Eco-nomics

What Everyone Should Know about Economics and the Environment

Richard L. Stroup

• Publisher: Cato Institute
• Year: 2016
• ISBN:
  9781944424015
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

It's one thing to be passionate about protecting the environment. It's another to be successful at it. This history of environmentalism includes a constant shift from one concern to another, and many laws have been enacted to clean up pollution or preserve natural beauty. However, many of these laws are ineffective and others have had unintended consequences. In this updated edition, Richard Stroup explains how economics applies to environmental decisionmaking, why many of our environmental laws have failed us, and how we might go about doing a better job of protecting nature. Eco-nomics is an indispensable guide to learning how to think about both economics and the environment.

1. Changing Environmentalism

The year was 1984. As he walked through the door of a small schoolhouse in Saint Anthony, Idaho, Hank Fischer, a young environmentalist who worked for a group called Defenders of Wildlife, faced a “sea of cowboy hats.” He had come to the meeting to persuade local ranchers to allow wolves to be brought back to Yellowstone National Park and central Idaho. Wolves had been exterminated in Yellowstone and other parts of the Mountain West decades earlier.

As Fischer started his talk, a sheep rancher he had met earlier stood up and called out, “Hank Fischer, you mean nobody’s kilt you yet?” Fischer recognized that this was an attempt at humor, but it was unnerving.

Fischer quickly learned that ranchers were not going to accept wolves in their region unless he could change their incentives. So he began thinking outside the box. He persuaded donors to Defenders of Wildlife to create a wolf compensation program.

And that made the difference. Once he started compensating ranchers for livestock that had been killed by wolves, “the wolf/livestock conflict was no longer an issue dominating the newspapers,” he wrote later. “It disappeared. I went back to my organization and said, ‘Let’s keep doing this.’”¹

Fischer went on to use compensation to protect grizzly bears as well as wolves. He is now employed by the National Wildlife Federation and works with ranchers to retire grazing land in the Yellowstone region so that more wildlife can thrive.

Fischer is an unusual environmentalist because he recognizes that people are part of nature and that their views and incentives matter. He didn’t know it at the time, but he was looking at wildlife introduction as an economist would.

This book is about applying economics to help us understand and solve environmental issues. But it’s important to understand just what environmentalism is, because it is a constantly changing landscape. That is the purpose of this chapter.

Fifty years before Hank Fischer walked through the Idaho schoolhouse door, Rosalie Barrow Edge was making people uncomfortable—and this time they were environmentalists, not ranchers. An affluent divorced matron who lived in New York in the early and mid-20th century, Rosalie Edge was an activist for women’s suffrage in her 30s and an activist for the environment in her 50s.²

Living across town from New York’s magnificent Central Park, she rediscovered a childhood love of bird watching. She began walking through the park, carrying a notebook, and listening and looking for birds. She was entranced. She enlisted the curiosity of her 12-year-old son, and they began watching birds together.

Inevitably, Edge joined the National Association of Audubon Societies, the leading society for protecting birds. But she soon became a thorn in its side.

The association of Audubon societies had been formed in 1887 to bring together bird enthusiasts who had organized local Audubon societies. Its chief goal was to reverse the loss of beautiful creatures like herons and egrets, whose plumes were being used in women’s hats. Indeed, one of the societies’ activities was to campaign against the purchase of feathers for women’s hats and clothing.

But the Audubon Society didn’t want to protect all birds.

Edge’s problem with the Audubon Society started when she came across an inflammatory pamphlet, “Crisis in Conservation.” It castigated unnamed “bird protection organizations” for failing to oppose bounties (such as Alaska’s bounty on the bald eagle, the national bird) and actually undermining the goal of bird protection. (The organizations were unnamed, but there was no doubt that this pamphlet was directed at Audubon.) Edge learned that the association had entered into an agreement with gun manufacturers: the society could save all the birds it wanted as long as it didn’t oppose sport hunting.

So Edge started a campaign against bird hunting. She became unpopular with the wealthy leaders of the Audubon association. She was even chastised by Edith Roosevelt, the widow of Theodore Roosevelt. In a letter signed by other dignitaries as well, Mrs. Roosevelt deplored the “small group of people” in the association who were undermining its leadership. But Edge had secret allies who cheered her on privately even though they were unwilling to take a public stand.

Although Edge didn’t win all her fights with Audubon, she did succeed in protecting birds of prey. Her most acclaimed achievement was the creation of the Hawk Mountain Sanctuary. Disturbed that hunters gathered at Hawk Mountain in eastern Pennsylvania to slaughter hawks by the thousands, she decided to lease the mountain and keep hunters out. The private preserve, founded in 1934, still exists today and is known for its raptor research.

Like Hank Fischer, Rosalie Edge was an environmental innovator who epitomized the constantly changing view of our environment and how to protect it.

Indeed, differences—and sometimes conflicts—over how to protect the environment go back at least to the late 19th century. To John Muir, an early American naturalist and geologist, the dramatic landscape of the California Sierras was sacred. As Robert H. Nelson has written about Muir, “Of the Sierra wilderness, Muir declared that ‘everything in it seems equally divine—one smooth, pure, wild glow of Heaven’s love.’”³ Muir founded the Sierra Club and spent much of his later life promoting the idea of national parks so that those landscapes could remain pristine.

At about the same time, Gifford Pinchot, an affluent young Yale graduate and forester, was developing a different concept of environmental protection. Late in the 19th century, many people had become alarmed about a “timber famine.” So many trees had been cut down across America, especially wide swaths of forest in the northern Midwest states of Wisconsin and Michigan, that some thought forests would disappear. Pinchot was worried, too. He wanted the government to protect the trees—while still selling them commercially. It did. Pinchot became the first director of the U.S. Forest Service.

The split between environmental organizations that promoted useful “conservation” (as Pinchot did) and those that wanted pristine “preservation” (as Muir did) continues today. It illustrates that there is no single “environmentalist” position on many matters.

Environmentalists were active during much of the 20th century, but the modern environmental movement—something of a mass movement—took hold in the 1960s.

Some claim that it started with the opposition that developed over the Storm King hydropower project in New York State. That project, proposed in 1963 by a private power company, Con Edison, would have pumped water from the Hudson River to generate energy and distribute it throughout the region. The opponents argued that the project, with its pipes, reservoir, and transmission lines, would violate the natural beauty of the Hudson Valley and Storm King Mountain. Ultimately, they prevailed. The case set important legal precedents and led to the first modern environmental law, the National Environmental Policy Act, signed by President Richard Nixon on January 1, 1970.

Others, however, give more credit to Rachel Carson, whose 1962 book Silent Spring recorded the extensive use of the chemical DDT to wipe out mosquitoes and other insects. She argued that DDT had led to the obliteration of birds, especially peregrine falcons, by thinning their eggshells. Although the issue was debated for years—and to some extent still is—the Environmental Protection Agency (EPA) banned most uses of DDT in 1972. The decision by EPA administrator William Ruckelshaus showed the power of the federal government in the environmental arena and launched the Environmental Protection Agency as a major government force.

Meanwhile, young people who had cut their teeth protesting against nuclear weapons and the Vietnam War had turned their attention to air and water pollution.

Such pollution had occurred frequently in the past, but court suits and local regulation had helped to constrain it. (So had new technology: in spite of its emission of pollutants, the automobile had improved the urban environment because horse manure no longer muddied the streets or spread disease.) But in the 1960s, the new wealth of the country, with its affluent college-educated young people eager to make everything right, led to massive efforts, local and national, to clean up air and water.

Emblematic of the effort was the original Earth Day, held on April 22, 1970, spurred by Wisconsin senator Gaylord Nelson, who became a champion of environmental legislation. According to National Geographic, 20 million Americans took part in that day’s speeches and demonstrations around the country.⁴

Soon health issues, especially fear of cancer caused by industrial chemicals, surfaced more forcefully than in the past. And then there were the ugliness of mining, worries about pollution of the ocean, and alarm over nuclear power. From 1969 to 1980, about a dozen laws were enacted that gave the federal government authority to control pollution. They took their place alongside earlier laws, such as the Migratory Bird Treaty Act and the National Park Service Organic Act, which reflected more traditional environmental concerns.

The next 50 years were punctuated by dramatic environmental events, some of them horrendous, such as the 1984 leak of toxic gas in Bhopal, India, which killed thousands of people, and the 1986 Chernobyl nuclear power plant accident in the Soviet Union, which killed 31 people and contaminated many more with radiation. But few events like that have occurred in the United States.

The closest the United States has come to an environmental disaster on that scale has been through notorious oil spills such as the Exxon spill of 1989 off the coast of Alaska and the lethal BP oil spill of 2010 in the Gulf of Mexico. The latter was caused by an explosion that killed 11 workers and caused oil to gush for 87 days. Those spills, however, did not destroy species and seem to have had little long-term environmental impact.

Most of the apparent environmental crises in the United States over the past half-century have turned out to be exaggerated.

• The Love Canal incident, which made headlines for months and led to a tremendous expansion of the EPA, is largely forgotten now. The 1976 discovery of a buried waste dump in Niagara Falls, New York, oozing chemicals and located next to a school, created fear that the nation was covered with hazardous waste dumps that were “ticking time bombs.” But the fears were much exaggerated.

• An accident at a nuclear power plant in Pennsylvania, Three Mile Island—caused partly by human error—magnetized public attention for weeks as it turned into a dreaded partial meltdown. Yet no one was killed or injured.

• For years, the public and scientists alike feared that lakes and forests in the eastern United States were being destroyed by acid rain caused by sulfur from electric power plants that killed fish and trees. Yet a 10-year, $500 million government study issued in 1990 concluded that at most a few high-altitude red spruce forests, damaged by cold weather and wind, may have been harmed by acid rain. Many of the lakes, it turned out, are naturally acidic.

Today, environmental issues are far different from those even 30 years ago. In part, that’s because visible pollution has almost disappeared—the plumes from power plants are mostly steam (and carbon dioxide, today’s bête noire, is invisible). Fears of toxic pollution have largely subsided.

Nevertheless, the impetus to protect the environment remains.

It is important to keep North American environmental problems in perspective, however. In 1990, James R. Dunn and John E. Kenney compared two lists of environmental problems: one covering the United States, one covering Africa. Americans had many environmental worries, from hazardous waste sites to destruction of the ozone layer. For Africans, the list consisted of diseases such as sleeping sickness and cholera, soil erosion, and lack of sewage treatment.

Dunn and Kenney called the American list a “media list in the sense that the public must be told about most problems (that is, most citizens do not really see or feel the problems on a daily basis).” In contrast, the African perils were “Third World megaproblems—noncontroversial, pervasive, and highly visible.”⁵

Today’s big environmental issue, at least in the United States, is climate change. This is the current term for the concern about global warming that emerged in the late 1980s. Some scientists contend that the world is heading for a cataclysmic impact from rising temperatures. Their proposed solution, picked up by many politicians, is to reduce the use of fossil fuels because the burning of those fuels emits carbon dioxide, a gas that traps heat that would otherwise be radiated into space.

Second only to climate change today is the somewhat enigmatic and stretchable concept “sustainability.” It stems from Our Common Future, a 1987 report by a United Nations commission headed by Grø Brundtland, then prime minister of Norway. The commission wanted to promote “sustainable development,” which is defined in the report as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs.”⁶

This upbeat statement has been interpreted by some to mean that there should be no tampering with natural habitat or conditions, and it has led to a motley collection of proposals ranging from creating coastal fish preserves to recycling everything that can possibly be recycled. In fact, on college campuses, “sustainability” sometimes sweeps in social justice and related concepts.

So the history of environmentalism includes a constant shift from one concern to another. What ties the concerns together? For the most part, it is a desire to keep what surrounds us beautiful, clean, valuable—and “natural.” One way to view environmentalism is to see it as what lies outside our own property—outside the things we have personal control over and, in many cases, outside the bounds of what anyone has personal control over.

In this book, as indicated, we will apply economics to environmentalism. Economics is the study of people’s choices under different incentives. It will help us understand why some of our surroundings are pristine, why some are polluted, and why many are somewhere in between. And it can help guide us in making the best environmental choices going forward.

Economic principles explain why we cannot have everything we want but instead must make tradeoffs, how people respond to changed incentives, and how the institutions of our country and society—the rules, customs, and habits that guide us—will affect our ability to protect the environment.

The next four chapters will introduce these principles and illustrate them with various ways that people have dealt with (or failed to deal with) environmental issues. The final chapter (Chapter 6) will apply those principles to the most talked-about issue of the day, climate change, and its connection with energy.

2. Scarcity: An Economics Primer

This chapter introduces 10 princ...

Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT PAGE
• CONTENTS
• LIST OF FIGURES
• ACKNOWLEDGMENTS
• 1. CHANGING ENVIRONMENTALISM
• 2. SCARCITY: AN ECONOMICS PRIMER
• 3. RIGHTS: HOW PROPERTY RIGHTS AND MARKETS REPLACE CONFLICT WITH COOPERATION
• 4. COERCION: PROTECTING THE ENVIRONMENT WITH GOVERNMENT ACTION
• 5. CHOOSING: ECONOMICS AND ENVIRONMENTAL POLICY CHOICES
• 6. CLIMATE CHANGE AND THE PROBLEM OF ENERGY
• NOTES