Book selection from specifications

Economics and the Environment

Although Terry L. Anderson and Donald R. Leal published their book, Free Market Environmentalism (Revised Edition) in 2001, nearly nine years ago, a great deal of the material is aptly suited and relevant in 2009. Their chapters are extremely well thought out and for the most part balanced between the stewardship of the natural world and the financially viable realities of the American economic system -- and how those two concepts clash or produce cooperation. There are a full 28 pages of footnote references in the back of the book, with very thorough reference information presented. The authors portray real issues and offer seemingly workable solutions, albeit their generalizations are sometimes too sweeping. For example, just about "everyone accepts" that managers in the private sector "would dump production wastes into a nearby stream if they did not have to pay for the costs of their actions" (Anderson, et al., p. 11).

An informed and alert person recognizes that above-mentioned passage as unfair because -- while there are no percentages available -- no doubt there are today many managers who would be environmentally informed and would never give a moment's thought to dumping waste in a stream. However, Anderson quickly presents a further argument on pages 10-11 that "incentives" serve to protect the environment and the business end by guiding "human behavior" in the right direction. In other words, "Good intentions" are certainly not enough when it comes to decisions that impact a policy based on political dynamics. To wit, if a park superintendent sees that setting aside more Grizzly Bear habitat is more valuable then addition camping spaces that is all well and good but if commercial interests in that market have influenced the political control over the park -- which they often do -- the campsites will be built and the bears can find another place to hang out. As Anderson explains (p. 26), in free market environmentalism entrepreneurs will move "to fill profit niches" and the prices will reflect the value placed on both resources and the environment. This is a key to Anderson's book; in other words, when those additional campsites are build in the Grizzly Bear habitat, they will likely cost more because of the value placed on the resources (i.e., proximity to bears) and the environment (just being in the park is worth a certain about of money for visitors).

On the subject of incentives (a constant theme in the book) the authors describe a critically important aspect of free market environmentalism on pages 172-180 ("Purity vs. Pragmatism"). Entrepreneurial pragmatists are giving incentives to private landowners to preserve lands and endangered species; for example, the Nature Conservancy (NC) has been paying farmers in Indiana "to help them purchase equipment needed for low-erosion tillage" and the Environmental Defense Fund (EDF) is paying Texas ranchers "to trap and remove cowbirds that invade the nests of rare songbirds" (Anderson, p. 172). The Nature Conservancy is clearly among the most visible and powerful free market environmental groups; in 2008 NC launched a program to plant a billion trees in the Atlantic Forest, that now contains only 7% of its original forested area. The NC also bought land or made trades that resulted in the preservation of 2,728,993 acres around the world (www.nature.org). Those kinds of actions reflect free market environmentalism at its best.

Anderson's book is rich with examples of how private property owners and conservation groups -- along with government support in some cases -- have collaborated to preserve and protect species and habitat. However, when it comes to oil exploration, cooperation between energy companies, the federal government, and conservation groups is rarely to be found. Even though the development of oil resources offshore brings "increased economic activity, higher incomes, and a higher tax base" (Anderson, p. 79) there is frequently stiff opposition to drilling offshore. That community opposition is often based on the risks to tourism, fishing, and marine life. Despite evidence that oil and gas production fattens a local economy and can be done safely in most cases and not interfere with wildlife -- such as the elk in Michigan's Pigeon River forest that returned once drilling was completed -- cooperation is rare when it comes to oil drilling.

Meanwhile, Dwight R. Lee (writing in The Independent Review, 2001) points to a situation where a powerful environmental group (Audubon Society) has cooperated with an energy company and both have profited. Free market environmentalism has shown the way for profits and preservation at the same time in this case. The Audubon Society (AS) owns the 26,000-acre Rainey Sanctuary in the swamps of Louisiana, and while the group is opposed to oil drilling and gas drilling in 99 out of 100 cases, the AS has "been willing to accommodate the interests of those whose priorities are different" (Lee, p. 219). Those interests include allowing thirty-seven wells to be exploited for oil and gas in the Rainey Sanctuary.

According to Lee, the AS has received royalties of more than $25 million from those 37 wells, and in the meantime the technology used in the oil and gas development has prevented any spills or other despoliation. Do not conclude that the AS has "acted hypocritically by putting crass monetary considerations above its stated concerns" for the protection of the natural world and its wildlife, Lee asserts (p. 219). Lee, Professor of Economics at the University of Georgia, views the AS -- because of its ownership of Rainey Sanctuary -- is part of an "extensive network of market communications and cooperation." This allows the AS to "do a better job of promoting its objectives by helping others promote theirs" (p. 219). "Money talks," Lee reminds readers; and indeed the consumers of the oil and gas from Rainey communicate the value they receive from those resources by paying the price the energy company charges. And those "market prices" for the oil and gas in effect are communicating to the Audubon Society -- owners of the land -- through the money the oil and gas companies are willing to pay to drill on that land.

Buy accepting $25 million from the royalties of the oil and gas the Audubon allows to be exploited from their property, the AS can then "purchase additional sanctuaries" to be preserved for habitat and the wildlife that flourishes in that habitat. However, Lee mentions that this deal was possible because the Audubon has ownership of the Rainey property. When government property is at issue, like ANWR (Alaska Natural Wilderness Reserve), environmental groups vigorously oppose drilling. ANWR is publicly owned so "environmental groups have no incentive to take into account the benefits of drilling" (Lee, p. 221). But Lee insists that if the Audubon Society or NDC or other environmental groups "if they were responsible for both the costs and the benefits of that drilling" (Lee, 221). In other words, if they profited from the sale of leases on oil development territory, conservation groups might soften their opposition.