Free Market Environmentalism

As mentioned at the top of my previous post, this post is a book review. It's quite a lengthy post so it took a while to find time to write it; I hope it was worth the wait.

Free Market Environmentalism for the Next Generation (abbreviated FME below) by Terry Anderson and Donald Leal was published in 2015. Through their research at PERC—the Property and Environment Research Center—in Montana, the authors have spent decades looking at how property rights and markets can be used to promote positive environmental outcomes. Free Market Environmentalism for the Next Generation provides an up-to-date look at their thinking on the topic, backed-up by numerous real-world case studies and some interesting history lessons.

The book is divided into ten chapters. Each chapter feels like a university lecture, in terms of its length and content (theory plus a few illustrative case studies). This is not a book you'd take to the beach; but it's not a textbook, either. The first two chapters introduce a lot of the concepts used in the book, such as contrasting political environmentalism with free market environmentalism, and emphasizing the dynamic nature of both environmental and economic processes. Chapter 3 looks at how property rights evolve over time, with notable attention paid to the history of the American West. I found it to be one of the most interesting parts of this book. The next two chapters take a deeper look at public land management in the United States as it relates to forestry (Chapter 4) and energy projects (Chapter 5). Moving from land to water, chapter 6 discusses water markets (which are an emerging approach to managing both quantity and quality) and chapter 7 discusses fishery policy. The book is not dogmatic, but rather offers incremental suggestions for solutions that involve communities (i.e. rather than insist on privatizing everything, they suggest things like moving towards more local management of public lands, fish & wildlife, etc.)—this is the focus of Chapter 8. Finally, Chapter 9 presents examples of some people and organizations that are making a difference with the toolkit the authors recommend, and Chapter 10 reaches into new territory, such as how their ideas could relate to climate change responses.

Now that I've given an overview of the book's contents, I'll move on to discussing its major themes, some interesting examples, and some thoughts of my own on applications.

One of the themes is that environmental problems are really disputes between people about their preferred use of resources:

All environmental problems emanate from conflicting demands on limited natural resources.
When human demands are small in comparison to the resource base, conflicts between competing users are less prominent. People were not concerned with waste emissions into the atmosphere when clean air was abundant.

This ties into the theme that there is no ideal environmental baseline to get back to, because the environment is not static.

Once we accept that nature is profoundly shaped by and connected to human action, we begin to see environmental problems through a different lens. In this view, environmental problems cannot be thought of as simply the consequence of human violations on the balance of nature. A new generation of ecologists has rejected the notion of a natural harmony in ecosystems[*]. Instead, environmental problems become questions of how to resolve competing human demands on nature's ever changing bounty.

* That is, ecosystems are dynamic and continually changing. They are subject to periodic disturbances and to long-term trends such as coming out of the last ice age 10 – 20 millennia ago, as well as human impacts.

As an aside, FME raises the point that settlers migrating westward in North America thought they were seeing pristine wilderness, but the landscapes they were encountering may have been managed by native people more than they realized (e.g. by setting annual fires). I've read another book that agrees with that point, but I don't know if it is a new scholarly consensus. In any case, I liked this suggestion to have:

"a more nuanced notion of a global, half-wild rambunctious garden, tended by us" (Marris, Rambunction Garden)

The dynamic, ever-changing nature of, well, nature, is set side by side with the dynamic nature of free markets:

For much of the twentieth century, ecologists and economists tended to study the world as if it were an equilibrium system. That is, the models used to understand nature and markets were based on the assumption that each system achieves or exists in balance. Ecologists, for example, historically relied on models that assumed an inherent balance of nature when undisturbed by humans.


Both markets and ecosystems are bottom-up systems that cannot be managed from the top down.


Once we recognize that most knowledge is fragmented and dispersed, then we can understand that, in the words of Thomas Sowell, "systemic coordination among the many supersedes the special wisdom of the few".

This link that is drawn between dynamic environmental processes and dynamic economic processes is an important theme in FME.

Another theme is the comparison between political environmentalism and free-market environmentalism. In the latter, exchanges based on secure property rights can hopefully find win-win compromises to contentious issues:

Markets based on secure property rights provide a decentralized system for enhancing the value of resources. They generate information in the form of prices that give demanders and suppliers objective measures of subjective values.

In contrast,

Political environmentalism is a zero-sum game that creates negative-sum conflicts as competing parties attempt to get what they want at the expense of others. Regulations and permits grant access to natural resources to some at the expense of those who are excluded. Addressing external costs through the political process pits interest groups against one another, leaving little room for cooperation. ... Benefits are concentrated on the group with the political clout.

I'd sum up another theme by the rancher proverb that the authors cite: "If it pays, it stays". Especially as it relates to conserving wildlife, they contend that conservation works a lot better when something is seen as a boon rather than a burden to nearby human communities.

The final theme of FME that I'll mention is its examination of the origin of novel property rights and prerequisites for markets. In order to have a market, it needs to be feasible to delineate property, define rights to it, and enforce those rights. This is something that has an evolutionary aspect, as new technology may make delineation possible where it wasn't before, or rising demand on an environmental resource may make defining and enforcing rights worthwhile where it wasn't before. This theme is illustrated most memorably in the history of the American West, where rights to grazing land went through several iterations before the invention of barbed wire made fencing (and thus clear delineation) feasible:

The problems on the American frontier centered on who owned the land, the cattle, and the water. Out of these problems frontier entrepreneurs developed new [i.e. not an existing part of common law] property institutions to define and enforce rights that improved resource allocation. Those institutions were not perfect, and the demonstrate very well the evolutionary nature of property rights and the potential for innovative property rights solutions on the American frontier as well as in the developing world today.

The history of the American frontier is related to conditions in the developing world today, where so much property is undocumented:

For the developing world, conditions are not unlike the frontier of the American West. Hernando de Soto estimated that "the total value of the real estate held but not legally owned by the poor of the Third World and former communist nations is at least $9.3 trillion".
But, lacking legal land title, the productive potential of land in the developing world is locked up. The importance of property rights to business activity and entrepreneurship is demonstrated by the fact that 70 percent of new businesses in the United States are started with loans secured with mortgages. In contrast, such collateral is unavailable in the developing world because 80 percent of the owners lack formal or up-to-date titles.

Moving into applications, I'll mention some examples (and other interesting things that I learned) from FME then discuss an area where these ideas might be relevant for New Brunswick.

  • Fire suppression practices on public land in the American West are an example of trying to keep nature static. Ironically, in the case of Yosemite park, fire suppression and a ban on grazing allowed trees to grow up and block some of the views that really impressed early visitors.
  • The Freshwater Trust in Oregon uses voluntary transactions with farmers (who have water rights) to increase in-stream flows and thus improve fish habitat.
  • FME discusses markets for water quantity (e.g. in Australia and Chile) and pollution reduction/quality improvements.
  • Individual fishing quotas are presented as an advantageous way to manage fisheries.
  • Chapter 8 discusses community-based management of wildlife and other natural resources in detail. Elinor Ostrom, a researcher who has written a lot on common-pool resources, is cited frequently. I think community management is a good instance of subsidiarity in action. One example given is the venerable water court in Valencia, Spain. Another is CAMPFIRE (communal areas management programme for indigenous resources) in Zimbabwe.
  • There were some interesting statistics presented on elephant (and other animal) populations in Africa. These populations have actually done better in countries that allow hunting (with quotas distributed to communities to hunt or sell to safari outfitters), such as Botswana and Zimbabwe, than in countries where hunting them is banned, such as Kenya. Theories about why this is the case include local communities being more willing to live alongside large animals (that can damage crops and property and kill livestock) when they can also receive some revenue, and the fact that poachers are more likely to be deterred or caught when there are legitimate hunters out in the field too.
  • Chapter 9 had some examples of "enviropreneurs":
  • Tree Ring Pens makes gorgeous pens and watches, and works to improve the condition and resilience of old-growth forests
  • Beartooth Capital buys old ranch land, restores it, and then sells it.
  • BirdReturns "rents" water from farmers in California, paying them to flood fields at strategic times to create "pop-up wetlands" for migratory birds.

Looking closer to home, I think some of the ideas presented in FME are worth considering when it comes to Crown Land in New Brunswick. Crown Land covers a lot of the area of the province (just shy of 50%), but from looking at recent provincial budgets I can't see that the province gets a lot of value from it—at least in a direct or quantifiable way. The Department of Natural Resources had revenue of $77.1 million but expenses of $91.7 million in the most recent budget statement (ordinary account numbers; see pages 7 and 8); the Energy and Mines Department also had more expenses than revenue. Crown Land management is also subject to political environmentalism and the divisive debates that go with the winner-take-all approach.

In FME, the authors suggest a number of ways to improve public land management: user fees and revenue retention, public private partnerships (e.g. concessions to manage recreation areas), land trusts (blocks of land set aside to be managed to generate revenue for a specific purpose, e.g. schools), and lands that are managed by First Nations bands or local communities. Many of these elements are already present in NB, but could perhaps be expanded. Community forests are being piloted next door in Nova Scotia. Increased private ownership rates could also be considered. If some Crown Land was sold off, prospective owners—woodlot owners large and small, conservation groups (the NB Nature Trust and Nature Conservancy of Canada are already active in owning and managing wild areas), hunters and anglers, etc.—would have to pay market rates (instead of lease rates determined by the department) in competition with other prospective owners/users.

All in all, I found this book to offer a unique perspective on some environmental issues. Its strength is the number and variety of examples offered (only some of which I've had space to mention in this post). If you're interested in reading more, a sample chapter is available here.