Continuing Conversation... Terry Anderson on the Environment and Property Rights

EconTalk Extra
by Amy Willis
Terry Anderson on the Environm... Daphne Koller on Education, Co...

This week Roberts discussed free-market environmentalism with Terry Anderson, of the Property and Environment Research Center and the Hoover Institution.

FME's unique combination of free-market principles and environmental stewardship may not be as radical as when it was introduced, yet still is not mainstream. Let us know your thoughts on its potential. We hope you find the prompts below useful. As always, we love to hear from you!

Check Your Knowledge:

1. Why does Anderson assert that we should expunge the term "externality" from our vocabulary? To what extent do you agree with him?

Going Deeper:

2. Anderson says that his approach is inspired largely by Ronald Coase's work on social cost. Roberts suggest the approach integrates some, but not all, of Coase. What elements of Coase are not present in Anderson's approach?

3. Anderson uses the example of barbed wire to illustrate the role of technology in defining and enforcing property rights. What role does technology play? What are some other examples (relating to the environment or otherwise) that illustrate this relationship?

4. Both Anderson and Roberts note that free-market environmentalism does not argue there is no role for government. So what is the proper role for government from the FME perspective? Does FME allow for too much or too little government?

Extra Credit:

5. In discussing national parks, Roberts admits that he thinks that the government running them isn't all that bad, though there may be be better alternatives, such as running Yellowstone as a non-profit. Revisit this episode with charity activist Dan Pallotta, who is highly critical of the "culture" of the non-profit world. From Pallotta's perspective, what would be the advantages and disadvantages of running the park as non-profit (as compared to being state-run)? What sort of "rule book," in Pallotta's parlance, should environmental goods be governed by?

Comments and Sharing

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COMMENTS (6 to date)
Jeff Dean writes:

This was an interesting discussion but I was disappointed that you didn't get more into the question of property rights should be.

I was driving through California recently and noticed all the signs saying that the State needed to resolve the water rights issue. It turns out there are about 4,000 California companies, farms and others who are allowed to use free water, while other farmers are bone dry. These "senior rights holders" have this privilege dating back to claims made more than a century ago when water was plentiful.

If senior rights holders get the right to this water (essentially because "they were here first"), they can sell it to others. But they get an unearned income or economic rent out of that privilege while others have to pay for the water and their costs are driven up. The senior rights holders become idle landlords who get rich not because they work but because of their privilege. It's a landed aristocracy all over again.

I agree that pricing is a good idea, but what about the unearned income? Instead, people should have to pay a rent for property rights to nature like water. Licenses/rights/privileges to these should be required to pay a rent to the government so that it doesn't unfairly advantage existing firms over new entrants.

It gets to the question of "who owns the earth"? Land is a free gift of nature and was not created by man, so I would argue that we should all own it equally and collect a rent for it from those who use it. The revenue could be used to reduce taxes that damage the economy: taxes on labour, commerce and industry which hurt marginal productivity.

Russ, you should have a Georgist economist on your podcast to explore these ideas. Mason Gaffney is an expert in California water rights. Nic Tideman, Fred Foldvary or Michael Hudson would also be good choices.

Jeff Dean

David Hunter writes:

Interesting discussion, as always. But I was surprised when, right near the end, Terry Anderson seemed to complain that necessary logging near his home was being delayed by lawsuits filed by environmentalists. I would have thought he'd be pleased at this. His proposal for a property rights based approach to environmental management requires that people, governments and corporations sue each other. That's how the system would be designed to work. So there would surely be far more litigation under his system than we have now. Indeed, an entire new branch of trial law would develop, focused on environmental litigation. And there'd be class action environmental suits. Not the sort of thing one would have guessed a conservative would support. Would have been interesting for you, Russ, to have asked him about this.


David Hunter

Christian Schnaas writes:

The way we interface with the environment is too complex to adopt a standard position on how we should solve problems. So, I tend to disagree with an approach that relies on market solutions for all situations.

I think the example of barbed wire as a solution to the property rights problem is very eloquent, but I must admit that the thought of introducing technology in many realms makes me think of market disruptions that to say the least, would be difficult to manage. For example, if I were able to determine the levels and origin of contaminants from the activities of my neighbors and make a claim on them, of course I would be tempted to at least sue the worst offenders. This would create a market for the technologies to extract claims from neighbors, would elevate the cost of doing anything and would crowd the justice system even more.

In his book "Collapse" Jared Diamond explores many examples, some successful and some disastrous on how different communities have dealt with scarcity, competition and innovation that either led them to survive and flourish or to collapse. The problem of what to do with trees in forests that are in danger of burning up is very interesting. Forests have been burning up for millennia but the fires are a threat only recently as a result of people living in the forests. Apparently there is no coherence within the ideas living in forests, living trees untouched and leaving the trees to burn. A combination of entrepreneurship, regulation and technology might strike the best balance.

Adam writes:

Re Jeff Dean's question, "what about the unearned income"?

There is no unearned income to owners of the water right. Each of the owners paid something to get the water right, mostly by buying or renting the land to which the rights are granted. As such, rights to water are just a form of capital. Their value may rise or fall over time, just like those of other types of capital assets.

Mark Maguire writes:

I enjoyed the whole podcast. I want to make an observation on just one aspect, near the end. You had a conversation about forest fires. It led to the discussion of management of national forests. My comment is focused more on local government land management.

This past Labor Day weekend, I was in R.I., and had a little free time for exploration. I had an unexpected demonstration of coastal land use, government vs. free market.

I drove to southern R.I., into a beautiful area, Watch Hill. Very nice, but too crowded on Labor Day weekend. I headed north, along the coastline. It did not take long before I ran into rampant seaside honky-tonk. Waterslides, bars, blaring music, $30/day parking. Miles of it. Then, up ahead, a clearing, and more clearing. It was Misquamicut State Beach, one of many R.I. state beaches, and it was a relief.

In these cases, I am grateful government gets involved and saves places like this from being overrun with consumerism. I immediately thought of the national forests, and am thankful for the level of preservation we see. I like free markets and property rights, but it appears governments must step in sometimes.

Christopher writes:

Re Adam and Jeff Dean.

Jeff's question was the same question I had. How does one acquire and retain rights to natural resources. People do not add value to rain falling from the sky or water coming up from the ground. If someone is a late comer (i.e. born or moved in later) to the market, they are automatically excluded from the natural resources unless they pay a rent.
Maybe the Israelites had it correct; in the year or Jubliee, the natural resources (land) was redistributed while wealth (houses and flocks) was still retained.

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