Ecology and economics are natural allies. Both words derive from the Greek word for “household.” Ecology is the study of our collective household: the Earth. Economics concerns the laws and conventions governing the use of our global home’s resources. It turns out that the best way to manage our natural resources is by using them in the most efficient ways possible, which economics guides us to do.
Efficient resource use is essential for conserving natural resources. Increased efficiency lessens the burden on the environment that maintaining our living standards requires. Yet the organizations that seek a more ecofriendly civilization often ignore economics and advocate for policies that run counter to efficiency, such as subsidizing supposedly “green” technologies or adopting costly and ineffective regulations such as the Corporate Average Fuel Economy standards (CAFE).
“Green” subsidies may seem environmentally friendly, but in reality they allow special interest groups to give themselves advantages over competing energy producers. The massive subsidization of corn ethanol is an excellent example. Corn ethanol has negligible (or even negative) environmental effects, but corn subsidies are a political third rail, because Ohioan corn growers are politically powerful.1 CAFE standards are also far from ideal; the Congressional Budget Office has concluded that requiring higher gas mileage standards is an ineffective and expensive approach to the problem of air pollution2.
Experience demonstrates the negative environmental impact of ignoring economics. The Soviet government had strong environmental regulations, but experienced some of the worst environmental disasters in history. One such case was the Soviet extraction of shoreline gravel from the Black Sea for construction projects between 1920 and 1960. This caused tremendous erosion as “hotels, hospitals, and, of all things, a military sanitarium collapsed into the sea as the shore line gave way.”3 A similar disaster occurred in the Chesapeake Bay, where only 2% of the historically massive oyster stock remains due to over-exploitation. Both cases were rooted in the fact that the natural resources were collectively owned; both fell victim to the tragedy of the commons.
The tragedy of the commons is a common cause of environmental issues. It occurs when many people have access to a limited resource. Each person with access to that natural resource knows that their own individual exploitation makes only a negligible difference in the health of that resource and that a choice not to abuse the resource won’t prevent others from laying it to waste. This eliminates any reason for individuals to conserve the resource; over-exploitation inevitably follows.
Happily, economics has revealed an elegant system that ensures efficient resource use and conservation: private property under the free market. Private property owners have all the right incentives to use their resources in only the most efficient ways. Copper mine owners do not strip all of the ore out of their mines as soon as it is discovered, because doing so would eliminate the future income that the mine could provide (along with value of the mine as a sellable asset). Mine owners, instead, extract and sell less as copper becomes scarcer since they realize that they will be able to sell their copper for higher prices if it becomes scarcer still. That is why, unlike the commonly held Soviet gravel and Chesapeake Bay marine resources, the free market has never run out of copper ore, despite its high usage over the millennia.
The free market encourages people to use resources in the ways conservationists wish them to: to use scarce resources less, to replace them with more abundant or renewable alternatives, to recycle, and to invest in more efficient means of using resources. Those who are best at these things earn profits, which they can convert into responsibility over more resources. This benefits society with both increased production and more efficient resource use.
Unlike private individuals, political actors’ control over resources is not dependent on how efficiently they use them. Politicians garner support and increase their influence by spending more of America’s limited resources in their electoral districts. It generally doesn’t matter to their constituents if the money is used efficiently; they gain the benefits, while the rest of the nation shoulders the burden. Every spending program garners votes for politicians, regardless of its efficacy.
Environmentalists must work with human nature rather than against it. We have forgotten that humans are natural beings, too. It is more productive to harmonize the desires of humans with ecological health rather than fight a fruitless war to conquer human nature in the name of Mother Nature. Individuals who are concerned about the environment should focus on minimizing commonly held property and government interference. We should place our trust in those private citizens who reliably protect their property and its natural resources, and not in politicians, whose only incentive is to exploit them.
– Post by Ian Downie, MPP ‘13
1. Taylor, Jerry. “An Economic Critique of Corn-Ethanol Subsidies.” The Cato Institute, n.d. Web. 17 Feb. 2013. <http://www.cato.org/sites/cato.org/files/articles/jerrytaylor_aneconomiccritiqueofcornethanolsubsidies_2009.pdf>.
2. United States of America. Congressional Budget Office. By Terry Dinan and David Austin. Fuel Economy Standards Versus a Gasoline Tax. 9 Mar. 2004. Web. 15 Mar. 2011. <http://www.ftc.gov/bcp/workshops/energymarkets/background/austin.pdf>.
3. Dilorenzo, Thomas J. “Why Socialism Causes Pollution.”: The Freeman : Foundation for Economic Education. N.p., n.d. Web. 16 Feb. 2013. <http://www.fee.org/the_freeman/detail/why-socialism-causes-pollution>.