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Free Market Offers Best Solutions for Environmental Policy

The New York Times’ Paul Krugman wrote a story last week called “Phosphorus and Freedom: The Libertarian Fantasy.” His argument? Free market advocates are wrong, and we need more government regulation, not less. His views are common, and seem right at a surface level, but they miss the fundamental truth that free markets provide a better way to address social problems—including environmental issues.

Krugman’s fundamental argument—that environmental issues require government control—is not only false, but a red herring. The existence of man-made climate change is based on questionable science, but regardless, there are market solutions to environmental sustainability issues. The plans presented by President Obama and Democrats in Congress aim at wealth redistribution far more than climate protection, using the “Global Warming” scare to advance their liberal agenda.

“If we truly care about the environment, we should let people take care of it.”

Krugman calls “libertarian visions of an unregulated economy…mirages,” and attacks “the idea that we have a vastly bigger and more intrusive government than we need” as “a foolish fantasy.”

To defend his facile argument, the New York Times columnist praises the D.M.V., dismissing the countless stories of delay, corruption, and general annoyance as “antigovernment clichés” and “projection.” Krugman refuses to admit that libertarians are not the only ones complaining about D.M.V. delays. Instead, he glosses over the fundamental truth that government agencies involve perverse incentives that lead to bad service, long delays, and unnecessary fines.

Krugman’s central argument hangs on environmental issues, however. He points to Toledo’s recent water pollution problems, and contrasts them with Eric Erickson’s complaints about phosphate bans on detergent.

The problem in Toledo, however, is not detergent, but runoff from fertilizer. Crony connections between industrial farms and the federal government go back at least as far as the New Deal’s Agricultural Adjustment Act. The fertilizer runoff may very well have been exacerbated by the perverse incentives given to a class privileged by the federal government, as industrial farms have been for over 80 years.

Libertarians have presented better solutions to environmental issues than Obama’s environmental initiatives, which have tended to provide more government contracts to favored businesses and result in scandalous wastes of taxpayer money like Solyndra.

Jonathan H. Alder, a professor at the Case Western Reserve University, has proposed four somewhat free-market reforms to address these issues. While his ideas are more conservative than Obama’s, they still require some tweaking to be considered fully libertarian.

1. Technology Inducement Prizes—Provided by Charities or Companies

Liberals like Obama frequently call for the development of new “green” technologies—like wind and solar power—which would cut carbon emissions and help address global warming. The problem is, their solutions involve crony offers of government contracts to new or existing companies in order to help them develop the technology. This leads to waste, since that money is provided with little or no accountability.

Instead, Alder suggests that the government offer a prize to the first person or company who develops new energy technology. This would provide an incentive for companies to innovate on their own, and ensure that government money is only spent on the completed technology that works. But this still requires government largesse to solve the problem.

The same solution need not be funded by government. A charity or even an interested business could present a competition and offer an excellent prize as well, thus bypassing government altogether.

2. Cut Red Tape That Blocks New Technology

Alder also proposes the federal government “identify and reduce barriers to the development and deployment of alternative technologies.” Red tape has held back the Keystone Pipeline, but also prevents oil companies from building new refineries in the United States, which would make the pipeline unnecessary. How many other programs and new technologies are held back due to red tape?

Loosening regulations could also encourage development in existing energy technologies, such as nuclear energy. The editors of The Scientific American declared that nuclear energy provides the most energy for the least damage to the environment, but it still requires breakthroughs in waste management that are being held back by the federal government.

3. Economic Incentives for Renewable Technologies

Alder also calls for the abolition of the federal income tax, to be replaced by a carbon tax that would raise money from those who produce carbon emissions. Conservatives have long supported shifting from an income tax to a consumption tax, and Alder argues that this tax “would be more transparent and less vulnerable to rent-seeking and special interest mischief than equivalent cap-and-trade schemes.” But again, government enforcement is far from necessary, and more likely to create problems.

The free market is increasingly shifting toward more “green” options on its own. Consumers are increasingly drawn to products that market themselves as environmentally friendly—cars such as the Toyota Prius and other hybrids, along with companies such as New Belgium Brewing, maker of Fat Tire Amber Ale, which reuses or composts over 75 percent of its manufacturing waste.

One need not resort to the strong arm of government when the general population itself can choose—and increasingly will choose—the cleaner options.

4. The Free Market Adapts

Finally, despite the best efforts of some activists, some degree of warming may have already spread across the globe. Alder suggests market-oriented steps that can improve our ability to adapt.

Back when wood was the primary source of fuel, many feared the world would run out of wood. Now, many fear that oil and other fossil fuels will dry up, but hundreds of companies are investing in new technologies to move beyond those sources as well.

Free markets adapt to changing conditions because individuals and companies have incentives to change how they do business, and are not constrained by the government from seeking new ways of doing so.

If people truly desire more freedom and more ability to prevent global warming and to adapt to a warmer planet, they should promote free market reforms, where each person can contribute to a solution, rather than top-down government policies, where one man—or a bureaucracy—dictates how we should act.

If we truly care about the environment, we should let the people take care of it, instead of trying to force them through the government. If however, like Krugman, we prefer the quality and efficiency of the D.M.V., perhaps we should support the same failed big-government approach to environmental policy.

  • Jonathan

    In your closing thoughts, you state “we should let the people take care of it”. Unfortunately, they won’t. On issues of large-scale environmental changes, the connections between consumer choices and environmental impacts are too subtle for the individual consumer to detect and the negative impacts of their choices are too weak to overcome the immediate benefits of using/abusing natural resources. Even if they are educated about the impacts, most consumers will rationalize poor choices, knowing that their own contribution to the problem is small. When aggregated together, however, the choices of several billion consumers over decades can reap large scale negative impacts. Free markets, as we generally envision them, are incapable of communicating back to the consumer, impacts that happen only on such large scales and long time horizons. That’s why we have to sometimes resort to top-down remedies, such as government regulation. I wish it weren’t so. I much prefer the freedom of all choices being left to the individual. But in some cases, such as issues involving the planet that we share, free markets fail us. We must recognize that and be prepared to select the best solution for a problem whether it fits with our ideological preference or not.

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