.  Jack M. Hollander, The Real Environmental Crisis: Why Poverty, Not Affluence, Is the Environment’s Number One Enemy (University of California Press, 2003), 3.
x.  See here.
xi.  There are a few notable exceptions, such as Scott Saban of Floresta, a Christian nonprofit organization working on deforestation and poverty issues in the developing world. Writing on the Creation Care blog, deepgreenconversation.org, Saban observes: “[E]nvironmentalism is often depicted as being against private property. Yet at Floresta we have found ourselves advocating for property rights. Poor farmers who have the right to use wood and products from trees they plant will be much more likely to plant and care for them in the first place. Similarly poor farmers are more effective stewards of land that they are assured of being able to use in the future." But this is about the only mention of property rights in the entire Evangelical Environmental Network or Creation Care literature.

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