Capitalism, Property Rights, and the Environment

A common lie I hear parroted by environmentalists time and time again is that capitalism isn’t sustainable. It’s sad that this lie has perpetuated so far and wide because the truth is entirely difference, environmentalism is a side effect of capitalism and absolute property rights.

How can I claim this? Doesn’t capitalism encourage the consumption of resources as fast as possible? I’ve refuted this claim before:

If one has possession of a valuable resource it is in their best interest to manage the extraction and sale of that resource in a way that maximizes profits. Why would somebody extract all the iron ore on their property and sell it immediately? Iron ore, being a non-renewable resource, becomes more valuable over time as it becomes more scarce.

Likewise I explained how the temporary nature of property rights in today’s society lead to the consumption of resources as fast as possible:

Property rights in most countries aren’t absolute and one can never be sure when their property will be seized through eminent domain laws. If you’re only likely to hold a property for a temporary amount of time it then becomes your best interest to extract all the value from it immediately. When you’re not sure if regulations or ore extraction are going to remain stable or change in a manner that makes extraction more expensive it becomes your best interest to extract it all immediately.

We have a situation where resources are extracted and sold as fast as possible because claims over them may be taken away by the state at any moment. Absolute property rights encourage the opposite by rewarding those who conserve their resources for sale at a later date when the prices are higher.

Another benefit of absolute property rights is the fact property owners can sue polluters for damages. Today polluters are granted immunity from damages so long as they emit an amount of pollution below that sanctioned by the Environmental Protection Agency (EPA), unless you’re wealthy enough to buy a permit to pollute more that is. Under a system to respects strict property rights any demonstrable damages to property must be corrected. If I dump one ton of sewage onto your property then I am responsible for paying the entirety of the cleanup and restoration costs as well as any costs incurred by you to get me to cleanup and restore the land (court fees for example).

Walter Block wrote a very interesting paper titled Environmentalism and Economic Freedom: The Case for Private Property Rights [PDF] that goes over many aspects of free market environmentalism. One of the more interesting exerts comes from his coverage of the history of property rights:

Contrary to Pigou and Samuelson, manufacturers, foundries, railroads, etc., could not act in a vacuum, as if the costs they imposed on others were of no moment. There was a “way to force private polluters to bear the social cost of their operations”: sue them, make them pay for their past transgressions, and get a court order prohibiting them from such invasions in future.

Upholding property rights in this manner had several salutary effects. First of all, there was an incentive to use clean burning, but slightly more expensive anthracite coal rather than the cheaper but dirtier high sulfur content variety; less risk of lawsuits. Second, it paid to install scrubbers, and other techniques for reducing pollution output. Third there was an impetus to engage in research and development of new and better methods for the internalization of externalities: keeping one’s pollutants to oneself. Fourth, there was a movement toward the use better chimneys and other smoke prevention devices. Fifth, an incipient forensic pollution industry was in the process of being developed.16 Sixth, the locational decisions of manufacturing firms was intimately effected. The law implied that it would be more profitable to establish a plant in an area with very few people, or none at all; setting up shop in a residential area, for example, would subject the firm to debilitating lawsuits.17

But then in the 1840s and 1850s a new legal philosophy took hold. No longer were private property rights upheld. Now, there was an even more important consideration: the public good. And of what did the public good consist in this new dispensation? The growth and progress of the U.S. economy. Toward this end it was decided that the jurisprudence of the 1820s and 1830s was a needless indulgence. Accordingly, when an environmental plaintiff came to court under this new system, he was given short shrift. He was told, in effect, that of course his private property rights were being violated; but that this was entirely proper, since there is something even more important that selfish, individualistic property rights. And this was the “public good” of encouraging manufacturing.18

Until the 1840s property rights were held as more of an absolute and property owners could successfully sue polluters. That all changed after the 1840s when the idea of the “public good” began to outweigh the rights of property owners. In effect socialist ideology and interventionism, two ideals commonly held by so-called environmentalists, began superseding property rights and the free market. This granted polluters a license to emit as many undesirable and damaging pollutants as they could get away with under the guise of the “public good.”

Let’s switch gears and talk about the role free market capitalism plays in environmentalism. At its heart free market capitalism is a method of dividing scarce resources. If one person toils to extract and refine a resource they can trade it to somebody who desires it. For example an automobile manufacturer would be more than happy to buy steel from a steel manufacturer who had previously purchased raw iron ore from an ore miner.

Iron ore is a finite resources and as scarcity increases so does the price. When iron ore is abundant the prices is fairly low so more consumption occurs and as more consumption occurs the amount of ore is reduces and the price increases encouraging conservation. A good example to use is water.

Water is abundant in some areas and scarce in others. If you live in a desert water is going to be more valuable to you as it’s harder to come by whereas water has less value to those living in Minnesota. What this means is people living in deserts aren’t going to waste water keeping a lawn green (unless the government subsidizes the cost of water as they do in places like Southern California). Likewise farmers aren’t going to grown crops in deserts that require a great deal of water. The price mechanism of capitalism is also a mechanism that encourages the conservation of scarce resources.

It’s kind of funny that the path of individual liberty is also the path to environmentalism. Really it’s ironic because the most staunch environmentalists usually strongly oppose capitalism and absolute property rights. They want more socialistic controls but fail to know their history, because as pointed out by the Walter Block paper linked above, socialism has a pretty poor track record of environmental friendliness:

If this criticism of the market were true, one would expect that, even if the Soviets couldn’t successfully run an economy, they could at least be trusted as far as the environment is concerned. In actual point of fact, nothing could be further from the truth.

Exhibit “A” is perhaps the disappearance of the Aral and Caspian Seas, due to massive and unchecked pollution, over cutting of trees, and consequent desertification. Then there is Chernobyl, which caused hundreds, if not thousands of deaths.13 For ferry boats in the Volga River, it is forbidden to smoke cigarettes. This is not for intrusive paternalistic health reasons as in the west, but because this river is so polluted with oil and other flammable materials that there is a great fear that if a cigarette is tossed overboard, it will set the entire body of water on fire. Further, under Communism, there was little or no waste treatment of sewage in Poland, the gold roof in Cracow’s Sigismund Chapel dissolved due to acid rain, there was a dark brown haze over much of East Germany, and the sulfur dioxide concentrations in Czechoslovakia were eight times levels common in the U.S. (DiLorenzo, 1990).

I find it quite sad that environmentalists have been so duped. They stand up and decry the destruction of the environment yet support the very ideologies that allow the destruction to occur in the first place. These people generally oppose the only real solution to environmental protection, free markets and absolute property rights.

Environmentalists Should be Advocating Strict Property Rights

Self-proclaimed environmentalists seem to always advocate stricter environmental regulations. Every time I turn around I see another self-proclaimed environmentalist demanding that the Environmental Protection Agency (EPA) further decrease the level of [whatever pollutant is the enemy of the week] that individuals and/or companies can emit into the atmosphere/water supply. I’ve explained, multiple times, why asking the EPA for environmental protection is a fool’s journey. The only way to solve environmental issues is through strict enforcement of property rights. Hell if Dr. Seuss would have taken property rights into consideration his famous work The Lorax would have ended on an entirely different not:

If the Once-ler does have the right to cut down the trees, would we imagine that he would clear-cut the forest? Assuming he believes he will have those rights into the indefinite future, his own self-interest should prevent him from clear-cutting. We know from the end of the book – spoiler alert! – that the trees are a renewable resource – they can be replanted. Why would the Once-ler throw away years and years of profits he could obtain by replanting just to make a few dollars now? The future stream of profits is so large as to make clear-cutting a really bad choice, which is why lumber companies cut only a portion of their forests and replant where they do cut. And even if the trees were not a renewable resource, clear-cutting only makes sense as a profit-maximizing strategy under the most unusual of circumstances.

In the case of a nonrenewable resource, “greedy” producers still have reason not to extract the full quantity. Owners of oil wells do not suck out every last drop once they start extracting. Why not? They face a tradeoff: They can extract a lot, or even all, and sell it at the market price and invest the proceeds to earn interest, or they can leave much or all of it in the ground and wait for the price to rise, earning higher profits in the future.

If one has possession of a valuable resource it is in their best interest to manage the extraction and sale of that resource in a way that maximizes profits. Why would somebody extract all the iron ore on their property and sell it immediately? Iron ore, being a non-renewable resource, becomes more valuable over time as it becomes more scarce. Another aspect to look at is the temporary nature property in most places:

Then why do we see clear-cutting or its equivalent in the real world? Usually it’s because the property rights of the owner are tenuous, substantially reducing the expectation of future profits and making it more rational to extract all the value now. This normally happens when governments threaten to nationalize resources or where the property claims are uncertain and one party wishes to grab all the value before another party enters the competition.

Property rights in most countries aren’t absolute and one can never be sure when their property will be seized through eminent domain laws. If you’re only likely to hold a property for a temporary amount of time it then becomes your best interest to extract all the value from it immediately. When you’re not sure if regulations or ore extraction are going to remain stable or change in a manner that makes extraction more expensive it becomes your best interest to extract it all immediately.

EPA regulations and weak property rights actually encourage environmental destruction. Like most government bodies the EPA effectively accomplishes the exact opposite of what its chartered mission claims. Environmentalists should be demanding the EPA be eliminated and property rights be recognized as absolute.

How Government Environmental Protection Works

When many of my friends find out Ron Paul wants to eliminate the Environmental Protection Agency (EPA) they flip out. These friends believe the EPA actually protects the environment when in fact they do no such thing. If the EPA was actually interested in protecting the environment they would allow lawsuits against polluters by individuals whose land and body the polluters have contaminated. Instead the EPA states entities that only emit arbitrarily selected amounts of pollution are basically immune from civil suits and issues waivers to favored corporations so they aren’t hindered by legislation while their competitors have to deal with the additional expenses of complying with those regulations.

Such corruption isn’t exclusive to the federal government though, state governments like getting in on the action as well:

A BP (BP) refinery in Indiana will be allowed to continue to dump mercury into Lake Michigan under a permit issued by the Indiana Department of Environmental Management.

The permit exempts the BP plant at Whiting, Ind., 3 miles southeast of Chicago, from a 1995 federal regulation limiting mercury discharges into the Great Lakes to 1.3 ounces per year.

If you have the money government environmental protection agencies will grants you special privileges so you don’t have to deal with those nasty and expensive regulations. While your company reaps the benefits of these immunities your competitors will be forced to pass on the expense of complying with those regulations to their customers, making their product more expensive than yours.

Indiana officials said the amount of mercury released by BP was minor.

“The permitted levels will not affect drinking water, recreation or aquatic life,” Indiana Department of Environmental Management Commissioner Thomas Easterly told the Chicago Tribune.

Than why did British Petroleum (BP) have to get a special permit? If the amount of mercury they’re dumping is insignificant shouldn’t all companies be allowed to dump the same amount without special permission? Shouldn’t everybody be treated equally under the law? Why can companies will huge bank accounts buy special privileges?

The same answer applies to all of these questions, it’s not about environmental protection it’s about extortion. By declaring rule over environmental issues the government has created a new revenue stream for themselves in the form of permits and waivers. Large polluters support these regulations under the veil of environmental concern when in fact their support stems from the fact that they can afford to deal with these measures while their competitors can’t. Expensive environmental regulations further distort the market by favoring wealthy established companies and making the barrier of entry into many markets so high that no upstart can’t afford it.

People who want to protect the environment should be demanding the abolition of state controlled environmental protection agencies and the establishment of strict property rights. If a company is dumping pollutants that are contaminating land or water owned by individuals those individuals should be able to sue based on the fact their property rights have been violated. You can rest assured that everybody living on the shore of Lake Michigan suing BP would cost them a pretty penny and urge them to find some other way of dealing with their mercury.

The EPA isn’t About Environmental Protection, it’s About Extortion

The Environmental Protection Agency (EPA) is one of those agencies that are deemed absolutely critical by most environmentalists. These tree huggers claim that the environment would be totally destroyed by evil corporations if it wasn’t for the EPA stepping in and protecting our fragile planet. What most environmentalists never do is actually look at what the EPA does because if they did they would see that the EPA isn’t in the business of protecting the environment, they’re in the business of extortion. Case in point a couple purchased a piece of land and started construction on a home until the EPA stepped in and threatened the couple with absurdly high fines unless they paid a fee to ask permission to build on the land:

Just imagine. You want to build a home, so you buy a $23,000 piece of land in a residential subdivision in your hometown and get started. The government then tells you to stop, threatens you with $40 million in fines and is not kidding.

That’s the case now before the U.S. Supreme Court, with briefs being filed today by the Pacific Legal Foundation on behalf of a Priest Lake, Idaho, family, Chantell and Mike Sackett.

See the couple made the mistake of buying an unassuming piece of land in a development that wasn’t located in any wetland registry. The EPA decided all of this was irrelevant and are treating the property as protected wetland:

The case developed when the Sacketts bought a .63-acre parcel of land for $23,000 in a subdivision in their hometown of Priest Lake, Idaho. The land is 500 feet from a lake, had a city water and sewer tap assigned, had no running or standing water and was in the middle of other developed properties.


Chantell reported she was told by the EPA that if “you’re buying a piece of property you should know if it’s in wetlands.”

“I started to do research. I said, ‘So how do I find this piece of property in the wetlands [registry]’? And she said, ‘Here’s the coordinates.’ When I actually pulled up the coordinates, it’s not there.”

Apparently you’re just supposed to know that a piece of land is protected even if it’s not listed in any registry of protected lands. If this piece of property is protected then the government should have noted as such by placing it in their registry. Remember how people say that ignorance of the law is no excuse for breaking it? How the fuck are you supposed to know you’re violating the law when there is no information available that would alert you to such?

Either way when you look a bit more into the story you’ll see that this move by the EPA has nothing to do with protecting a piece of wetland but instead it has everything to do with demanding the peasants pay their tribute to the ruling king:

So the Sacketts went to court, only to be told the courts can’t address a decision like this, as it’s an administrative decision. The couple would have to meet the demands of the “compliance order” and pay the $250,000 to apply for a building permit, then challenge the eventual decision.

Or they could expose themselves to $37,500 per day in fines by refusing to cooperate.

If the couple pays $250,000 for a permit I’m sure the EPA will suddenly see that it’s OK for the couple to build there. That’s usually how these government extortion schemes work. First the government waits for you to take an apparently legal action, then they step in and threaten you with fines for violating some obscure law, and finally they tell you if you pay them for a permit (which is always cheaper than the fines you’re facing) the entire mess will go away.

You know what the most sickening part about this story is? Tax dollars stolen from you and me are being used to steal even more money from other people.