Thoughts on Environmentalism: Pollution

            Essentially, what is necessary to strike a rational balance between pollution that quickens material economic development and environmental goods that retards it is a firm system of private property rights in the environment. This will prevent things like air and water pollution from being negative economic externalities, that is, costs that the producers of the externalities, in this case the polluters, can impose on other members of society without compensating them, in this case the victims of pollution. They are indeed negative externalities if no one except far-removed national governments owns environmental goods such as air and water and are consequently responsible for their protection. To illustrate how ownership could help reduce environmental pollution, consider the following: a man decides that he does not like the looks of bags of household waste sitting in his garage until garbage pick-up day, so he decides to throw them over the fence onto his neighbour’s front yard. Under current law, this, of course, is illegal. The neighbour’s front yard is his property, the man has no right to use it as a garbage disposal ground without his consent. Now imagine a similar scenario, but this time, the polluting man is a paper mill located on a river, and the neighbour is a farmer downstream. The paper mill disposes of its garbage (industrial waste) in the river, sullying the water downstream that adjoins the farmer’s property, which he liked to use as drinking water or as a place to swim. The facts of the case are similar, but for whatever reason, under current law it is treated very differently. The polluter of the river is not fully liable for his actions the way the garbage-tossing man is. This is because the farmer’s property rights in the river adjoining his property are not properly recognized. Now imagine that the law is changed to treat the farmer's portion of the river in the same way as the neighbour’s front yard, as his property that he may protect from physical invasion or pollution. The farmer would have a strong case against the paper mill, and he would presumably be allowed to sue them for damages and have the courts force them to cease polluting the farmer’s part of the river immediately, unless of course the paper mill paid the farmer for the right to continue polluting. The same reasoning applies to air, only this time, the ‘garbage’ is the noxious fumes given off by factories that waft into the lungs of nearby inhabitants, and, given recognition of private property in the air, the legal remedy would probably be a similar one.

            

           Now, the reader may be thinking that such legal remedies would actually weight the scales of ‘development’ versus ‘environmental goods’ tremendously in favour of environmental goods, thus joining the radical environmentalist proposals in results, even though the reasoning employed is different. For if pollution is considered an invasion of the just property rights of nearby people in their air and water, than any even minorly-polluting factory would be operating illegally and would be vulnerable to lawsuits that might be able to shut down their operations. Needless to say, this eventuality would be a disaster for industrial civilization if it occurred. These worries are justified, and I have worried about them a lot myself. Luckily, there are some ways to deal with these problems while still getting the benefits of private ownership of environmental resources. 

           As it is for a lot of libertarian ideals, the practical difficulties generally lie not so much with the ideal system itself but with the transition from a non-libertarian to libertarian arrangements. In an ideal world, reasonable property rights in air and water would have been acknowledged and respected the moment Homo Sapiens started settling land to farm and build structures on, according to the homesteading principles for acquiring previously un-owned land laid out most famously by John Locke. Real history, unfortunately, does not correspond to this ideal, consisting as it does of many forms of aggression against person and property and the trampling on and ignoring of what should have been private property rights. For our particular case, for example, the private property in air of land owners was generally acknowledged by courts in the early 19^th century, and plaintiffs could successfully sue defendants for polluting their air. This changed from the mid 19^th century on though, and polluters were allowed to continue polluting because the development of industry as quickly as possible was deemed to be in the ‘public interest’ and hence could not be interfered with by plaintiffs claiming that their property rights to air were being violated. Unsurprisingly, given this legal green light, industrial complexes that gave off a lot of pollution proliferated and what would have been considered property rights violations before became widespread. If private property to air was recognized, we could probably have expected the following: 1. Industrial complexes would have been situated in areas more remote from residential areas in order to avoid the consequences of violating air property rights. 2. More importantly, factory owners and other polluters probably would have attempted to buy an easement right to pollute the air of others, in exchange for money. This is how the free-market system could have decided between ‘economic development’ and ‘environmental goods’ in a rational way: by recognizing private property in environmental goods and allowing the holders of this property to trade away rights to these environmental goods for a price. Because the conflict is between potential and current polluters and potential and current victims of pollution, the people best equipped to work out the conflict in a mutually beneficial way are these two groups and them alone, through the mechanisms of voluntary exchange. This would force polluters to internalize what is now a negative externality by paying the main victims of pollution to bear the environmental cost. It would on the one hand incentivize producers to employ processes of production that resulted in less pollution, as this would mean they would have to pay less to nearby bearers of the environmental cost, and on the other hand would result in compensation for the people who actually bear the brunt of the negative consequences of the pollution, the ones whose land, water, and air is affected significantly by the pollution.

            

           The problem is that this framework of respecting private property rights to environmental goods was not maintained in actual history, pollution being treated like a negative externality by polluters instead. To affect a reasonable transition from the current state of affairs to the one envisaged, we must, to the best of our abilities, try to guess what free-market arrangements would have been in existence if environmental property rights had been respected. Some libertarians writing on this issue, such as Murray Rothbard and Walter Block, have portrayed air and water pollution mainly as invasions, aggressive actions perpetrated by polluters against their hapless, defenceless victims. While polluting someone’s air and water without their consent should indeed be considered illegal, the problem is that since private individuals generally were not allowed to assert their ownership over air and water resources, they were prevented from either giving or withholding their consent. To portray air and water pollution as in the main a criminal invasion is to guess that if a free-market, environmental property-respecting system had been in place, owners of air and water resources would have steadfastly refused to allow their environmental resources to be used as receptacles for pollution no matter what. This scenario, however, is unlikely. Clean air and water, like any economic good, has diminishing marginal utility, that is, the cleaner the air, the less people will tend to value one ‘unit’ of cleanness and consequently the more willing they will be to exchange such a ‘unit’ for some other good, such as money. Though perhaps most could bit have been induced to accept heavy pollution putting them at risk of serious lung disease, most probably could have been induced, if paid the right price in money or other goods, to accept some amount of pollution resulting in a reduction in the cleanness of their air or water resource.

            

           Keeping these considerations in mind, I will now try to outline some principles that could probably fruitfully be followed in any transitional period. The first is that polluting factories should generally have the right to their existence affirmed, provided that they adopt reasonable best practices to help keep pollution to a minimum. This is because, given a regime where environmental property rights were delineated and respected, few factory owners in their right mind would have opened a polluting factory in a certain area if they knew that by doing so, they were vulnerable to lawsuits and court injunctions to stop their activities. This would represent a huge waste of investment capital if it happened. Rather, before setting up shop, factory owners probably would have made sure that they came to an arrangement with the owners of the environmental resources they would be polluting, probably buying some kind of pollution easement in exchange for money, that is, paying the people who would be bearing the environmental cost a voluntarily agreed-upon sum of money in exchange for their loss. The amount that would have to be paid for such easements would have entered as a serious item into any competent factory owner’s calculations being used to determine which location to situate his factory in. If the costs proved prohibitive, factory owners could have decided to locate their factories in more remote areas or in more industrially-dedicated areas where pollution was more acceptable, provided the disadvantages of doing so did not prove too overwhelmingly great. In the real world, conditions are different from these hypothetical considerations, factory owners for the most part viewed pollution as a negative externality they could impose on non-consenting people with no cost to themselves and situated themselves accordingly. Nevertheless, it would be impractical to just maintain that since the factory owners did not have easements to pollute, any pollution currently being done should be treated as a criminal action. The factory owners did not buy easements to pollute because they did not need to do so and because individuals did not have the right to sell such easements, but they presumably would have bought such easements if environmental property rights had been consistently respected. To simply allow current victims of pollution to force the factories to cease and desist their polluting operations might not only result in a catastrophic fall in production and a waste of capital investments made in the past on a monumental scale, but seems unfair to the owners of the factories. Essentially, they are being hit with an ex-post facto law. On the other hand, to simply assume that all polluting factories would have had the necessary easements to pollute to the levels that they do currently and thus allow them to proceed as before is unfair to the victims of pollution, who never got a chance to defend themselves from pollution or reach mutually beneficial agreements with the polluters.

 In light of these considerations I propose the following transitional arrangement: 1. Polluters will be given ownership of pollution easements over the property that they are currently polluting but only to the extent of the amount of pollution typically created by average production using available environmental technologies and best practices that the polluter can reasonably be expected to adopt at non-prohibitive costs. 2. For this easement, the polluter will have to pay an amount of money annually to the owners of the air resources being polluted (probably an air protection association, but more on this later) based on the amount of pollutants emitted. This amount will have to be an appraised, not a market, value and thus will be pretty arbitrary. Perhaps a calculation involving the costs of curing pollution-related diseases divided by the increased likelihood of getting such diseases that each bit of pollution brings might be a reasonable way of making such an appraisement.  3. The forgoing applies only to polluters situated in mixed residential-industrial areas. For polluters situated in mainly industrial areas, it can be assumed that pollution easements had been homesteaded by industrial polluters and thus owned by them, and that any residents who lived in such areas knew what they were getting into and knew that area would be particularly polluted when making their decision to live there. 4. If polluters do not wish to reduce their pollution to the easement level outlined in point #1 in mixed areas, they may negotiate with the owners of the air resources to buy a bigger pollution easement from them, presumably in exchange for money. Similarly, if the people being polluted wish to have less pollution than defined by the easement level, they may give up some of the compensation money or even pay additional money to the polluters in order for them to give up or level down their easement level. 5. In order to prevent a non-market price (the appraised compensation value) from lingering indefinitely and interfering with genuine market exchanges, it and any associated pollution easements should expire after a sufficient length of time to allow factory owners to adopt cleaner technology, consider different locational options, and generally adjust themselves to the new institutional framework, perhaps 20 years. Hopefully by this time, and certainly after, genuine market exchanges between polluters and polluted will become the norm and the arbitrariness necessarily involved in the transitional period will dissipate.

This transitional plan is of course not perfect, but any such plan will involve difficulties. The fact that such plans are difficult to formulate points to the importance of establishing private environmental property and free-market transactions as quickly as possible, for only through these can the problem be solved in a rational and non-arbitrary way, based on the demonstrated preferences of owners and would-be owners of environmental goods such as air and water. In one sense though, even the transitional period will be an improvement over the status quo. This is because currently, far-removed governments impose environmental taxes on polluters, with the proceeds going into the general treasury of the government. Though the level of the taxes and the amount of pollution permitted by the government and the appraised compensation value and level of pollution easement during the transitional period are all arbitrary, at least during the transitional period the victims of the pollution will be the ones compensated by the polluters, rather than the national or provincial government stepping in and taking that money for themselves.     

With this provisional transitional plan roughly in place, let us now consider some possible problems once the ideal system is reached. The main problem with carrying out transactions with environmental goods such as water, and especially air, is that there will most likely be a great number of these resource owners affected by pollution. For a factory to be compelled to make individual deals with each person whose air quality will be affected by pollution from that factory would be very costly and thus impractical. Another problem is that of the stubborn hold-out. What if a factory owner reaches a mutually beneficial agreement with every inhabitant of the locality whose air is to be polluted except for one who refuses to make a deal at any price or at only prohibitively high prices, perhaps because he is a die-hard environmentalist? A relatively small number of such people could render industrial production nearly impossible in vast swathes of territory, something that would probably result in a serious decline in the society’s material standard of living. Some hardcore libertarians might object that just because I disagree with the value judgements of some owners of air resources does not mean that I have a right to label them a ‘problem’ and try to find a way to get around their stubbornness. After all, interpersonal comparisons of utility are not methodologically sound and only completely voluntary market exchanges demonstrate true benefits for both parties. While strictly speaking, all this is true, I personally care about our society’s material standard of living too much to allow the value judgements of a few isolated environmentalists to sabotage it.

As a solution to these problems, I suggest that owners of air resources should be compulsorily organized into Air Owners’ Associations, perhaps on the basis of existing municipal or county-based small administrative divisions. Thus, for example, everyone with a permanent or semi-permanent residence in Scarborough, Ontario (including residential renters) would be a member of the Scarborough Air Owners’ Association. If any factory wanted to open that would result in a reduction of Scarborough’s air quality via pollution, they would have to negotiate a mutually beneficial compensation arrangement with the association. This association would then divide the compensation equally among its members as it came in, whether annually, monthly, or whatever. The typical procedure would probably go as follows: the owner of a potential new factory to be built in the area or an existing factory owner who wanted to increase his pollution levels would go to the relevant association and try to make an arrangement to increase the level of his pollution easement. The association would probably track the level of air pollution currently in the air and make this information public, and based on this it could make an informed decision, based on the desires of its members that it represents, on whether to allow more air pollution and if so, for what amount of compensation. A factory owner may have to make arrangements with more than one association if his activities affect the air quality of more than one association’s member base. I imagine that the association would run on a representative-basis, members electing ‘air politicians’ to represent them. The most prominent issue in such elections would probably be whether a candidate would go for more dividends for members or more protection of air quality. I envisage a similar model applying to water resources, although the member base of these associations would probably be smaller and votes would not be equal but would be based on the amount of a body of water owned. Furthermore, water associations would have to deal with additional issues besides compensation arrangements with water polluters such as whether to allow any dams, water extraction, etc…

While this association idea is still a bit collectivist, I could not think of a way to make what would be the ideal solution, individual ownership and control over rights to the environmental resources of air and water, work in the real world. I do think that the association compromise is much better than the current system of government command and control regulations though. Firstly, as alluded to earlier, the polluters will be compensating the owners of the environmental resources being polluted, or those that bear the cost of the pollution, rather than paying money to a distant government. Though making polluters bear some of the external costs of their actions in the form of taxation is not a terrible idea, making the polluters pay the actual bearers of these costs directly makes a lot more sense. Secondly, these associations will be single purpose and will have a smaller member base, as opposed to national or provincial governments which are multi-purpose and have larger member bases. This should render the associations more responsive to their members’ desires on the particular issue of what to do with their environmental property than larger general governments are to their voters, where multiple different issues are debated and packaged up in elections. Thirdly, the smaller scope of these associations when compared with national or provincial governments leaves more room for interregional competition. Associations that are too unyielding when it comes to protecting air quality could lose potential factories, potential drivers of regional economic development, to other areas with more compromising associations, which might prompt members to vote in association leaders who are more compromising themselves. The same applies vice versa with associations that are too gung-ho about sacrificing air quality for monetary gain and economic development, for they might lose residents to less polluted areas and residential property values might fall too much. These three advantages mean that the association scheme will approximate the individual ownership and right to contract with environmental resources necessary for a rational calculation of the costs and benefits of polluting activities while avoiding most of its practical difficulties.

At its core, the problem with government command and control ‘solutions’ to environmental problems is that they do not consult the subjective values of those affected with very much precision. Do citizens prefer more economic growth with more pollution or less economic growth with less pollution? Besides voting in far apart elections that concern a vast array of other issues as well, the citizenry has no real way of making their exact opinions on this issue known. Besides, some voters may claim to be adamantly opposed to pollution in the abstract, but in government systems they generally do not face the real costs of this attitude until quite a bit later and in an indirect way. With the associations idea, being relatively more opposed to pollution has a price, namely, less money in the form of environmental dividends in your pocket and a more direct connection between this attitude and less economic and employment opportunities in your home area. In the same way, some voters claim that they are all for economic development and that all this environmentalist stuff is a leftist conspiracy, but some do so while living in places with relatively good air quality. Again, with the associations idea, being relatively more in favour of pollution has a price, namely, you yourself experiencing more pollution first-hand. While under government command and control, environmental issues tend to be framed as big, polarized, ideological issues representing different philosophical views, under the associations scheme, trade-offs become very real to the owner of environmental property, pollution versus money in the bank, air quality versus more economic development in the region. Also, in this form, individuals can make decisions on these issues in more precise and gradated ways, instead of in all-or-nothing are you an ‘environmentalist’ or an ‘economic development guy’-type decisions.