The New Resource Economics Part One: Creation at Montana State University

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The New Resource Economics Part One: Creation at Montana State University

By: John A. Baden, Ph.D.
Posted on June 23, 2016 FREE Insights Topics:

John and Ramona are leaving for Europe to present a series of talks on the creation and dissemination of the New Resource Economics, the NRE. They and other professors at MSU developed the NRE approach to environmental policy in the 1970s and as their invitation to speak in Europe indicates, it flourishes today. The NRE emphasizes the importance of entrepreneurship in protecting, promoting, and restoring ecological sustainability. It is a constructive alternative to the bureaucratic command-and-control model of the Progressive Era reformers a century ago. The NRE provides a constructive, innovative policy framework for harmonizing ecology, liberty, and prosperity.

Forty years ago this summer several Montana State University (MSU) colleagues and I launched an intellectual experiment in the political economy of natural resources. We all had an economic specialty, mine economic anthropology. We also favored environmental quality over material quantity and elected Bozeman as the place to build our lives. When selecting academic jobs mountains trumped money. 

As a student I helped save Montana's Lincoln-Scapegoat Backcountry from the ravages of the U. S. Forest Service and Anaconda Forest Products.  My National Science Foundation post-doctoral fellowship was with Prof. L. K. Caldwell, an author of National Environmental Policy Act. My post-doc was to help establish Indiana University's School of Public and Environmental Affairs. (I claim no credit but again in 2016 it ranks number one in America.)

Our experiment was an exercise in intellectual entrepreneurship and we were well prepared. Three of us had worked closely with Nobel Prize winning economists. Although we taught in a small cow college in the most remote of the lower 48 states, we all had excellent connections with nationally respected economists. I also had contacts with foundation leaders. Further, public policy was an unknown field at MSU so we were, for a while, free to roam.

Our general goal was to explore and promote intersections of liberty, ecology, and prosperity. Where and why do they thrive together? Responsible liberty, sustainable ecology, and modest prosperity don’t always or easily go together. How could we foster their concurrence?

This approach became know among economists as the New Resource Economics, or NRE.* The conventional, or old resource economics, was based on the Progressive ideal of command and control by experts, Green Platonic despots. These fine men, nearly all agency people were male, were assumed to understand ecological systems. They didn't. Further, they could somehow divine the public interest. No one can. Also, they were to be insulated from and immune to political influence. Irresponsibly naive. Actually, the Progressive Era model usually led to regulatory capture by the bureaucracy and allied commodity groups.

Our orientation was radically different from the conventional Green perspective.  In that view, ecology, liberty, and prosperity are necessarily in opposition; theirs is an inherently dark perspective. We believed the environmental culture actually can be sunnier. The New Resource Economics we created at Montana State University in the 1970s shows how to brighten an oft dark and negative arena.

Our highly positive outlook came naturally for we worked in the "romance" arena of environmental policy rather than sludge. Parks, wilderness, forests, rangelands, water, and wildlife had our attention. We avoided nasty, toxic sludge in both research and residence. We found Bozeman a great place to live and earn a living.

In addition to marrying Ramona, several other good and important things happened to me in 1976, the summer of America's bicentennial of independence. (Thanks to France for the Statue of Liberty!) I was at the economics department at UCLA for a summer program for young professors. J. Clayburn (Clay) LaForce, chairman of the econ department, organized the program. Clay introduced me to several presidents of foundations interested in supporting libertarian professors and we began discussing the institute I soon founded at MSU, the Center for Political Economy and Natural Resources.

Two well-educated foundation officers, Neil McLeod (Harvard Ph. D.) of the Liberty Fund, and Richard Larry (MBA, Penn's Warton School) of the Sara Mellon Scaife Foundation, joined Clay in several of our dinners. They were enthused by the possibilities of a free market institute focused on the romance sector of environmentalism. We proposed to study parks, range and timberlands, water, and wildlife not nasty sludge. This was a vacant niche and the foundation officers offered funding to pioneer it.

The MSU faculty linked with the resultant institute, MSU's Center for Political Economy and Natural Resources, published numerous refereed articles in academic journals. (I had not yet understood the importance of having a catchy acronym such as FREE or PERC.) We took no corporate or governmental contracts but received many foundation grants. These funds enabled us to host academic conferences that included several Nobel Prize winners.  The Center for Political Economy and Natural Resources blossomed.

However the three wise men I met at UCLA, Clay, Neal, and Richard, had given me a caveat. Each warned me of political problems inherent to operating such an institute at a state university. Special interests, recipients of federal subsidies and their university co-conspirators in administration, would be exposed by our work. Faculty dependent on grants from federal agencies, mainly people in the natural sciences, would surely not understand our work. They would also be hostile to it by predisposition. The great majority of academics are statists, people who favor government control over individuals and the private sector. That was and remains the dominant force in academic culture. 

The wise men warned me it is risky to reside in a state university while advocating liberty as a complement to ecology and prosperity. This was a risk I chose to accept. While their expectations were correct, the outcome ultimately became highly positive. I feel blessed.


*The key features are clear and enforceable property rights, the rule of law, entrepreneurship, and the market process. For over forty years the NRE has explained how this works and examined its applications and limitations. Examples are most clear and attractive in the romance arena of natural resources.


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