Robert G. Ingersoll: A Lay
for pollution externalities of motor vehicle travel invites
more complex issues. One approach widely explored involves
upon what are known as Pigou taxes, after noted British economist
It attempts to recover the costs of externalities in the natural
environment and even involving health damages. Yet Pigou taxes are more
often talked about than actually implemented. Related to such designs
are those growing out of the theories of Ronald Coase, designed not
necessarily to recover the full social costs of negative externalities
but rather to foster the most efficient economic choice among options,
even if some parties are disadvantaged.(32)
Taxes recovering such costs are most easily collected at the production
stage -- at the wellhead or the refinery for oil, and from the
manufacturer for tires and other materials.(33)
Still a third approach is that represented by the Georgist tradition,
which would recover the costs of specified pollution externalities by
accepting them to the extent that the environment is capable of
absorbing them, and charging polluters for the use of the environment
as a sink for such wastes. This approach is particularly attractive as
a way to charge for the release of noxious gases in motor vehicle
read the whole article
No man should be allowed to own
any land that he does not use.
Everybody knows that -- I do not care whether he has thousands or
millions. I have owned a great deal of land, but I know just as well as
I know I am living that I should not be allowed to have it unless I use
it. And why? Don't you know that if
people could bottle the air, they
would? Don't you know that there would be an American Air-bottling
Association? And don't you know that they would allow thousands and
millions to die for want of breath, if they could not pay for air?
not blaming anybody. I am just telling how it is. Now, the land belongs
to the children of Nature. Nature invites into this world every babe
that is born. And what would you think of me, for instance, tonight, if
I had invited you here -- nobody had charged you anything, but you had
been invited -- and when you got here you had found one man pretending
to occupy a hundred seats, another fifty, and another seventy-five, and
thereupon you were compelled to stand up -- what would you think of the
invitation? It seems to me that every child of Nature is entitled to
his share of the land, and that he should not be compelled to beg the
privilege to work the soil, of a babe that happened to be born before
him. And why do I say this? Because it is not to our interest to have a
few landlords and millions of tenants. ... read the whole article
Mason Gaffney: Bottling the Air
Times have caught up with
Ingersoll. Ronald Coase, prominent
Chicago economist, says polluters (whom he calls emitters, to avoid
bias) have as much right to emit as victims (he says receptors) have
to breathe clean air. It doesn’t matter, says Coase, how we
assign property rights originally: as long as property is firm, the
market will sort it all out. However, since emitters have invested in
costly facilities, and property is sacred... you see whither this
unbiased science is tending.
Was he laughed to scorn? Au contraire, he was raised on the
shoulders of his adulatory peers and anointed a demi-god (which tells
you something about his peers). Having risen on wings of theory the
idea found its way into practice, and today The South Coast Air
Quality Management District awards "offset rights" to those with
worthy track records of emitting. New emitters must buy "property
rights" from old ones. ... read
the whole article
Mason Gaffney: Economics in
Support of Environmentalism
property: from means to end
In a proper view of things, I
submit, private property is a means
to an end. It is not an end in itself; it needs a functional
rationale. The end is to get land put to the best use. All the
private land in the world was originally granted by some sovereign
public person or body, mainly for that purpose, not as a welfare
entitlement. Landowners and their lawyers have slyly, over time,
turned the means into an end, a fetish they endow with "sanctity."
This is a term they borrowed from absolutist medieval theology.
"Sanctity" means the quality or state of being holy or sacred, hence
inviolable. It means property may not be challenged, or even
questioned. It has become an end in itself, its own voucher. You're
not even supposed to think about it, it is above thought. Taboo!
historically, marked the final, total
surrender of the profession to this fetish. The modern economist's
view runs something like this: "I pledge allegiance to the 14th
Amendment, and to the overinterpretation of private landowner
supremacy for which it has come to stand." It is ironic to recall
that Radical Republicans passed that Amendment, at a time when a
"Radical Republican" was one who favored freeing the slaves. The 14th
Amendment was designed to protect the rights of freedmen. As
interpreted now, the 14th Amendment means that The Emancipation
Proclamation itself was unconstitutional! Fortunately, no one has
brought that case - yet.
The Neo-classical economists' view
of their proper role is rather
like that in The Realtor's Oath, which includes a vow "To protect the
individual right of real estate ownership." The word "individual" is
construed broadly to include corporations, estates, trusts, anonymous
offshore funds, schools, government agencies, institutions,
partnerships, cooperatives, the Duke of Westminster, the Sultan of
Brunei, the Medellin Cartel, Saddam Hussein, congregations,
Archbishops, families (including criminal families) and so on, but
"individual" sounds more all-American and subsumes them all. This is
a potent chant that stirs people to extremes of self-righteousness
and siege mentality when challenged.
The resemblance between
Neo-classical economics and the Realtor's
Oath is easier to understand when you learn that Professor Richard T.
Ely, founder of the modern discipline of Land Economics, was heavily
subsidized by the National Association of Real Estate Boards, the
utilities, the major landowning railroads, and others of like mind
and property interests.
it comes to violating property
rights, air pollution today is
perhaps the greatest invader and confiscator of property. Where
economists stand? Once a few of them tried to say, following A.C.
Pigou, "let the polluter pay," and in parts of Europe they still do.
In our modern backward thinking here at home, however, it's not the
polluter who is invading the property of others, nor the human rights
of those not owning property. Rather, when you tell them to stop, the
government is invading their rights. The wage-earning taxpayers must
pay them to stop, else you are violating both the 14th Amendment and
the "Coase Theorem," a rationalization for polluting now dearly
beloved by Neo-classical economists.... read
the whole article
Peter Barnes: Capitalism
3.0 — Chapter 4: The Limits of Privatization (pages 49-63)
Free Market Environmentalism
One other version of privatism is worth considering. Its premise is that
nature can be preserved, and pollution reduced, by expanding private property
rights. This line of thought is called free market environmentalism, and
it’s favored by libertarian think tanks such as the Cato Institute.
The origins of free market environmentalism go back to an influential paper
by University of Chicago economist Ronald Coase. Writing in 1960, Coase challenged
the then-prevailing orthodoxy that government regulation is the only way
to protect nature. In fact, he argued, nature can be protected through property
rights, provided they’re clearly defined and the cost of enforcing
them is low.
In Coase’s model, pollution is a two-sided problem involving a polluter
and a pollutee. If one side has clear property rights (for instance, if the
polluter has a right to emit, or the pollutee has a right not to be emitted
upon), and transaction costs are low, the two sides will come to a deal that
How will this happen? Let’s say the pollutee has a right to clean
air. He could, under common law, sue the polluter for damages. To avoid such
potential losses, the polluter is willing to pay the pollutee a sum of money
up front. The pollutee is willing to accept compensation for the inconvenience
and discomfort caused by the pollution. They agree on a level of pollution
and a payment that’s satisfactory to both.
It works the other way, too. If the polluter has the right to pollute, the
pollutee offers him money to pollute less, and the same deal is reached.
This pollution level — which is greater than zero but less than the
polluter would emit if pollution were free — is, in the language of
economists, optimal. (Whether it’s best for nature is another matter.)
It’s arrived at because the polluter’s externalities have been
For fans of privatism, Coase’s theorem was an intellectual breakthrough.
It gave theoretical credence to the idea that the marketplace, not government,
is the place to tackle pollution. Instead of burdening business with page
after page of regulations, all government has to do is assign property rights
and let markets handle the rest.
There’s much that’s attractive in free market environmentalism.
Anything that makes the lives of business managers simpler is, to my mind,
a good thing — not just for business, but for nature and society as
a whole. It’s good because things that are simple for managers to do
will get done, and often quickly, while things that are complicated may never
get done. Right now, we need to get our economic activity in harmony with
nature. We need to do that quickly, and at the lowest possible cost. If it’s
easiest for managers to act when they have prices, then let’s give
them prices, not regulations and exhortations.
At the same time, there are critical pieces missing in free market environmentalism.
First and foremost, it lacks a solid rationale for how property rights to
nature should be assigned. Coase argued that pollution levels will be the
same no matter how those rights are apportioned. Although this may be true
in the world of theory, it makes a big difference to people’s pocketbooks
whether pollutees pay polluters, or vice versa.
Most free marketers seem to think pollution rights should be given free
to polluters. In their view, the citizen’s right to be free of pollution
is trumped by the polluter’s right to pollute. Taking the opposite
tack, Robert F. Kennedy Jr., an attorney for the Natural Resources Defense
Council, argues that polluters have long been trespassing on common property
and that this trespass is a form of subsidy that ought to end.
The question for me is, what’s the best way to assign property rights
when our goal is to protect a birthright shared by everyone? It turns out
this is a complicated matter, but one we need to explore. There’s no
textbook way to “propertize” nature. (When I say to propertize,
I mean to treat an aspect of nature as property, thus making it ownable.
Privatization goes further and assigns that property to corporate owners.)
In fact, there are different ways to propertize nature, with dramatically
different consequences. And since we’ll be living with these new property
rights — and paying rent to their owners — for a long time, it
behooves us to get them right. ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)
“Let us suppose,” economist Ronald Coase wrote in 1960, “that
a farmer and a cattle-raiser are operating on neighboring properties.” He
went on to suppose further that the cattle-raiser’s animals wander
onto the farmer’s land and damage his crops. From this hypothetical
starting point Coase examined the problem of externalities and proposed a
solution — the creation of rights to pollute or not be polluted upon.
Today, pollution rights are used throughout the world. In effect, Coase conjured
into existence a class of property rights that didn’t exist before,
and his leap of imagination eventually reduced real pollution.
“Let us suppose” is a wonderful way for anyone, economists included,
to begin thinking. It lets us adjust old assumptions and see what might happen.
And it lets us imagine things that don’t exist but could, and sometimes,
because we imagined them, later do.
Coase supposed that a single polluter or his neighboring pollutee possessed
a right to pollute or not be polluted upon. He further supposed that the
transaction costs involved in negotiations between the two neighbors were
negligible. He made these suppositions half a century ago, at a time when
aggregate pollution wasn’t planet-threatening, as it now is. Given
today’s altered reality, it might be worth updating Coase’s suppositions
to make them relevant to this aggregate problem. Here, in my mind, are the
appropriate new suppositions:
* Instead of one polluter, there are many, and instead of one pollutee,
there are millions — including many not yet born.
* The pollutees (including future generations) are collectively represented
* The initial pollution rights are assigned by government to these trusts.
* In deciding how many pollution permits to sell, the trustees’ duty
isn’t to maximize revenue but to preserve an ecosystem for future generations.
The trusts therefore establish safe levels of pollution and gradually reduce
the number of permits they sell until those levels are reached.
* Revenue from the sale of pollution permits is divided 50 percent for per
capita dividends (like the Alaska Permanent Fund) and 50 percent for public
goods such as education and ecological restoration.
If we make these suppositions, what then happens? We have, first of all,
an economic model with a second set of books. Not all, but many externalities
show up on these new ledgers. More importantly, we begin to imagine a world
in which nature and future generations are represented in real-time transactions,
corporations internalize previously externalized costs, prices of illth-causing
goods rise, and everyone receives some property income.
Here’s what such a world could look like:
- Degradation of key ecosystems is gradually reduced to sustainable levels
because the trustees who set commons usage levels are accountable to future
generations, not living shareholders or voters. When they fail to protect
their beneficiaries, they are sued.
- Thanks to per capita dividends, income is recycled from overusers of
key ecosystems to underusers, creating both incentives to conserve and
- Clean energy and organic farming are competitive because prices of fossil
fuels and agricultural chemicals are appropriately high.
- Investment in new technologies soars and new domestic jobs are created
because higher fuel and waste disposal prices boost demand for clean energy
and waste recycling systems.
- Public goods are enhanced by permit revenue.
What has happened here? We’ve gone from a realistic set of assumptions
about how the world is — multiple polluters and pollutees, zero cost
of pollution, dangerous cumulative levels of pollution — to a reasonable
set of expectations about how the world could be if certain kinds of property
rights are introduced. These property rights go beyond Coase’s, but
are entirely compatible with market principles. The results of this thought
experiment show that the introduction of common property trusts can produce
a significant and long-lasting shift in economic outcomes without further
government intervention. ... read
the whole chapter
Mason Gaffney: 18 Fallacies
7. "Economics is
hostile to environmentalism"
Partly wrong, although some
economists are guilty as charged.
Economics, properly pursued, deals with how best to meet human wants.
Recreation, fishing, wildlife, amenities, clean air, pure water,
sustained resource supply, watershed protection, good health, and
conservation are legitimate human wants. ...
Here are four reasons why
environmentalists and economists are
Economizing is conserving.
Rationalizing water use, the proper aim of economics, is
inherently conserving. For example, if we put the Santa Ana River to
its highest and best use, it would obviate megatons of water imports,
and with them the associated environmental damage.
I myself possess a share of this river, which rises
an area of intense water shortage, yet I waste it. Why? There is hardly
any variable charge imposed on me for using more. There is a yearly
fixed cost, at about $20 per acre-foot for a 'standard' amount. The
'standard' hasn't changed in a century, and is much more than I
Incidentally, the small charge covers expenses of the Gage
Co., which delivers to me in the cheapest old-fashioned way, by
gravity, in rotation with other users. There is no charge at all for
water as such.
Meantime, the State is importing water here at a true
of about $2,000 per acre foot, 100 times what I pay). If there were a
market where I could sell my 'right' for a tenth of that price I would
surely do so, but there isn't, so I am waiting. If there were a price
charged to me at a tenth of that cost, I would not buy, but there
isn't, so I am taking. Thus I, and thousands like me, just stand pat
and waste water.
Abuse of local waters in arid areas of high demand, like
California, results in 'hydro-imperialism.' The prevailing ethic is
mixed-up macho. Conservation is for sissies: Real Men don't conserve
water; Real Men prove they possess predatory genes by preying on
peaceful people's waters. The predators can build more golf courses in
the Sonoran desert of the Coachella Valley.
wastes both dollars and ecologies.
Hydro-imperialism is the common enemy of Sierra Clubbers and
economists. That is lucky for economists, because Sierra Clubbers have
more clout. For example, twenty years ago some pork-barrellers proposed
pumping water from the lower Mississippi River up to West Texas, to
overcome drought in Lubbock. It was to be one of the The Great
Boondoggles -- a real record-smasher for pure waste.
I laughed when I read ecologists were fighting it to save
habitat of some unremembered nothing-bird, say the 'Least Southwestern
Shiny-rumped Fleapicker.' ...
'You have no right to stop growth,' says the
I agree, but insist on the counterpart: we have no duty to subsidize
growth. Hydro-imperialists and allied land speculators have no right to
demand subsidies. Water supply and flood control and navigation
projects, the traditional kinds, are heavily subsidized. Subsidy
generates waste almost by definition, in the amount of the subsidy. If
it is a subsidy to withdraw water it also creates scarcity of water
where nature may have given us plenty. Consider the lower Colorado
Every major user
subsidized, mostly by Congress. No one pays a dime for water at
the source, but everyone gets paid to suck it up and take it home. No
wonder there is a shortage. No
wonder there are 82 golf courses operating in the Coachella Valley, a
Sonoran desert, and 50 more planned.
No wonder The
Bureau of Reclamation can't even find takers for water carried to
Phoenix in its multi-billion dollar Granite Reef Aqueduct. I
could go on, but exhorting Congress not to waste money is scolding
sinners in Sodom. Come on, ecologists, find an endangered species!
economic analysis prescribes more water for fish
Twenty years ago a study on the S... River of B.... prescribed
sacrificing the fishery to a proposed power project, reasoning as
follows. The fishery has no value because it is overcrowded; 'its rent
has been dissipated by the tragedy of the commons'.
The value of the catch is only great enough to pay the
The fishery as such therefore has no residual value; it adds nothing to
the total value. Take it away and nothing is lost, net of costs.
That is a profound fallacy. You will have noted it is a way
'dehumanizing' fishermen and assuming away their unemployment costs,
but that is not my main point. It says you should remove water from the
use that is crowded with people, and dedicate it to the use of fewer
people. This violates the basic law of diminishing return'; (a.k.a.
variable proportions). It violates good marginal analysis, a bedrock of
economic analysis presumes public trusts
Another thing some economists do right is to acknowledge that
'entitlements' -- the initial assignments of property rights - have a
major effect on the relative bargaining power of different parties.
For years, economists would ask, say, canoers what they as
individuals would pay to keep a river wild.. They got rather low
valuations, and duly reported them as the value of recreation. This was
an effective defensive strategy for dam builders.
One day it occurred to some unsung genius to ask not what
canoer would pay for the wild river; ask what the power company would
have to pay the canoer, and all potential canoers, to extinguish their
The second question presumes that canoers, as citizens,
own the wild river.
In recent years ecologists have been catching onto this
rubbing the noses of legislators and bad economists in it. In the
currert lingo, one arguing ex parte the canoers stresses that canoers' WTA
(Willingness to Accept) is the relevant dollar value, and it is
higher, perhaps much higher, than their WTP (Willingness to Pay).
In defense, the black-hat economists are developing the new
defensive strategy of trivializing the matter by claiming WTP = WTA.
They follow a Chicago-School guru, one Ronald Coase, who
written it doesn't really matter how you assign entitlements so long as
it is clear and firm. Then just call the signal for 'Free Market!' and
punt: everything will work out for the best. Property will be allocate
the same, no matter who starts the game with all the chips, because WTP
Bunk! You are not surprised when someone says 'My home is
sale. I will not sell at any price' even in our highly mobile,
commercially oriented society. They can take that attitude when they
hold the initial entitlement.
You would be amazed to hear anyone say 'I will pay any
There are many documented instances of a person swearing under oath his
land is worth no more than $X for tax assessment purpose and soon
thereafter swearing again it is worth $15X when being condemned for a
park or other public use, because he wouldn't sell it for less.
Modern' micro-economics is a throwback to the old
School, some of whose members carried Adam Smith far beyond Smith's
intent. They prescribed 'free trade in land' as the solution to all
resource problems -- free trade beginning with entitlements inherited
from millennia of conquest, corruption, aristocracy, confiscations,
negligence, covin and fraud.
In this narrow view, everyone is an economic man; everyone
price; all decisions are marginal; etc. Facts are forced to fit that
theology. One modernist works the northwest Pacific Coast these
days taking questionnaire surveys to put a value on environmental
values. He has written that he rejects and screens out WTA answers when
they exceed WTP answers by more than 5%. They don't fit the model, so
they are invalid 'aberrations.'
If so, aborigines are aberrations. Consider Indian tribes
Treaty Rights to fish. Their WTP for those rights is minimal, partly
because their ability to pay (ATP) is minimal. In addition, the mere
hypothesis they are the ones who must pay implies they are impoverished
and cannot pay anything.
On the other hand, their WTA presumes their Treaty Rights
valid and they are in control. In their culture, traditional land
rights rank very high relative to money. They have seen people squander
money and be ruined by it land is not squanderable, by nature. Land has
more than marginal value to them because they have just one way of
life, based on fishing. Substitution of other lands is not part of
their ethic. Religion is also involved. It is entirely believable they
mean it when they say they will not sell 'at any price.' They may be
unreasonable, but that's the point: ownership lets you be as
unreasonable as you please. We only notice when someone else has the
entitlement. Politics and institutions are involved: Treaty Rights are
the most valuable mode of holding property there can be. They enjoy
legal supremacy as high as the Constitution itself (Article VI, Section
2), preempting contracts and ordinary legislation.
Indians are an extreme case, but
most of us have a streak of their
psychology. Not many generations back we shared the same kind of
culture, a dependence on traditional lands we held in common, in
trust for our descendants. These traditions affect current behavior,
and are totally disregarded in mechanical-type formal micro modeling
(except perhaps as tautological 'revealed preferences'). ... Read
the whole article