On April 22 we will celebrate the 25th anniversary of Earth Day. This is also the last time I will teach the environmental policy course I began teaching in 1970 at Indiana University.

When I began teaching environmental courses, many of my colleagues looked toward two reforms for ecological salvation: an environmental ethic to regulate behavior and a wise and powerful government to manage for the greatest good, for the greatest number, for the long run. While ethics are indeed important and limited government has value, we have learned since Earth Day not to depend on either.

Students in environmental courses still bring some burdensome baggage: well-intended but fundamentally naive ideas regarding the potential of altruism and government action. Unless trained in economics, they come mentally wired with an anti-market, anti-property-rights orientation. They often can't separate their hopes from reasonable expectations for political solutions. They believe that government power is easily harnessed for good ends.

Fortunately, as students grow wiser they often reject government command-and-control. They follow the examples of leading academics and environmental writers. These people have learned the perverse, unintended consequences of bureaucratic governance, e.g., ecological damage caused by predator- and fire-control programs of the U.S. Department of Agriculture.

Skepticism of the notion that government has a nearly boundless power to do ecological good is spreading. For example, John Crutcher, the editor and publisher of Common Ground, a New Age, environmentally sensitive monthly magazine, wrote a March cover story on property rights. In discussing the federal resource agencies, Crutcher notes:

"Rather than the public trust being protected, society's preserves have been sacrificed upon the altar of the almighty federal pie - and without even making a profit upon selling out its employer - the taxpayer."

He explains that agencies maximize budgets rather than profits. They compete for market share, scrambling for hunks of the federal budget. Such articles are becoming common in the elite media and even in green magazines, including Northern Lights, High Country News and Sierra. In the popular media as in academia, we're moving up the environmental policy learning curve.

One hundred years ago, Progressive era reformers told America that professional management motivated by the public interest and guided by science would work well. Today, economics and history have exposed this dictum as a self-serving myth. Rather than being boundless, the federal government's constructive role is limited to:

(1) Providing legal means that enable people to protect themselves from pollution;

(2) Supporting basic research;

(3) Protecting migratory resources such as waterfowl;

(4) Protecting our heritage.

When going beyond these assignments, bureaucratic pathologies ultimately prevail.

For 25 years, I've explored ways to harmonize liberty, ecology and prosperity. In my judgment, the most important principles are quite clear:

First, unless consciously randomized, decisions are made on the basis of information and incentives. This is true whether we are trying to save our souls, soils or seals.

But institutions differ dramatically in the quality of information and strength of incentive they generate. And each kind of institution biases the results in some way. Elective politics, for example, rewards the ambitious, rich and duplicitous while placing sincere, honest reformers at a huge disadvantage.

The second principle is equally important but carries less analytic power: Character and personal integrity matter a great deal. There are good people who, at least in the short run, can withstand the force of institutions that generate poor information and perverse incentives. For example, I respect and admire individuals who do good work in the bowels of the Forest Service.

The above principles tell us that stated mission gives little clue as to actual performance. Here are two examples.

The Park Service is to employ science and sound management to protect the integrity of our most valuable natural treasure. Universities are to foster the search for truth. Yet, the Park Service tried to suppress the University Press of Colorado's publication of the book "Rocky Times in Rocky Mountain National Park" by Karl Hess, an ecological scientist who had done years of field work in Rocky Mountain Park. To his credit, Luther Wilson, head of the University Press, stood firm, resisted Park Service pressures, and published the book.

In contrast, when Alston Chase published his book, "Playing God In Yellowstone: The Destruction of America's First National Park," Bill Tietz, then president of a university beholden to Park Service favor, fought to keep that book out of Yellowstones' visitors' centers. This is despite the fact that Chase's book has been adopted and recommended by such universities as Harvard, Stanford, Washington and Yale.

There is no substitute for character. But character alone cannot consistently produce good policy. Over time, the incentives generated by institutions usually trump ethics by attracting certain types of people. The Forest Service is a friendly environment for those who think science should be subservient to budgetary imperatives. Forest Service employees whose ethics lead them to think otherwise find that promotions are elusive. The Forest Service is not unique; good character will not prevail without good institutions.

Thus, successful environmental reform must focus upon institutional design. An important task of stewardship is to create institutions that harmonize private and public interests. Private property rights, markets and voluntary cooperation can foster these ends. After 25 years of trying, I believe I can now tell how this all works.