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Free Market Environmentalism


Published: January 9, 2019

Most environmental problems result from the tragedy of the commons. The typical response to environmental issues is to turn to government regulation. In contrast, free market environmentalism embraces the lessons of markets by defining and enforcing property rights to prevent overconsumption or other negative outcomes. Through free market environmentalism, the government and markets can work together to create effective solutions for sustainability. 

Discussion Questions

  1. Can government and markets work together to create effective solutions for sustainability?
  2. How does the tragedy of the commons affect the environment?

Additional Resources

  • For more, read Free Market Environmentalism for the Next Generation, by Terry Anderson and Donald Leal, available here
  • Terry Anderson explains the reasoning behind the production of his book, Free Market Environmentalism for The Next Generation, available here.
  • Watch "A Better Way to Preserve the Environment" by Terry Anderson. Available here
  • In "Greener than Thou: Are You Really an Environmentalist?" by Terry Anderson and Laura Huggins, the authors make a powerful argument for free market environmentalism as they break down liberal and conservative stereotypes of what it means to be an environmentalist. Available here.
View Transcript

We are continually bombarded with images of floating plastic islands in the ocean, clouds of air pollution in China, and birds coated with oil spilled by tankers.

Headlines warn of rising sea levels caused by global warming, of massive wildlife extinctions resulting from habitat losses, and of severe wildfires due to droughts.

Of course, we should do something about such environmental problems. But before we can, we need to understand why environmental problems occur.

Simply put, virtually all environmental problems result from the tragedy of the commons. The tragedy is that unlimited access to the use of resources—forests, rivers, or air—have an effect on others.

Deforestation in the Amazon, for example, occurs because there are no limits on who can cut.

If I don’t cut the tree, you will.

Waste dumped in the river or spewed into the air reduces water and air quality for everyone.

The tragedy is no one has an incentive to take care of resources they don’t own.

The typical response to environmental problems is government regulations.

For example, in the U.S. we have laws like the Endangered Species Act or the Clean Water and Clean Air Acts, and agencies such as the Forest Service or EPA.

These environmental regulations and regulators have worked in some cases, but they can be contentious and costly.

There is another way to achieve our environmental goals, one that I call “free market environmentalism” because it uses market incentives to promote environmental stewardship.

Owners of trees don’t overharvest; owners of land don’t overgraze.

For example, timber companies such as Weyerhaeuser or Georgia Pacific own thousands of acres of forest land, which they manage sustainably.

This helps explain why there are more trees in the U.S. today than there were 100 years ago.

A growing demand for water to be left instream for fish and wildlife illustrates the contrast between the regulatory approach and free market environmentalism.

To provide water for endangered fish, environmentalists have filed lawsuits trying to require farmers to stop irrigating.

Not surprisingly, farmers, who have rights to divert water for irrigation resist, leading to costly drawn out legal battles and leaving fish high and dry.

Water markets provide an alternative that replaces conflict with cooperation and conservation.

Oregon environmental groups that have been willing to “buy that fish a drink” give farmers a positive incentive to reduce irrigation.

In California, the Nature Conservancy uses a crowd sourcing app where bird watchers locate migratory water birds.

The Nature Conservancy then contracts with rice farmers to flood their fields and create habitat.

Villages in Africa offer another example of how markets can help.

Where elephants trample crops, sometimes kill people in their path, and sport ivory worth more, pound-for-pound, than gold, poaching is a problem.

A program that which allows villagers to manage elephant herds and profit from hunting and ecotourism, gives villagers a stake protecting elephants.

They use hunting as a tool for sustainable management. Profits from hunting and ecotourism are invested in schools, hospitals, and water wells.

Free market environmentalism does not mean that government has no role.

Indeed, by helping to define and enforce property rights, the government encourages markets and makes the environment an asset to be conserved.

State governments and courts are necessary to define and enforce water rights so that they can be bought and sold. Game wardens guard against poaching and enforce hunting quotas.

Pragmatic environmentalists are using markets to achieve their goals more effectively and less acrimoniously.

As the Environmental Defense Fund puts it, they are “finding the ways that work.”