THE FREE-MARKET ENVIRONMENTALIST

Environmental Quality/Economic Prosperity - An Achievable Ideal

Volume 1, Number 1

An Introduction

I thought that, perhaps, some personal background would be in order in
this first issue.  Following graduation from the University of
California at Davis in 1979, I was employed as a geologist in an
environmental consulting form.  My career began with the water resources
investigations associated with the Air Force's proposed mobile basing
of the MX missile.  In 1981, Reagan decided to use the existing,
hardened silos rather than mobile basing.  I hope national security was
served because my job certainty certainly wasn't.

I took my walking papers and enrolled in graduate school.  After several
years of graduate studies, I reentered the workplace and began focusing
on ground-water contamination issues.  This entailed interesting
problems, such as oil slicks floating on ground water, surface pond
leakage into subsurface soils, and contaminatiot migration in low-
permeability ground-water aquifers.

Eventually, I realized that our services were being rendered to "the
environment" rather than to human beings.  This is the crux of
environmentalism ("The Toxicity of Environmentalism") George Reisman
has summarized as follows: "The environment is considered to be a
value in and of itself, apart from its relation to humab being."
human being." FME is dedicated to providing an alternative to the
environmental ethic by upholding the principle that the environment
should serve human beings.

Owning the Air: A Market Alternative to the Clean Air Act

The value of free markets is widely recognized as their ability to
produce those goods and services for which property rights are easily
stipulated.  Air has generally not been viewed as being amenable to the
application of property rights.  This article, an extension of the air
rights example in FME December 1990, will demonstrate how property
rights apply to air.

First, let's review the present method of mandating standards.  In late
1990, the Clean Air Act was amended.  Amond other things, the revised
Act mandates reductions in volatile organic compounds (VOCs) from
tailpipe exhaust.  The mandate is based on the assertion that VOCs
cause the formation of ozone, one of the principal components of smog.
The EPA has been striving for years to reduce VOC emissions from
automobiles.  In fact, from 1974 to 1988, VOCs were reduced by more
than 40 percent in American urban areas.  However, the average level
of ozone INCREASED slightly during that time.

The EPA has estimated that controls on nitrogen oxide and hydrocarbon
emissions will add $100 to the price of new automobiles.  However, a
Brookings Institute study has shown that regulations that raise car
costs slow the turnover of cars, leaving more old cars on the road.
These cars burn fuel less efficiently and generate higher emissions.
Pre-1981 cars now account for 83 percent of all VOC emissions. (Warren
Brooks, "Will Senate Declare War on Family Autos?" Human Events, Feb 3,
1990; and Rose Gutfeld, "Clean Air Proposal Eventually May Add As Much
as $600 to Car Sticker Prices," Wall Street Journal, Oct 11, 1990.)

Air pollution is a complex issue.  As such, it requires a principled
approach that allows the incorporation of new information while insuring
flexibility to address the problem.  These requirements can be met by a
free market.

What Is Pollution?

The first thing required is a better definition of pollution.  Today,
pollution is commonly considered to consist of industrial wastes that
adversely affect human life.  However, this definition is too narrow.
It needs to be expanded to include non-manmade sources because nature
is also a polluter of the environment.  Edith Efron (The Apocalyptics,
Chapter 4) lists numerous examples of natural pollution including the
following:

* Radioactivity of uranium in the earth's crust

* Sulfur dioxide (SO2) that occurs naturally in air.

* Metals such as arsenic, that are emitted from plants and degassing of
the earth's crust

* Asbestos contained in the earth's soil and rocks.

* Hydrocarbon emissions from forests which exceed man's contribution to
the atmosphere sixfold.

These facts may seem surprising, but are understandable when we realize
that, strictly speaking, man does not create new matter; he merely
reforms it.  Elements from wastes in industrial processes are not
created out of thin air; rather, they are merely different forms or
combinations of elements that already exist.

In this context, the question becomes: If pollution exists in nature
outside of man's influence, how do we define it?  Pollutants can be
defined in relation to their affect on human life.  Elements in the
natural or manmade world that adversely affect human life should be
considered pollutants.

Counter to prevailing perceptions, industry, for the most part, reduces
pollution.  When we modify and control our environment, we can reduce
our exposure to pollutants.  In fact, increasing industrialization has
actually increased our life span.  The average American life span has
increased from 47 in 1900 to 74 years today (Elizabeth Whelan, 1985,
Toxic Terror, p. 255.)

The optimum solution to pollution is usually more technology.  Simply
by living in a house we remove dust and other airborne aerosols from
our immediate environment.  Switching from a 1000-megawatt coal-burning
plant to an equivalent size nuclear plant reduces the plant waste from
3 million tons to 50 tons of waste per year (Dixy Lee Ray, 1990,
Trashing The Planet, p. 134.)

However, let's suppose for some reason, other than government regulatory
restrictions, a switchover to nuclear is not feasible.  Or, alterna-
tively, most of a region's air pollution is from automobiles rather
than heavy industry such as coal-burning power plants.  In this case,
continued population growth and the associated air pollution could
have a net affect on some people.  To prevent this, property rights
need to be established for air.

The Father of Property Rights

John Locke is properly considered the father of property rights.  In the
17th century, he defined two key concepts underlying property ownership:
exclusivity and transferability.  He noted that until there is a demand
for a resource, it belongs to the "commons."  Locke realized that people
who find or develop new resources must develop a method to exclude their
newly claimed property from the commons.  In the case of land exclusiv-
ity, it could be established by fencing the property.  Transferability,
allows owners to trade their property.  This is often facilitated
through the use of legal contracts.

An additional feature of ownership is, of course, liability.  When we
use or sell our property, we must not infringe upon the rights of
others.  For instance, if a piece of machinery malfunctions and injures
someone during normal useage the equipment manufacturer can be held
liable for the injury.

Now we have a framework from which we can apply property rights to air.
To apply exclusivity, we define rights for those aspects of air that
are in demand, such as ozone concentrations, VOCs, etc.  With adequate
foresight, the new owners of an undeveloped area could stipulate air
rights prior to the start of development.  In already developed areas,
one method for initiating a market for air rights is an auction.

Initiating the Market for Air

To initiate the market for property rights a limited government
presence is appropriate.  In a free society, government's function is to
protect individual rights.  If the rate of growth of an area proceeds
ahead of the evolution of the appropriate property rights, some
individuals may have their rights infringed.  Without the stipulation
of rights, people can use a resource without being fully liable for
their actions.  The government, by initiating the auction, in this
limited context, is taking action to prevent rights violations.

For the sake of simplicity, let's assume that a few large companies
purchase the available air rights for the area.  At this juncture, the
the rights (exclusivity) and liability belong to those companies.
These companies can, in turn, sell (transfer) those rights in the form
of effluent fees or permits.  (The same principles apply if a large
number of individuals or companies purchase the air rights.  The
difference is that the legal contractual arrangements will become more
complicated.)

Let's use VOCs as an example.  A company owning rights to VOCs can add
or subtract VOCs so long as there is no harm to others or their prop-
erty.  The owner needs to understand the nature of his property in order
to dispose of it responsibly.  In the case of air, this probably means
conducting some sort of scientific investigation to understand the local
physical and chemical reactions that affect VOC concentrations.  The
owner needs this knowledge to know what levels of VOC effluents are
safe.  Knowing this he can use the resource responsibly and thereby
avoid liability problems.

Using this knowledge, the owner can assess an effluent fee to individu-
als wishing to purchase access to this resource.  If the fee is too
low, effluents in an area may become too high and as a result human
health may be adversely affected.  This would cause the owner incur
liability.  His potential liability, therefore, provides the appropri-
ate motivation for him to maintain a monitoring program and optimize
the fee.

Transferability of the air rights can be accomplished by several
methods.  For mobile sources of VOCs, (automobiles, etc.) access to
the resource (transfer) can be accomplished by a highway toll.  For
stationary sources, businesses can be metered as with utilities.

Market competition would insure that fair fees are charged for the air
rights.  Overcharging would make a company vulnerable to competitive
pressures, such as corporate buyouts, as with any other type of
business.

This approach is flexible and open-ended, as is the case in any free
market.  For example, highway tolls may work well in areas of high
density but not in those of low density.  Or, nature's pollution
constributions in a certain area may far exceed man's and rates could
be lowered accotdingly.  The participants in the air market would
determine how best to buy and sell the rights, as with any other
commodity in the free market.

In other instances, the government would need to intercede to provide
further definition to the property rights of the parties involved.  For
instance, during monitoring, new chemical reactions might be discovered
which indicate one owner's effluent is reacting with another owner's
effluent, thereby necessitating redefinition of their respective air
property liability.

The Moral Case for Air Rights

Decisions pertaining to the disposal of property are complex.  Evalu-
ation of an action's costs vs. benefits require individual judgement.  A
government agency can never know the values and specific context that an
individual considers when making a judgement.  As a result, when the
government mandates controls it must rely on force to uphold them.  But
force is not a valid substitute for individual judgement.  This contra-
diction is the source of the economic inefficiencies associated with
controls.  The Clean Air Act is one more example of this principle
failing to work in practice.

This is why government needs to be restricted to the principle of
preventing the use of force in human relationships.  Market forces can
flourish when property rights are well defined.  In cases where property
rights are infringed an impartial arbiter, i.e., the government, is
needed.

As I indicated in my opening remarks, FME will challenge the idea that
the environment is a value apart from its relation to human well being.
This idea is the fundamental moral principle underlying the environ-
mental movement.  (George Reisman, "The Toxicity of Environmentalism,"
1990, The Jefferson School of Philosophy, Economics, and Psychology.)

An alternate moral outlook was developed by Ayn Rand.  Her ethical
system is founded on the principle that human beings must pursue values
to sustain life.  In her system, nature is a value only in relation to
human life.  In evaluating the facts of nature, man considers the
conditions of his life, and then places a value on nature.  Depending
on his context, he may want to keep it in its natural state, or pave it
over with a four-lane highway.

What do these moral outlooks have to do with air pollution?  Rand's
system gives a theoretical grounding for dealing with uncertainty in air
pollution issues.  Nature does not provide us with automatic knowledge
of how to pursue our values.  We are not programmed like animals.  No
one knows all of the chemical and physical parameters and reactions
that occur in the atmosphere.  The EPA has proven that by the fact that
when VOCs emissions were reduced ozone levels increased.  Yet, it is in
our nature to continue to try to improve the conditions of our lives,
which in turn means the use of industry with its associated air efflu-
ents.

Earlier is was stated that monitoring of urban areas would be necessary
to establish appropriate levels of effluent.  Deciding the level and
extent of monitoring is a complex issue.  Liability gives incentives
for implementing a monitoring program.  Anyone who disposes of their
property, in this case an air effluent, must be responsible for it.
But at a certain point, the costs of monitoring outweigh their benefit.
Does the owner monitor every street, or every other street, or every
1000 feet, etc.?

Eventually the owner must decide on a level of monitoring considering
the relevant, available facts.  If private property rights for air
becomes a possibility, environmentalists will undoubtedly challenge it
by claiming that no one can know for certain what will happen in the
atmosphere.  And they will be right.  This is where Rand's principle of
acting to sustain life, even in the face of uncertainty, must be invok-
ed.  It allows industry and the owners of air effluent rights to act on
the knowledge they have.  They will be innocent until proven guilty.  It
will be up to the environmentalists to prove that certain levels of
effluent are harmful.

Fortunately, there is a historical practice to support this theory:
namely, the +200 years of industrial development that have occurred
since the industrial revolution.  People in technologically advanced
countries live longer at a higher standard of living than nonindustrial-
ized countries.  Pollution reduction is possible by using higher levels
of technology.  These are facts, and when we combine them with Rand's
moral outlook we have a supporting theory.  In other words, property
rights for air is the appropriate approach based on theory and practice.

Summary

To develop a comprehensive case for air rights we need both a theoreti-
cal basis and practial application.  The theory rests on the idea that
values are rooted in life and the environment is a value only in
relation to human life.  This idea frees us to use the environment even
though there is a level of uncertainty involved in our actions.  In
order to prevent one person's actions from infringing on another's,
the principle of property rights must be applied.  Government's
function is to uphold the institution of property rights and arbitrate
disputes over their boundaries.  The use of property rights allows for
a free market for the use of effluents in air.  Air rights are
economically efficient because they are based on property rights which
allow individual choice in the market.

The Case For Privatizing Science

It is a common perception that scientists represent the highest height
of objectivity and rational thought.  Indeed, to be a scientist
requires an unfailing commitment to the principle of objectivity.
Observation to hypothesis, to experimentation, to peer review, and
eventually to publication can be a grueling process for the scientist
in pursuit of new insights into nature.  Unfortunately, changes in 20th
century philosophy have exacted the price of objectivity from scientific
pursuits.

In the early 20th century, the principle that the individual should
serve society was becoming increasingly accepted.  This principle
formed the basis of political systems in Communist Russia and Nazi
Germany.  Although England lagged somewhat behind, in 1945 Winston
Churchill was defeated and the socialist Labor party came into power.
In the U.S. Franklin Roosevelt and his "braintrust" of the 1930s and
1940s promulgated the "New Deal" and its alphabet soup of government
agencies.  Rex Tugwell, one of the leading architects of the "New Deal,"
commented: "We are turning away form the entrusting of crucial decisions
... to individuals who are motivated by private interests." (L. Peikoff,
The Ominous Parallels, 1982, p. 279)

This thinking began creeping into the world of science in the 1930s.  In
1939, J. D. Bernal wrote that science has a "social function."  This
sort of thinking gained momentum with the realization that technologic-
ally advanced weapons could bring an early conclusion to World War II.
Funding of the Manhattan Project brought scientists such as Robert
Oppenheimer into the public eye.

Subsidized Science Begins

In 1963, the Office of Economic Cooperation and Development (OECD)
recommended the development of a national science policy.  OECD
recommended that scientific activities be "coordinated through a
central agency, and that it be integrated with public policy."
Between 1963 and 1973, federal spending on general science more than
doubled from $263 to $726 million (T.D. Long, ed., 1975, Science
Policies of Industrial Nations, chapters 1 and 7.)

Science and its offspring, technology, can indeed fulfill a social
function.  In terms of national defense, the use of science and
technology protects the public.  That so few American causalties have
occurred in the war with Iraq directly relates to the U.S. military's
overwhelming technological superiority.

Science also has a social function in the context of a free market.
When people are free to apply science and technology to their lives,
products and services can be developed more efficiently and at lower
cost, thus enabling more people to purchase these same good and
services.

However, these are not the functions currently envisioned for science.
By the 1960s, "serving society" had come to mean acting in an altruistic
and nonprofit-seeking manner.  For science to serve, it followed that it
should be Federally funded.

In a market situation, consumer demand drives the flow of resources.
However, when a government funds an activity, that activity is, by
definition, removed from market forces.  Individual choice and the
supply and demand of the market no longer function.  The vacuum they
leave is instead filled by a "consensus."

The Scientific Consensus

In a subsidized area of study, government administrators allocate its
funding.  Since the administrators are not experts in these fields they
must rely on "established" experts.  Because they lack even the know-
ledge to pick qualified experts they must rely on reputation.  (Ayn
Rand, "The Establishing of an Establishment," Philosophy Who Needs It,
1982.)

When the large-scale science funding was beginning in the 1960s the
"established" environmental "experts" included Rachel Carson, Paul
Ehrlich, Barry Commoner, and the like.  According to them, the earth
has an "egg-shell delicacy" and the "unity" of life is very fragile.
These are the principles of holistic biology and resource economics
and they form the foundation of thought for the environmental "scientific
consensus." (See FME Dec 1990 for details.)

Other more general philosophic ideas were also incorporated into the
scientific establishment in the 1960s.  For several centuries, Western
philosophers, such as Immanuel Kant, had been promulgating theories
that had undercut man's independent ratioanl faculty.  Kant said the
senses were not valid.  This led to the idea that reality was subjective
rather than objective.  These ideas were being promoted by scientific
philosophers in the early 1960s.

Sir Karl Popper stated that scientific discovery was not a rational
process, but that in validating theories there was objectivity.  Popper's
student, Paul Feyerbend, took thingws even further: "Scientific method
... is but an ornament which makes us forget that a position of anything
goes has in fact been adopted."

In 1962, science philosopher Thomas Kuhn wrote The Structure of
Scientific Revolutions, that has since been widely read in the scientific
community.  Kuhn discussed how scientific paradigms (comprehensive
theories) came to be accepted.  He stated that scientists "...must have
faith that the new paradigm will succeed with the many large problems
that confront it, knowing only that the older paradigm has failed with
a few.  A decision of that kind can only be made on faith." (James
Lennox, 1981, "The Anti-Philosophy of Science," The Objectivist
Forum.)

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