I just returned to Virginia, from Montana, where I had the privilege to serve as one of PERC’s Lone Mountain Fellows and participate in a colloquium co-sponsored by PERC and the Liberty Fund, Inc. entitled Reconciling Ecology and Economics: Processes and Property Rights (August 13-16). Reflecting on the experience, I find my conscious (and probably my unconscious) thoughts whirling around in overdrive trying to assimilate, process, and integrate the many thoughtful papers, articles, and discussions presented and engaged in by the impressive array of scholars and practitioners assembled in Bozeman this past week.
Freely associating memories and impressions, I am swept up in the thoughts and writings, not only of Terry Anderson and his PERC colleagues, but also Daniel Botkin, noted ecologist and author of The Moon and the Nautilus Shell, who was also present; Hayek, Thomas Sowell, Aristotle, Cicero, Smith, Hardin, Coase, Ostrom, and an intellectual tradition focused on such weighty matters as liberty, virtue, property, community, the nature of nature, and humanity’s relationship to it.
A central concern of the discussants was the integration of the insights of Botkin on the dynamic, not chaotic, character of ecology and nature, with the insights of F.A. Hayek on the complexity of the market and the decentralized nature of human knowledge and experience, which is most effectively communicated through the price system. Trust me, this was and will continue to be hard work. There will be a prolific stream of articles, books, essays, and subsequent salons reflecting on these matters in the days, months, and years ahead.
Clearly, the work of PERC over three decades has demonstrated the efficacy of property rights applied to natural resources as a means of both maximizing human liberty while achieving better outcomes for both the resources and the people who depend on them. Most notably, its work on Individual Fishing Quotas (IFQs) or catch shares and the development of water markets in the western United States, under the legal regime of Prior Appropriation (“first in time, first in right”), are examples of cutting-edge work by the sages of Bozeman. Another way of putting it might be as follows: where environmental or natural resources partake of the nature of commodities, there will be many opportunities to actualize the potentiality of free market environmentalism.
Matters become more complicated when speaking, say, of air and water pollution. The structuring of “trading” markets to offer least-cost compliance options to regulated parties is something less than ideal from a free-market environmentalist perspective. But statutory and regulatory goals are the rule rather than the exception, and programs such as water quality trading between wastewater utilities and farmers still provide benefits on both sides of these transactions.
A bit of heat and, hopefully, light was generated in Bozeman over the concept of “externalities” which was put in play or criticized as a concept incompatible with the teachings of Coase, Hayek, and authentic free market environmentalism grounded in property rights, the elimination of transaction costs, and the overcoming of asymmetric information challenges.
I recognize that not all discharges or emissions constitute an externality as such. One must use science and risk assessment (e.g., “the dose makes the poison”) in order to determine if they are in fact “pollution.” There is a dimension of externalities or pollution which is socially constructed, so to speak. But I am not quite ready to abandon the concept of externalities even while recognizing that we can aspire to a better system of negotiated or market-based solutions. Others argue that admitting to the existence of an externality effectively creates new rights, which can be illegitimately asserted against the economic rights of others.
These and many other topics will continue to be the focus of analysis and energetic debate within the vibrant community of economists, historians, philosophers, lawyers, journalists, scientists, conservationists, and environmentalists who are privileged to participate in these stimulating deliberations at PERC.