A Primer on Liberty, Prosperity, and Ecology

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A Primer on Liberty, Prosperity, and Ecology

By: John A. Baden, Ph.D.
Posted on August 06, 2014 FREE Insights Topics:

FREE fosters liberty, prosperity, and ecology by advocating reforms that recognize the importance of each. Our focus is the "romance" ring of the environmental arena; parks, wildlife, water, and wildlands. The focus holds in our academic and agricultural lives.

Four decades ago we chose to live on a ranch near Gallatin Gateway. It is the ideal place for Ramona and me. We are only ten miles from Bozeman and Yellowstone Park is our backyard. We placed this highly productive ranch in a conservation easement. (We produce grain and alfalfa under center pivots using our 1866 water in dry years.) We enjoy managing the ranch while protecting its beautiful water, wild land, and wildlife. Sandhill Cranes nest on one of our islands and trout flourish in the 62º water. This month we are building new fences to protect our spring creek and ponds from livestock grazing the lush bottomlands. Both parts of our work lives, the agricultural and academic, focus on the romance of parks, wildlife, water, and wildlands. It's no wonder we feel blessed.

The contrast to romance is "sludge"; superfund sites, toxic waste, and other pollutions. Occasionally, as in the highly successful Boston Harbor Cleanup, a sludge infested waste area that people avoided was transformed into a romantic place. Similar events, over a far greater time span, have occurred at abandoned mine sites. Telluride, Colorado is a prime example.

FREE has always been a boutique organization, one working with the upper intellectual tier, for example federal judges, law professors, and top economists. At our programs, FREE participants have been treated to dozens of talks by Nobel Prize winning economists. Focusing on high quality products and participants, we emulate Tiffany not Zales.

Later this month FREE will initiate an experimental program. With the help of federal judges, we organized a seminar for law clerks working for Article III judges. We will explore with them how harmony has been achieved among ecology, liberty and prosperity. As well as, how we can create more harmony.

Economics is especially useful in explaining both the success and failures in environmental and natural resource management, a highly contentious policy arena. Public Choice and Austrian economics in particular, help answer key questions involving human behavior and the environment upon which people depend.

What arrangements foster the protection and restoration of endangered species? Which ones further endanger them? What government programs and policies exacerbate the problems?

Economics provides many counter-intuitive answers. It also shows how to achieve ecological objectives with little or no coercion and minimal bureaucracy. Most importantly, it suggests ways to harmonize liberty, prosperity, and ecology. Environmental entrepreneurship is often the key to success. It often overcomes common pool and free rider problems.

Historic and contemporary examples abound. They range from the Boone and Crockett Club founded by Theodore Roosevelt in 1887, which is still active today, to the thriving American Prairie Reserve, a foundation created in 2001. Boone and Crockett Club helped expand and protect Yellowstone National Park. Its founders led the American Conservation Movement. It also helped eliminate large-scale commercial market hunting of game, a practice that drove several species toward extinction.

American Prairie Reserve's mission is "to create and manage a prairie-based wildlife reserve that, when combined with public lands already devoted to wildlife, will protect a unique natural habitat, provide lasting economic benefits and improve public access to and enjoyment of the prairie landscape”(American Prairie Reserve, Mission Statement). APR's goal is to guide conservation efforts and joint management plans on some 3,000,000 acres, a highly complex area nearly one and a half times the size of Yellowstone Park.

FREE's program with law clerks and federal judges will include a visit to Yellowstone Park. Dan Wenk, the current Superintendent, and Bob Barbee, a famous and former Yellowstone Superintendent, will join us and make presentations. Pete Geddes, American Prairie Reserve's Managing Director, was my FREE colleague for over 14 years. He will discuss the American Prairie Reserve’s environmental entrepreneurship.

Here is the foundation for linking ecology and economics. Both words come from the classic Greek root, oikos, meaning household. Consider some truths, empirical generalizations about human behavior and the evolution of politics. I will initially discuss linkages among education, wealth, and environmental sensitivity. A page later I explain why commodities never run out.

First, across time and cultures as people become more educated and wealthy, they become more sensitive to the quality of their environment. Which of these places will enforce higher and tighter environmental standards, a gated community near a national park or a trailer park equally close to that park? Windshield empiricism, information gathered by driving around and observing the landscape, provides the answer and economics helps explain why it is true. As people become financially well off, they can more easily afford environmental quality. Further, culture and tastes change with wealth. Demand for environmental quality is highly elastic. It resembles their reveled preferences for foreign travel, BMWs, and gourmet foods.

There is an obvious problem in this. Many wealthy people develop environmental sensitivities--but they also have the capacity to inflict great change in ecosystems, many of them negative. Consider the Big Sky area of Montana. Wealthy people had a large impact on a subalpine ecosystem--and naturally they want to protect and preserve what remains.

Second, consider earlier fears of running out of the world's material stuff, energy stocks, minerals, and wood as examples. Beginning in the late 1960s through the 1980s and beyond, there was a barrage of literature proclaiming soon exhaustion of resources. These were to be caused by population and economic growth.

Both, many alleged must be stopped. The goal was zero population and economic growth. Hence, there were subsequent demands for federal policies to accomplish these goals. Well-intended people created organizations focused on these ends. Some were my colleagues and I followed their arguments.

In retrospect all these efforts were naive on multiple dimensions, especially economic. The population bomb has not exploded--and the problem in most developed nations is that of population replacement. The others have dropped below the equilibrium number of 2.2 births per woman. Several are under 1.5 (Forbes 4/25/2012  "Warning Bell for Developed Countries: Declining Birth Rates"[1]).

Regarding the running out problem, some remarkable errors were in the 1974 book funded by the Ford Foundation, A Time to Choose: America's Energy Future. One primary assertion was the "need", usually a dangerous word, to move to a zero energy growth economy. In the authors' view, and independent of American preferences, it was likely that environmental or scarcity problems would soon mandate zero energy growth (p 333).

The book ignored or discounted totally unplanned, non-directed effects of incentives. The incentives led to innovations, conservation, and substitutes. The Hayekian spontaneous order worked it magic. For example, insulation is a good substitute for energy when heating homes.

As a result, many people and firms adjusted in multiple ways. Despite the absence of any coherent federal energy policy and with substantial growth in population and GNP, U.S. energy consumption has grown only from 74 Quadrillion Btu 1974 to 97.5 Quadrillion Btu forty years later.

One good thing that the book, A Time to Choose: America's Energy Future, generated was an excellent and short rejoinder, by faculty of the UCLA Economics Department, title, No Time to Confuse. The UCLA book nominated its target for the Guinness World Record for errors of logic, exaggeration and misunderstandings. The Ford foundation funded book neglected elementary principles of supply and demand. It greatly underestimated the capacity of people to adapt to changing circumstances.

Here is my perspective on the problem of running out of commodities: When property rights are secure, government is not arbitrary (but rather operates by the rule of law), and the market free to coordinate, scarcity never wins a race against creativity.

Here are the primary reasons: Markets give incentives to conserve, substitute, develop new sources, adjust current sources, and innovate. The market process also gives strong incentives to delay consumption. People with the highest expectation of future value hold commodities out of consumption. They speculate by conserving for the future, a time when they believe the commodity will fetch a higher price.

I have discussed two well and often tested empirical propositions about natural resources and environmental quality. Both have high relevance for public policy. First, when people become more educated and wealthy their environmental sensitivity increases. Second, we do not run out of commodities; scarcity does not beat creativity.

In contrast with the above empirical statements, consider a mere tautology, a statement true by definition. I believe it has serious consequences for environmental and natural resource management: Things that can't go on won't. They must stop.

The implications of this tautology bring me to consider the environmental consequences of our huge and growing national debt. I'm thinking not just of the roughly $17 trillion on the books but also the $70 trillion[2], of American governments' actuarial obligations. These are promises of transfer payments made by the federal government to citizens.

This massive debt load will result in serious reconsiderations of America's environmental and natural resource management. We will again hear suggestions of selling Yellowstone Park, a remarkably bad idea. I'll discuss the consequences of debt problem in future FREE Insights.

[1]  “Western European countries have low fertility rates, below the replacement rate of 2.1. Germany: 1.4 (its total population is 81.9 million, of which 8.2% are foreigners). Holland: 1.8 (16.5 million, of which 4.4% are foreigners). Belgium: 1.8 (10.8 million, of which 9.8% are foreigners). Spain: 1.4 (46.1 million, of which 12.4% are foreigners). Italy: 1.4 (60.2 million, of which 7.1% are foreigners).”

[2]  James D. HamiltonNBER Working Paper No. 19253, Issued in July 2013, NBER Program(s): PE:  "Much attention has been given to the recent growth of the U.S. federal debt. This paper examines the growth of federal liabilities that are not included in the officially reported numbers. These take the form of implicit or explicit government guarantees and commitments. The five major categories surveyed include support for housing, other loan guarantees, deposit insurance, actions taken by the Federal Reserve, and government trust funds. The total dollar value of notional off-balance-sheet commitments came to $70 trillion as of 2012, or 6 times the size of the reported on-balance-sheet debt."

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