Bozeman, Montana was the birthplace of The New Resource Economics, aka “Free Market Environmentalism.” Having lived in its midst for decades, I recently began thinking of the historical context of this movement, and the causes of its unlikely success. The take-home message is clear; over the long run ideas have consequences. 

A victory implies contesting parties. One was the dominant Progressive Era model of natural resource management, the U. S. Forest Service, other federal agencies including, the Bureau of Reclamation and Bureau of Land Management among others. Together they had responsibility for one-third of America’s lands and waters. 

Over the decades, they had skillfully and relentlessly developed constituencies among commodity groups and national environmental organizations who pushed for reforms advantaging their constituencies and university departments. 

Their operational model was straightforward; find fine young men of good breeding and character and provide them the best in scientific natural resource education in such places as Yale’s and Cornell’s schools of forestry. Then send them out to manage the nation’s natural resources for the greatest good for the greatest number, for the long term. This was the Platonic despot recipe. After the WWII period, environmental and economics problems became clashingly obvious-to those who were concerned and informed but not invested in the payoff matrix. 

The Progressive approach was the overwhelmingly dominant paradigm. Those who opposed it were rare indeed. Through locational preferences and accidents of fate, the opposition was born in Bozeman at Montana State University some 40 years ago. (MSU is a Land Grant university that doesn’t have a school of forestry.)

Four young scholars arrived at MSU with an unusual quiver of training in economics, Public Choice and Austrian economics with a tinge of anthropology’s emphasis on culture. People who understand Public Choice are also reflexively skeptical of governmental programs. They expect such experiments to generate rent seeking, gross inefficiencies, and corruption.  

When evaluating government programs Public Choice practitioners, by reflex gained from training and experience, place their hopes and expectations in separate baskets. They anticipate sorry results to flow from politically influenced schemes of administration. Professors working with the Public Choice model of bureaucratic behavior are not typical academics, they are outliers among most colleagues in social sciences and humanities. They well understand the value of coordination and innovation via the market process and the dangers inherent to political management. The proper role of government is to monitor and protect. It’s natural trajectory is to advance constituencies’ interests. They have incentives to redistribute wealth and opportunities to those already well off.

When confronted with a problem of environmental and social justice, many sincere and well-intended citizen leaders attempt to ratchet up good intentions. When that proves insufficient they too often default to more and more invasive stringent government regulations and programs. This quite naturally inhibits innovation and productivity.  

The group of young scholars at MSU focused on the quality and strength of information and incentives produced by alternative institutional arrangements. We stressed the importance of providing constructive incentives to managers. For example, why did the U.S. Bureau of Reclamation spend up to $5,000 per acre to provide subsidized water to private land? Perverse incentives not stupidity explain such common results.

We explained why market coordination and clear and enforceable property rights are critically important, especially to the poor and disadvantaged minorities. The mountain top removal method of coal mining in West Virginia provides compelling examples of the perverse consequences of power politics trumping the property rights of individuals and families. The political process generated and protected the imposition of environmental and social externalities on poor communities. (Much of this is thanks to the late Sen. Byrd.)

We also emphasized the important contributions of social entrepreneurship. Social entrepreneurs create organizations and programs that provide concrete ways for citizens to implement their good intentions. Their non-profit entities address social and conservation/environmental problems and opportunities. Examples include protection and restoration of habitat and care for injured or ill persons. Trout Unlimited, Ducks Unlimited, Rocky Mountain Elk Foundation, and Pheasants Forever are examples of groups that promote the improvement and preservation of wildlife habitat. Warriors and Quiet Waters is a recent creation devoted to the care of wounded warriors from current conflicts.

The institute we established at MSU systematically attacked the sorry environmental and economic results of Progressive Era management.  We did so with scholarly articles and many books, most by university presses. We were harshly criticized and told we had no intellectual standing.

Under pressure from the then governor of Montana, the institute was disbanded due to pressures from high university officials, i.e., the president, VP for research, and two deans. (The existence of a report by a national peer review team that evaluated the MSU institute was denied and hidden by the president’s office. It’s available on FREE’s website under “History.”)

We had many scholarly achievements and regularly involved numerous distinguished economists, including several future Nobel Prize winners, in our MSU programs. They included Nobel laureates  James Buchanan, Vernon Smith, Doug North, and Lin Ostrom. 

After the MSU institute was driven off campus, its principals created two complementary organizations, first PERC and shortly later FREE. For the past three decades we have independently worked to critique existing federal programs and offered constructive alternatives. More importantly, we create and foster environmental and natural resource policies and programs that harmonize responsible liberty, environmental quality, and general prosperity. 

The alternative developed at MSU in the early 1970s and 80s has become the dominant intellectual paradigm throughout America and beyond. It is hard to find a responsible, well -informed analyst less than 60 years who defends the Progressive Era command-and-control, “scientific management” approach. The scholarly battle is over-we’ve won. Special interests, of course, dominate the policy arena but their pleading has been exposed for what it is. 

While continuing our long established seminar program for religious leaders and federal judges, FREE is beginning a new program focused on explaining the success of the NRE triumph over bureaucratic command-and-control management. 

Here is the key: Analysts now understand two principles. First, decisions are made on the basis of information and incentives, not the proclamation of good intentions implemented through political pressures. Second, institutional arrangements largely determine both the information generated and the incentives to act upon it. Bureaucratic command-and-control organization too often generates poor information and perverse incentives. 

Economics explains why theirs is a naive strategy and what institutional arrangements are likely to do better.

I recently wrote a friend: “I’m just beginning a new project on the evolution and dissemination of “Free Market Environmentalism (FME).” Could we “define the DNA of FME and then map it?”

This is a highly ambitious and I believe worthy goal. It’s is an unlikely road to the improvements they desire. When we understand the transformation in thinking about environmental policy, its DNA, people interested in reform may have leverage to promote more effective social policy in several arenas, perhaps education, health care, and consumer finance. This is a goal of FREE’s new program.