Free-market environmentalism: It’s about choice, not science

Published August 1, 2001

“Environmental debates . . . [are] really debates about preferences and whose preferences should be imposed on society.”

Cato Institute’s director of natural resource studies, Jerry Taylor challenges the “market failure” critique of capitalism as it pertains to energy policy and environmental protection. He believes that government failure to recognize private property rights leads to environmental degradation, and that economic growth is a vital prerequisite for ecological health.

Under Taylor’s direction, Cato’s scholars have become some of the nation’s most influential and outspoken critics of federal land management policy, various “sustainable development” initiatives, global warming control policies, federal environmental regulations, environmental “doomsaying,” energy conservation mandates, renewable energy management, federal energy policy, and public utility regulation in general.

Since joining Cato, Taylor, a popular public speaker and debater, has emerged as a major voice in the environmental debate. A former editor of Environmental Monitor, Taylor is an adjunct scholar at the Institute for Energy Research and senior editor of Regulation magazine. He spoke recently with his favorite brother, ECN Managing Editor James Taylor.

ECN: What is the Cato Institute’s philosophy on environment and natural resource issues?

Taylor: Although environmental debates sound like they’re arguments about science and public health (with a smattering of economics tossed in), they’re really debates about preferences and whose preferences should be imposed on society.

Although participants argue that “sound science” ought to determine whose preferences determine the standards (it’s just that their science is better than their opponents), science cannot referee the debate.

Consider the dispute about the regulation of potentially unhealthy pollutants, the central mission of the Environmental Protection Agency. The agency examines toxicological and epidemiological data to ascertain the exposure level at which suspect substances impose measurable human health risks. Even assuming that such analyses are capable of providing the requisite information (a matter, incidentally, that is hotly debated within the scientific and public health community), who is to say whether one risk tolerance is preferable to another?

The amount of resources one is willing to spend on risk avoidance is ultimately subjective, without a “right” or “wrong” answer. Everyone’s risk tolerance is different. Scientists can help inform our decisions, but they cannot point us to the “correct” decision.

Should experts–acting on behalf of regulatory agencies–decide what sort of environmental quality people should or should not have a right to consume? In no other area of the economy do scientists have the power to rule in such a manner. After all, people are allowed to consume all kinds of things–such as power crystals, magnets, age-defying vitamins, and organic food–that scientists, doctors, and public health officials think are silly or even potentially counterproductive.

Many people–perhaps even a majority of voting Americans–want to secure cleaner air and cleaner water regardless of whether those improvements significantly reduce human health risks. Under the present political regime, however, no such improvements can occur without some alleged scientific justification.

That is why those who wish to improve environmental quality are forced to embrace whatever science they can–no matter how dubious–to get what they want. They should not, however, have to engage in such scientific gymnastics to secure desired goods or services.

The debate over public land use is likewise garbed in the dubious cloth of science. How do we know whether public lands are more “valuable” if left wild than if developed in some way? While methods such as contingent valuation surveys exist to measure the “existence value” of any particular parcel of land, they yield highly dubious information for the simple reason that what people say they’re willing to pay in surveys rarely comports with their actual behavior in the marketplace.

Likewise, there’s no objectively correct way to measure the economic benefits provided by certain ecological services (such as water filtration services provided by wetlands) because so many of the resources affected are –at the moment–outside of the marketplace. The debate, again, is more a battle of subjective preferences than a battle of ecological economics simply because the information necessary to inform the latter is unobtainable by government.

As a libertarian, I’m not comfortable having government tell us what tradeoffs we should or should not make regarding environmental risks or how much consumption of environmental goods we should or should not prefer.

While Cato certainly seeks to better inform the public about the scientific issues, our main goal is to promote policies that would allow the maximum amount of freedom for individuals to pursue their preferences without impinging upon the equally valid preferences of others.

ECN: In what ways does the Cato Institute’s emphasis on the free market supplement traditional conservative ideas?

Taylor: Conservatives tend to think that scientists can and should tell people what risks they should be willing to bear and what level of environmental quality they should be happy with. I call this the “guys in white coats should make the rules” worldview.

While I certainly agree with most conservatives that the scientific justification for more restrictive environmental regulations is dubious, I don’t think in the long run that conservatives are going to win any arguments by telling people they shouldn’t want what they demonstrably do want out of environmental policy.

In the final analysis, environmental goods and services–to the greatest extent possible–should be treated like other goods and services in the marketplace.

People should be free to secure their preferences regarding the consumption of environmental goods such as clean air or clean water regardless of whether some scientists think such preferences are legitimate or not. Likewise, people should be free to the greatest extent possible to make decisions consistent with their own risk tolerances regardless of scientific or even public opinion.

ECN: Some people contend that natural resources and environmental goods are not well suited for the free market. For example, how do you track and redress air or water pollution? How can we ensure a safe, affordable, and free flow of water or energy without government regulation?

Taylor: Economic growth is a vital prerequisite for environmental improvement, and to the extent that free markets lead to more economic growth than alternative arrangements, free markets are crucial prerequisites for environmental quality.

There are a number of reasons for this. First, it takes a healthy, growing economy to afford the pollution control technologies necessitated by environmental protection. A poorer nation, for example, could scarcely have afforded the nearly $200 billion this nation has spent on sewage treatment plants over the past 30 years.

Second, growing consumer demand for environmental goods–parks; recreational facilities; land for hunting, fishing, hiking; urban air and water quality–is largely responsible for the improving quantity and quality of both public and private ecological resources.

Virtually all analysts agree that, for the vast majority of consumers, environmental amenities are “luxury goods” that are in greatest demand in the wealthiest societies. Economic growth is thus indirectly responsible for improving environmental quality in that it creates the conditions necessary for increased demand for (and the corresponding increase in supply of) environmental quality.

Third, advances in technology, production methods, and manufacturing practices–both a cause and a consequence of economic growth–have historically resulted in less, not more, pollution. Even advances in non-environmental technologies and industries have indirectly resulted in more efficient resource consumption and less pollution.

Economists who have studied the data find that, without exception, trends in air and water pollution track trends in per-capita income.

ECN: How has the debate over natural resources and environmental issues evolved during your years at Cato?

Taylor: While it would be nice to say that the debate has improved or become more informed, that would not be accurate.

Debates about environmental policy have always been and probably always will be debates about essentially religious beliefs concerning man’s proper role in the world. The flash points of the debate may change, but the nature of the debate does not.

ECN: Do you see the free market making many ideological inroads in the environmental debate?

Taylor: Not really. The encouraging developments that we have seen have less to do with an increased public acceptance of “free markets” than they do with an increased judicial acceptance of the importance of property rights and a properly construed Interstate Commerce Clause.

ECN: In your years in the environment and natural resources debate, what do you consider to be free market environmentalism’s most encouraging success story? What is its most disappointing setback?

Taylor: You’re really putting me in the dock here, aren’t you?

The most encouraging “success story” of the 1990s was our ability to resist the siren call for significant emissions reductions of greenhouse gases to address the threat of global warming. But that was less a win for “free market environmentalism” than it was a win for scientific and economic common sense. You don’t have to sympathize with free market environmentalism, after all, to oppose taking our economy over a cliff to address an over-hyped threat.

The most disappointing setback has to be our inability to convince a Republican Congress to seriously examine opportunities for environmental regulatory reform and regulatory federalism. President Bush has yet to show any interest in this effort either, so politically, we’re doing no better than enforcing a rough political stalemate.

ECN: What are the most imposing obstacles to free market environmentalism at the grassroots level?

Taylor: Few people are interested in spending their time and energy in “marching” for free market environmentalism. Conservatives often have a lot of causes they care about. The only real “grassroots” movement we’re going to see in this area is the slowly growing “property rights movement,” which is grounded in real grievances that cut across many of the same environmental issues that interest free market environment types.

ECN: How can state and local governments best implement free market ideas regarding environmental issues?

Taylor: Unfortunately, state and local governments are severely hand-tied by Washington. The federal government has assumed primary responsibility for air, water, and land-based pollution control, turning state and local agencies into little more than glorified deputies of the EPA.

The only way to improve things is to encourage Congress to allow states to apply for regulatory waivers, much in the same way Congress allowed the states to apply for waivers under the old welfare regime. State and local governments could best advance the cause of “free market environmentalism” in the short run by actively campaigning for such waivers.

At the end of the day, the only way we’re going to see interesting regulatory experiments in the environmental arena is if we unleash the fabled “laboratories of democracy.” Congress will never allow such experiments to be run nationally out of EPA.

ECN: OK, I’ve got to ask: Do you drive a “gas-guzzling SUV”?

Taylor: Yes.