Today marks the 50th anniversary of the Arctic National Wildlife Refuge (ANWR) and, as has often been the case throughout its history, it has stirred up political conflicts over its use. There are the usual loud claims about what should be done with ANWR. Drilling proponents call for enhanced energy security, environmentalists appeal for ecological integrity, and preservationists have even suggested that it be designated as a national monument. The result is zero-sum political land management--conflict instead of compromise.
One group that is lobbying to prohibit energy development in ANWR is the Audubon Society. Audubon's president David Yarnold released a statement today urging lawmakers "to keep the Refuge safe from oil and gas drilling," which imperils wildlife and contributes to the "significant ecological disruption" already brought on by climate change.
But as Terry Anderson and I write in Greener Than Thou, the Audubon Society has allowed oil companies to operate in a few of their privately owned wildlife sanctuaries. The Paul J. Rainey Preserve, for instance, allowed an oil company to operate thirteen natural gas wells for nearly fifty years. The company had to comply with tough stipulations, including no pumping during the nesting season and special equipment that made less noise. As one Audubon manager said, "when the cranes punched in, the hard hats have to punch out." In exchange, Audubon earned more than $25 million, with which it was able to purchase additional lands.
The Bernard Baker Sanctuary in southern Michigan serves as another example. Audubon operates a well outside the sanctuary and uses a slant drilling technique to drill into the sanctuary's reserves. According to the resident manager, the agreement was so successful that the sanctuary is negotiating with another oil company to build a rig on the other side of the sanctuary.
Why does the Audubon Society behave so differently in the political arena than they do on their private land? The answer is ownership of the resource. With public ownership, there is no incentive to consider the tradeoffs associated with alternative or even complementary uses of ANWR. Environmental groups have no reason to take into account the benefits of drilling, and energy proponents have no drive to consider the environmental costs. In the public domain, conflict instead of cooperation is the norm as both sides stick to oversimplified exaggerations.
On campuses across the country, sustainability is hot. Writing on the National Association of Scholars site, Ashley Thorne reports on her visit to the "sustainability open house" at Princeton. Somewhat bemused, she investigates trash sculptures, trayless eating, personalized beer cups (so you don't throw them away each time you have a beer), and competition with Yale (to reduce carbon dioxide emissions).
In fact, Thorne and her colleague Peter Wood have been writing a lot about sustainability. As she says on the blog post:
I’m wary of how the sustainability movement has positioned itself as higher education’s newraison d’être.
Ethanol is back in the news, but as Politicoreports, there are contradictions within the government on the fuel source's viability:
Energy Secretary Steven Chu on Monday said that the future of transportation fuels shouldn't involve ethanol, the gasoline additive that historically has received billions of dollars in federal subsidies.
"Ethanol is not an ideal transportation fuel," Chu said during an event hosted by the National Press Club.
But while Chu publicly questions ethanol's efficacy, the EPA is ramping up production mandates:
Responding to a congressional mandate, the Environmental Protection Agency will require that 13.95 billion gallons of transportation fuel comes from renewable sources in 2011, or about 8 percent of domestic gasoline and diesel supplies.
Of that, 12.6 billion gallons will come from ethanol. Congress requires that figure to nearly triple (!) to a whopping 36 billion gallons by 2022.
Why such a contradiction? There's a reason this one's filed under "Politics."
By most measures, this appears to be a very good time to be alive. What about trends in the U.S.? Is our modern, industrialized lifestyle killing both us and the environment? Here’s some data.
For all races and both sexes combined, long-term trends in cancer deaths have been declining since the early 1990s. In 2007, U.S. life expectancy was 78 years. (In 1990, life expectancy was 75.4 years.) The global life expectancy for males is 61 years. For females it’s 65. The reasons for this discrepancy are not fully understood. Some attribute the difference to biology; others point out that men are employed in more hazardous occupations. Behavior certainly plays a role, as men generally drive, smoke, and drink more than women.
For women and children the news is also good. In 2007, American infant mortality dropped to 6.4 deaths per 1,000 live births and has been on a general decline since 1958. The steady decrease is due to improvements in public health, nutrition, and medicine; and a decline in unhealthy behavior, such as smoking.
It looks like life in a modern, industrial society extends your life. But doesn’t our material comfort here depend on exploiting our environment and the environment in the developing world? Paul and Anne Ehrlich, who surely deserve (but will never receive) an award for the most predictions gone bust, confidently and sanctimoniously assert, “Sadly, our nation is also at present the biggest engine of ecological destruction on Earth.”
...the United States remains the world’s environmental leader and is likely to continue as such. Environmental improvement in the United States has been substantial and dramatic almost across the board…The chief drivers of this improvement are economic growth, constantly increasing resource efficiency, innovation in pollution control technology, and the deepening of environmental values among the American public that have...changed behavior and consumer preferences. Government regulation has played a vital role to be sure, but...[w]ere it not for rising affluence and technological innovation, regulation would have much the same effect as King Canute commanding the tides.
Richer societies are healthier, cleaner, and more resilient than poor ones. Without exception, the worst cases of environmental pollution occur in poor countries, especially those lacking democratic institutions.
Paul Schwennesen recently appeared on Fox Business to discuss food safety. Paul offers more comments on the issue below.
We all want safe food. Question is, how do we get it? “There oughta be a law,” seems to be the generally conceived approach, as evidenced by recent passage of the now-famous food safety bill. A tidy and altogether comforting solution: simply slay the beast of dangerous food with the bludgeon of enlightened bureaucracy. But for the food advocates who support this kind of top-down solution, beware. The kind of government meddling that created cheap-at-any-cost is now about to do the same for “safe” food.
But isn’t food safety a pressing concern, a public health problem we can’t afford to fool around with? The problem is, the problem isn’t. Emotional rants that “thousands die every year!” do not help us grapple with the scope or magnitude of this alleged threat. Let’s try some perspective: according to the Centers for Disease Control, the estimated number of deaths caused by food borne illness numbers around five thousand a year. Sounds pretty bad, eh? Time to call in the Salmonella SWAT team? Before you do, consider that the same number of people die by intentionally strangling themselves each year. Or that the same number of people die from Alzheimer’s in California alone each year. Or that four times that number die each year accidentally falling off of things. Moreover, 70% of food borne illnesses result from poor food handling procedures during preparation. Unless you’re also on a crusade to flatten everything or cure Alzheimer’s, I’d think twice about ceding greater authority of our food system to centralized management.
True to form, Congress has blithely offered its professional problem-solving services to rid us of the menace of deadly food. And, true to form, it’s about to embark on another unarmed expedition into the tortuous territory of unintended consequences.
More regulations always have the effect of reducing the number of operators in that sector. It can be dramatic (as in the case of the payday loan industry), or it can be insidious (as in the case of the livestock industry). The food industry is no exception; it’s impossible to envision a wave of enthusiastic newcomers clamoring at the gates to enter the food business now that the FDA has been granted the most sweeping extension of powers in seventy years. Granted, some of the bad actors need to be pushed out of the industry (as in the Peanut Corp. of America, which apparently intentionally distributed salmonella-laced product). Call me a Pollyanna, but I don’t think the bad actors generally represent the food industry. The people who do represent a large part of the industry are the small, local, independent operators who have been squeaking by for decades. This kind of regulatory barrage is exactly the sort of thing to make them call it quits. BSE (mad cow) regulations pushed our predecessor to hang up his hat. The increasing silliness over E-coli testing pushed his predecessor over the brink years ago. Warranted or not, an increasingly difficult regulatory environment will always winnow out the small players, leaving the field more sparse than before.
Of course the demand for food hasn’t gone down, so how does the system accommodate a hungry public? Well, that’s where Cargill, Tyson, Monsanto and the rest of the Big Food set come in. They’re not evil (despite bumper-sticker claims to the contrary) they’re just picking up the slack left when the small guys get pushed out by Big Government. I know, I know, it’s easier to blame their success on high-priced lobbying and a cozy relationship with regulators. But consider this: government regulators can only be manipulated by the lobbying and cozying when their hands are firmly on the wheel of that particular industry.
The unintended consequence in this legislative bid to create safer food is to push more and more production into fewer and fewer hands. As we all know, the more top-heavy a thing gets, the more prone it is to toppling (pick your metaphor: pyramids, the Eiffel tower, icebergs, Michael Dukakis...). As Tom Philpott writes, “the real systematic risk of the food system [is] the exponential expansion of hazard that comes from concentrating huge amounts of production in relatively small spaces.”
So, is there any solution? If we agree that even one death from food borne illness is too many (and it is), then how can we aim to squeeze out that lingering menace without artificially exacerbating the very problem we are trying to solve? How can we do to Lysteria what we did to malaria?
I may be waxing heretical, but might I suggest de-regulation? Contrary to myth, markets are in fact very good at giving us what we want, even if those things are intangibles like clean air or safe food.
Let me give you an example: As a producer of livestock and owner of a small (very small, according to the USDA) packing house, I know about the raft of bureaucratic “protections” between you and the beef I produce. There is little or no incentive for me to create a remarkably safer production system because my processes are effectively in the hands of our state inspector. The incentive among producers is to win the race toward the bottom, where you can most cheaply and easily meet the minimum standard. Imagine for a moment what the food world would look like if we made food safety a competitive advantage. What if I could demonstrate (through third-party quality assurance, a sophisticated testing regime, or something completely unthought-of of) that my beef was quantitatively safer than my competition? I suspect that the maligned self-interest of “money-grubbing capitalists” would be instantly harnessed toward the greater public good. I, for one, would probably behave considerably differently if I were continually striving for the next-higher grade on a “Good Housekeeping Seal of Approval” instead of aiming simply for the “Inspected -- Passed” stamp.
We didn’t regulate malaria out of existence; we simply ensured that millions of empowered individual actors had the information to combat it (that, and some choice applications of DDT). Allowing food processors to compete for customers by marketing their very best possible food handling practices would have a similar effect.
Regulations are good for imposing minimums, but not at creating excellence. Since our food safety “problem” is clearly in the vanishing margins, excellence is what is needed. This can only really be attained when incentives are structured to push our producers (and consumers) to go the extra step to make food as safe as it can possibly be.
Many food advocates rightly criticize government meddling in the food sector in the late 1940s for attempting to create cheap food at tremendous ecological and sociological expense. Let us not condone the same mistake under the aegis of “safe food.”
Paul Schwennesen is a southern Arizona rancher and a PERC Enviropreneur alum. He can be reached at AgrarianLiberty.com. For more from the Schwennesens on this topic, see here, here, and here.
PERC senior fellow Bobby McCormick appeared on Florida's WUSF 89.7 today to discuss the White House's new ban on offshore drilling on the Atlantic coast and eastern Gulf of Mexico. Listen here (McCormick appears around 2:35):
Some economic histories are valuable because they provide insights into events and places previously not fully explored, while others contribute through a well-formulated test of economic propositions. In Commerce by a Frozen Sea, Ann M. Carlos and Frank D. Lewis have given us a marvelous melding of the two. The authors have written a carefully researched and well-organized discussion of the early fur trade in the very northern reaches of North America as well as a fascinating use of basic economic theory. The book extends our understanding of the overall extent of the trade and the interaction between the European traders -- primarily the French and British -- and indigenous tribes. Europe wanted furs, primarily beaver, and the resident tribal groups valued the commodities available from the more economically-developed countries.
When Adam Smith published his Wealth of Nations in 1776, he devoted a bit more than a page to the Hudson Bay Company, which was over a hundred years old at that point, having been created by royal charter in 1670. Smith places his discussion of the Company in his section discussing the costs and benefits of joint stock companies, and thinks the Hudson Bay Company probably had a reasonable level of profits, despite some of the principal-agent problems inherent in such organization.
Smith could have made the Company and its relations with the Native Americans in the region around Hudson Bay a prime example of one of his basic assumptions about human nature, “the propensity to truck, barter, and exchange one thing for another.” He also argued that the division of labor is limited by the extent of the market and he would have found in the activities of the Hudson Bay company a surprisingly robust case study of entrepreneurial efforts to further extend the market and hence the division of labor.
Commerce by a Frozen Sea is, at its core, an account of the gains from trade when two very different cultures with very different resources and productive abilities come into contact. And that contact itself was not exogenous, but driven by farsighted individuals who were able to organize trade across thousands of miles in the most difficult of circumstances. The Hudson Bay was frozen for most of the year, so the outposts or “factories” along the edges of the Bay depended upon the yearly vessel that would bring rations for the Europeans stationed at the factory as well as trade goods. These goods were often ordered specifically by the Indians the year before. The ship would then load the furs that had accumulated at the trading post for the return trip to Europe.
Carlos and Lewis provide useful insights into several issues surrounding eighteenth-century fur trading. First, the Indians were careful traders and industrious harvesters of furs and were very sensitive to price fluctuations, both of the goods they were selling and the commodities (needles, guns, axes, textiles) that they wanted to receive. There is no evidence that the natives were an indolent lot, trading to a point of satiation, and then ignoring more opportunities for exchange. Instead the trade was between two relatively equal groups and the Indians were careful shoppers who knew what they wanted and what the relative prices were at French as compared to British trading posts.
Second, alcohol played little role in the trading patterns. Some natives traded for alcohol, but their overall consumption was quite modest and the Hudson Bay Company did not try to use alcohol as a lubricant for trade. In fact, The Company acted as a firm that cared a great deal about long-term relations and thought that the use of alcohol during trading created suspicion and made future trades less likely.
Third, there was little violence in the trading relations. The Hudson Bay outposts were far apart and had only 20 to 30 men at them. Hence, if the Native Americans would have wanted to overwhelm a post and plunder the store of tradable commodities they easily could have done so. They, like the European traders, however, saw the gains from a long-term relationship and did not want to jeopardize the possibility of future trades.
Fourth, the English clearly understood gains from specialization, and believed that the Native Americans could harvest beaver and other furs much more cheaply than European trappers. Hence, the trading posts were just that, a place where two cultures could interact to provide substantial gains for both groups.
Finally, there was a general understanding of the problem of over-exploitation of an open access resource, and where the British has a monopoly on trade they were careful to discourage over-trapping. In regions where there was an interface with French traders, and when a single tribe did not have complete control of an area, over-exploitation did occur. Also, some of the cultural norms of the tribes that allowed harvesting for survival meant that it was difficult to establish and enforce well-defined property rights to fur-bearing animals, particularly beaver.
Carlos and Lewis also provide interesting insights into long-term growth issues. They call the eighteenth century “the golden age” for the tribes in northern regions. Their per capita income compared favorably to working class British. That was because they controlled a valuable resource, primarily beaver pelts that were valued in Europe for hats. Once that resource was exploited and most of the gains from trade had been realized, there was little basis for ongoing economic growth, hence over the long-run the tribal communities did not experience the increases in per capita income that occurred in Western Europe and the parts of North American with permanent European settlers.
This is a delightful book to read. It is fascinating in terms of its insights into the trading culture of a particular place and time and it also provides useful correctives to many misconceptions about various aspects of that trading.
At the end of the 19th century, historians declared that the American frontier had closed. The Homestead Act had caused population density in the West to exceed two people per square mile—the metric the census used to gauge frontier status. Writing in 1893, historian Frederick Jackson Turner regretted the impact this would have on the character of the American individual. The frontier, he claimed, created freedom by “breaking the bonds of custom, offering new experiences, [and] calling out new institutions and activities.” According to Turner, with the closing of the frontier went the American propensity to forge new ideas, institutions, and solutions in the face of new environments.
Now, more than a hundred years later, the Great Plains are experiencing Manifest Destiny in reverse— people are leaving in droves. Rural counties have lost 20 percent of their population since 1980, continuing a steady downward trend that dates back to the 1930s. The young are leading the exodus, seeking better opportunities elsewhere, and the median age in some rural counties is pushing 60. This situation in the Great Plains is widely portrayed as dire. The Atlantic described a “slow death in the Great Plains,” and the New York Times spoke of “dying towns” and futures “mired in poverty.”
Without a doubt, the plains are undergoing a period of economic and demographic change—agriculture provides only half as much employment and income to the region as it did in 1969—but where some see the death of a traditional way of life, others see a landscape full of new opportunities. Land values are rising and nonlocals are buying up property for investment or recreational purposes. Entrepreneurs are creating new enterprises by capitalizing on ecotourism and the preservation of environmental amenities, thus transforming the region’s traditional agriculture-rangeland paradigm into a new nature-based economy.
Hidden in this dynamic process of change is an irony: population density outside of metropolitan areas in the Great Plains has fallen to 1.5 people per square mile—well below frontier density. The frontier that Turner saw as the engine for new institutions and innovations has returned. What’s emerging is a new type of region—one that is led by entrepreneurs discovering innovative ways of combining traditional land management with new opportunities on the frontier.
Last week, PERC was featured on the Fox Business Channel's Stossel program for a Thanksgiving special giving thanks to property rights. Executive director Terry Anderson joined Manny Jules, former chief of the Kamloops Indian Band, to discuss how property ownership benefits Native Americans.
American Indian tribes are the single largest land holders in the United States; in aggregate nearly 100 million acres—an area just smaller than California. And much of these lands are rich in natural resources. Along with timber, grazing, and crop lands, other resources include oil, coal, and uranium.
One might think such assets would equal prosperity. Not so for the majority of American Indians. The same variables important to economic prosperity in developing countries are important on Indian reservations. Without institutions that reduce the temptation for government to engage in transfer activities and without private property creating a reward for productivity, Terry Anderson says, “Indian economies are likely to remain enclaves of poverty in a sea of prosperity."
The impact of insecure property rights can be seen on almost any reservation. Some families of the Pine Ridge Indian Reservation in South Dakota, for example, are still living with no electricity, telephone, running water, or sewer. On this reservation, the eighth largest, unemployment hovers around 80 percent and 49 percent live below the federal poverty level. The life expectancies are in the high 40s for males and the low 50s for females.
On the bright side, starting with The Self Determination Act and followed by a series of compacts, some tribes have taken a lead in assuming management responsibility for their reservation. The Confederated Salish and Kootenai on the Flathead Reservation (Stossel showed an aerial image of this reservation) have been successful at starting small businesses and at managing their timber resources (see PERC's "Two Forests Under the Big Sky"). The White Mountain Apache operate a sustainable logging operation and a lucrative elk hunting camp, all without Bureau of Indian Affairs control. In both of these cases individuals are rewarded for their initiative and tribal governments refrain from counterproductive redistribution. This direction offers a new path for reservations still caught in a collectivist trap.
A new NBER working paper from Dongwoo Yoo and Richard H. Steckel reminds us of the importance of institutions that protect property rights (ungated version here). From the abstract:
Several studies link modern economic performance to institutions transplanted by European colonizers and here we extend this line of research to Asia. Japan imposed its system of well-defined property rights in land on some of its Asian colonies, including Korea, Taiwan and Palau. In 1939 Japan began to survey and register private land in its island colonies, an effort that was completed in Palau but interrupted elsewhere by World War II. Within Micronesia robust economic development followed only in Palau where individual property rights were well defined. Second, we show that well-defined property rights in Korea and Taiwan secured land taxation and enabled farmers to obtain bank loans for capital improvements, principally irrigation systems. Our analytical model predicts that high costs of creating an ownership updating system and a citizen identity system discourage a short-sighted government from implementing these crucial components, the absence of which gradually makes land registration obsolete. Third, considering all of Japan’s colonies, we use the presence or absence of a land survey as an instrument to identify the causal impact of new institutions. Our estimates show that property-defining institutions were important for economic development, results that are confirmed when using a similar approach with British Colonies in Asia.
Founded 30 years ago in Bozeman, Montana, PERC—the Property and Environment Research Center—is the nation’s oldest and largest institute dedicated to improving environmental quality through property rights and markets.
The goal of PERC’s programs is to fully realize the vision of establishing “PERC University,” where scholars, students, policy makers, and others convene to expand the applications of free market environmentalism.
PERC's fellowships share a common goal of exposing new scholars, students, journalists, and policy makers to free market environmentalism, as well as enable scholars already familiar with FME to explore new applications.