Free Market Environmentalism Is Not An Oxymoron

0:00Our final speaker is Walter Block. He teaches economics at the University of Central Arkansas and has just recently accepted the Harold E. Worth Eminent Scholar Chair in Economics in the College of Business Administration at Loyola University in New Orleans. He's an adjunct scholar at the Mises Institute. He's been published in many journals, from the Harvard Journal of Law and Public Policy to the Journal of Labor Economics to the Review of Austrian Economics. He's been the editor or Walter is our co-editor of a number of journals, a commentator on many radio and television programs, gives speeches all around the country to many different groups, and he's the editor, co-editor of a large number of books, too numerous to name here. And his talk is appropriately titled, Free Market Environmentalism is Not an Oxymoron, and I really like that title. We thought about calling this conference that.

0:56Thank you, Walter. Thanks for the kind introduction. I was listening to Doug Banda's speech and he mentioned that a lot of environmentalists now are very leftish and I have a, I don't know, a thing to keep in mind when you hear a story like that with which I fully agree. And that is, think of watermelons. I have three stories that I want to tell you about environmentalism, as all good stories have to start, long, long time ago in a faraway country. Actually, it's not a very faraway country, but it was long ago, and that was in the 1830s.

1:44In the 1930s you had a spate of what were then called nuisance lawsuits and we would now call them environmental lawsuits. Typically what would happen would be some railroad would come along and get sparks out onto a farmer's haystack and the farmer would go to court and say that their railroad set fire to my haystack and I want damages and I want an injunction to get them to stop it. or another case would be some old lady, little old lady would hang up her washing on a line and some factory a mile away would pollute dark smoke and get her laundry dirty and again she would go to court and pretty much in those days, because we had a legal regime of protecting private property rights, the courts were very respectful of that, very receptive to that.

2:37namely these courts would grant injunctions, namely prohibitions of the violators, the polluters, the people who were trespassing their dust onto the property rights, onto the property and lungs of other people or haystacks. They would award damages for the damage done and they would grant an injunction. And this was very salutary. This is very good because there were no externalities. The companies had to pay their internal costs, land, labor and capital, insurance, what have you, but they also had to take into account external costs, namely pollution. They would be led as if by an Adam Smith's invisible hand to use clean burning anthracite coal, even though it was a bit more expensive, rather than dirty burning sulfur coal, because they knew that if they used the sulfur coal, they'd get a bunch of old ladies on their case and they'd pay big bucks.

3:31So they had to take these things into account. Railroads had to try to prevent sparks, they'd have spark prevention devices, what have you. There was even a nascent forensic environmental industry. Now you all know what forensics is, and forensics is the study of blood and hair follicles and semen and fingernail, stuff under your fingernail. And the reason we have forensics is because we have laws against murder and rape. And given that we have laws against murder and rape, it behooves us to find out who done it. Well, one way to find out is to have a scientific crew to inspect the semen and whatever to find out who the bad guy is. Well, in the good old days, in the 1830s, we had environmental forensics, which meant, here's a piece of dust, where did it come from?

4:22Let's go get that guy, because he's trespassing. Okay, that's the first scenario. That was the good guy story. Now, along in the 1870s, 60s, 80s, this was the so-called progressive period. This was one of the first pushes of socialism or coercive socialism. And at that time, a new legal regime came into effect. In that time, the U.S. was not number one. You know, nowadays we have this The March Madness with the basketball and everyone's yelling we're number one or we want to be number one. Well, the U.S. wanted to be number one and Great Britain was number one. And the way to become number one was to have more manufacturing. This was a new legal philosophy that took place in the 1880s, 1890s.

5:09This was a gradual process. And then what happened when some old lady would come to the court or some farmer would come to the court and say, and say, well, there is an environmental pollution, protect my property rights, grant me an injunction, grant me damages, they'd say. What? You're stinking, sniveling, selfish, private property rights? The hell with your stinking, sniveling, selfish, private property rights. Well, that's a mouthful. There's a higher good, a higher goal. And you have a little drum roll and what's the higher goal? Well, you've got to be number one. We've got to whip Britain's And the way to do that is to give carte blanche to manufacturers. Let them do their thing. Let them use other people's lungs and property as sinks for disposal of pollution.

5:57Well, now, under this regime, everything was different. There's no need for any environmental forensics. The only reason you have environmental forensics is to find the bad guys. But now there are no bad guys because the law was changed to undermine private property rights. Now there's no incentive to use anthracite coal. There's no incentive to have research and development to stop pollution. There's no incentive to have scrubbers or smoke prevention devices or all these other good environmental things. Now, if you're a green business person, businessman, and you say, well, you know, let these other guys pollute and do bad environmental things, I will be, maybe I'm a religious person, I don't want to trespass, or maybe I'm a green businessman type, and I will have smoke prevention devices.

6:43What happens to you, you go broke, because you have a competitive disadvantage. Everyone else is doing their thing, and using other people's property to dispose of waste, you're not. Other things equal, you'll go broke. Now there was one SOP that the court offered the environmental plaintiffs and that was minimum smokestack height laws. The idea was you get that smokestack 300 feet high and it's not going to get this little old lady. It's sort of like putting the problem under the rug or into the clouds. Some other old lady will get it or other people's lungs will get it. And that was pretty much the situation of the law from about 1870 to about 1970, 1960, I'm not much of a historian, but that's roughly the time period.

7:33And all during this time, the invisible hand wasn't working because the underlying regime of private property rights was undermined. And all of a sudden we realized that, you know, we're choking on our own excrescences. You know, you have to wear gas masks in certain places. There was once a cartoon I saw. There was a mother and a daughter in an outdoor restaurant and the mother said, hurry up dear, eat your soup. And you'd think she'd say before it gets cold, but she said before it gets dirty. The air was really horrible. I once went from New York to L.A. and I got off the plane and my eyes started tearing and I wasn't very unhappy or or anything. It's just that I wasn't used to the California pollution. I was used to the New York stuff, but you know, it was pretty tough. And of course capitalism was blamed and markets were blamed and private property was blamed and greed was blamed and business people were blamed, but the real problem was none of that. The real problem was the lack

8:32of private property rights. So when I say that it's not an oxymoron to talk about free and market environmentalism, that's one story, that's a case in point. Okay, the second story occurred, I forget what year it was, maybe in the mid-80s. And what was happening was two things were happening. One thing that was happening was, this is before the belly-up of the Soviet Union, so it must have been the mid-80s. And what happened was that McDonald's opened up a restaurant in Moscow. And I was applauding, oh, this is wonderful, you know, McDonald's is sort of emblematic of our free enterprise system and we'll show those commies, you know, how we do it and this is great, they'll get burgers, they'll get fries, you know, they'll see some of the benefits of the market.

9:26This is really wonderful, maybe it's not the thing that we can be most proud of, but it's a nice thing, you know, You know, good quality food, the poor can go out to restaurants, you're traveling around the country, you stop at a McDonald's, you know what you're going to get. It might not be five-star stuff, but it's good. And around the same time, a McDonald's was trying to open up in Seattle, and they wouldn't let them. Why? Because they were using styrofoam and plastic stuff in those days, and the environmentalists were going rabid and crazy like they do in Seattle just a year ago. Seattle is a great place for going rabid, for some reason, don't ask. And I said to myself, wait a second, you know, something's funny here, here the goddamn commies are allowing McDonald's to open and here in the land of the free and the home of the brave, you know, you can't even open a McDonald's, what's going on here?

10:13And the answer was it was all due to this environmental nonsense because of plastics and styrofoam and this and that and the other. Okay, well I'm going to assume for the purposes of my second story, this is a story about plastics and styrofoam, that plastics and styrofoam are every bit as evil and vicious and environmentally disruptive as all the lefties say. Just assume for the sake of argument. Later, if I have time, I'll call that assumption into question. Well, if this is true, Adam Smith's invisible hand is supposed to be helping us out. The invisible hand is your lead, as if by an invisible hand to do that which is in the public good, even out of your own selfish interest. That's one of the essences of the capitalist story, one of the greatest defenses of free enterprise.

11:01Well, how come it's not working? And I want to illustrate, let's see if I can get that thing to work. I'm a pro-tech person, so wish me luck.

11:36Okay. What I'm doing here is I'm going to take you, my first scenario here is you're now at the supermarket checkout counter and they've rung up all your groceries and they ask you this $64,000 question, paper or plastic bag. And I'm going to assume that the costs of these things are explicit, not implicit as they are in many cases, although there are some supermarkets where they'll charge you for a plastic bag or a paper bag. Let's assume that they do it explicitly so we can have something out here to show you. And let's assume that it costs a penny to produce a paper bag and a penny to produce a plastic bag. And do you have any incentive to eschew the un-environmentally sound plastic bag?

12:24No, because it's a penny versus a penny. So the only incentive that you have to act in a green way, to act environmentally soundly, is benevolence. which is all well and good, benevolence is great and some of my best friends are friends and I smile once in a while and you know benevolence is nice but you know you can't really count on it as much as you can for selfishness so we're not really doing too well yet defending the marketplace because you know what Adam Smith said about benevolence he says it's not from benevolence that the butcher and the baker and the candlestick maker give you their product it's out of a keen analysis of their own selfish interest So I'm not against benevolence but I think we need more to show the viability of markets than benevolence and so far we don't have it.

13:09Okay, let's try again. Okay, so far we discussed producing. Now we're talking about disposing of it. And again, it's a penny versus a penny. Assuming, actually, it's hard to say this because most disposal, most garbage, you don't pay per disposal of a paper bag or a plastic bag. Rather, you pay a fixed price for garbage disposal to your town council or what have you or to the city through taxes. And I could either put a penny there or I could put zero depending on how we did it, but the point is there'd be no marketplace incentive yet.

14:01So where's the greatness of the market? Well, the greatness of the market comes about, or we can see it, when we realize that the government, bad guy, has undermined yet another instance of private property, and that is solid waste management or dump sites. Imagine now, second scenario, first scenario was at that checkout counter when they asked you which paper bag or plastic bag you wanted. Now imagine that we had a scenario where there was no municipalization of garbage dumps. All garbage dumps were private. Now you had to put stuff in a garbage dump because if you piled it up in your house, the neighbors would get on your case, you'd be a nuisance or what have you. You can't put it at the side of the road or on someone else's property.

14:49You'd have to make a deal with a private dump site owner. Now let's suppose, again, that paper really is environmentally sound. It's biodegradable. It's all sorts of great stuff where it's plastic and styrofoam will create methane gas and all sorts of monstrous environmental situations. Let's suppose that the real cost of putting a piece of paper bag into the ground is a penny And at the real cost, the full cost of putting a plastic bag into the ground is five bucks. Namely, anyone stupid enough, any private owner, stupid enough to allow you guys to put a plastic bag in his land is going to lose five bucks per plastic bag. You get it? Okay. Well, what then will the market generate as the cost of disposing of a plastic bag?

15:39Would it be $10 or $9? No, because then excess profits would be made, and in equilibrium, not that we always reach equilibrium or even indeed ever reach it, but let's assume for simplicity that we are at equilibrium, the price would have to be no higher than $5, because at $5 or $1 or more you make profits. Nor could the price be $4, $3, $2 or $1, because then you would lose money and eventually go bankrupt. So, if we had privatization of solid waste management disposal, dump sites, the scenario would look a little different. The difference would be, it would not be two cents versus two cents.

16:33So it would rather be 501 versus two cents. Do you see the point? The next time, now go back to the first scenario when you were at the checkout counter, and now they ask you, do you want paper or do you want plastic? The answer is very clear and it's not going to be depending upon benevolence. Rather, a keen analysis of self-interest will lead you as if by Adam Smith's invisible hand to eschew the evil, vicious plastic or styrofoam You want to take the paper. Does anyone doubt that the whole environmental problem will go away if we have prices that reflected the true costs? This is very similar to one of the points that was made by the panel before, that if you don't have prices that mean anything, you can't plan your way out of a paper bag or a plastic bag.

17:26Now, what is the true case? Is it really true that plastic is so bad and styrofoam is so bad? Well, there is this guy, William Rathje, R-A-T-H-J-E, who is a garbologist. A garbologist is like an archaeologist, only an archaeologist, you know, gets into ancient ruins. A garbologist gets into garbage. Now, it's true, no little kid grows up wanting to be a garbologist. On the other hand, no little kid grows up wanting to be a proctologist either, and yet we have them. So we have garbologists, and according to Rathje, can you imagine some proud mother saying, my son the garbologist, you know, doesn't quite ring true. In any case, William Rathje, the garbologist, gets down in deep and dirty intergarbage, and he finds out that really the bad stuff is paper, especially phone books, which release methane gas.

18:18Now, I'm no garbologist, I don't know, I just sort of take it on faith, but I have no bias one way or another. My bias is toward the market to show how private property rights can help you. You see, the point is that at 501, it doesn't mean that no plastic bags would ever be used. Rather, it means that plastic bags would not be used unless they were worth 501 or more, or more than 501. What kind of plastic bags would still be used? Well, the stuff that they drip into your arm when you're in the hospital, you can't use a paper bag for that, you use a plastic bag. The point is that the market would naturally gravitate toward rational use of resources if the market were allowed to be the market. But if the government rescinds the market, in this case, solid waste management or dump sites, then of course it can't work.

19:08And similarly with packaging. The reason we have so much packaging and stuff that's so hard to recycle, You've got orange juice, frozen orange juice with tin, with plastic, with cardboard, which is very expensive to recycle because there's no incentive to do it because you don't pay for that. If you had to pay more to dispose of hard to recycle stuff than easy to recycle stuff, you'd be buying the easy to recycle stuff and any company that didn't give you that would go broke. So there are sort of waves of ramifications of markets here. Private property or the lack of private property in one area translates into socialist chaos in other areas. Okay, the third story I want to tell you has to do with the, what do you call it, species, ending of species, species survival, going extinct.

20:01And I don't want you to laugh at me because I'm not a great artist, but I'm going to draw a picture of a cow and a buffalo. The reason I draw a picture of a cow and a buffalo is because we as social scientists, we as economists have to explain why it is that the cow never went within a million miles of being extinct, whereas the buffalo almost bit the dust. the Dust. So here goes my auditory.

20:51They have horns. I wanted to indicate horns there. See, as far as I'm concerned, I'm a non-biologist. I hope that if there are any bioprofessors here, they'll excuse me. But as far as I'm concerned, they're the same animal. You know, don't confuse me with, you know, the species, the genus, you know, they both move, they both give milk, they both have horns, they both have a tail that flap around, and if you crash into one of them, you're in trouble. You know, you don't want to mess with these guys. But otherwise, they're the same bloody animal. And why is it that one went extinct and the other didn't go extinct? It's because of the tragedy of the commons. There was a stupid movie that probably won awards, Dances with Wolves, which showed a bunch of evil white men, you know, killing Buffalo.

21:40Well, the reason they were killing them is because they couldn't have private property rights in them. No farmer, even white ones, white male farmers who by definition are evil because they're white males, nothing personal guys, but you know, white males are evil, just have to accept that. Well, no white male farmer goes into his lower 40 with a machine gun and starts shooting The reason he doesn't is because if he doesn't, he has a cow tomorrow, whereas if he lets a buffalo go, he doesn't have a buffalo tomorrow, it goes to someone else. The example I like to use to illustrate this is two more scenarios. Suppose I give you orange juice. The first scenario is I give you each a can of orange juice and I give you a straw, And in the straw, there's a monitoring device, unbeknownst to you, that monitors how quickly you sip that orange juice throughout the lecture.

22:33And, you know, you probably sip it slowly because, you know, you've got to make it last, and there's this boring lecture on economics, and, you know, God forbid you run out of orange juice, you're in trouble. So it lasts pretty long. You drink it slowly. The second scenario, I'll give you one big, fat, big swimming pool worth of orange juice and long straws so you can all dip into it. And now, you're going to slip until your head comes off, because if you don't, the guy next to you is going to grab your share. Do you see the point? In the case of buffalo, it's like a common orange juice. You've just got to slip it up quickly. You've got to kill those buffalo quickly, even if you only use their tongue, because if you don't, somebody else is going to get them. Whereas with cows, they're yours. So obviously the answer is to privatize the buffalo.

23:20And elephants are just cows with big ears and a funny nose to continue my biological lesson here. And I hope I'm not tossed off the stage for this because, you know, a week on biology. But the key is the tragedy of the commons, which is underlying why the black rhino and the elephant and these other animals that some of the other speakers mentioned are in such trouble. And also, as they mentioned, when they are privately owned, then people tend to economize on them. I just want to end with one last point. See, I'm not really against collectivism. I'm not really against communism, as in communism. I'm not really against the commons.

24:09I'm not even against socialism. I'm against the coercive versions of those things. In other words, don't take this Buffalo Cow business to assume or to derive or to imply that I'm opposing all collectivism or all communalism or all commons. After all, a partnership is a commons. The key is, is it a voluntary one or is it a coercive one? And I want to draw something else to illustrate that.

25:03I'm sorry to keep pausing. I should have had this set up so that I can talk from here. What I'm trying to say is that there's a two-by-two matrix. On the one hand, we have voluntary actions. On the other hand, we have coercive. Those would be the columns. And then the rows would be socialism or collectivism or communism or commons or what have you. And the other would be capitalist or individualism. To me, it's not a debate between socialism and capitalism, rather it's a debate between voluntary action and coercive action. Because, let's give an example of a voluntary socialist commune. What are the examples? The commune, the kibbutz, the monastery.

25:50The American family lives according to the Marxian notion of from each according to his ability, to each according to his needs. There's a mother and a father and a three-year-old daughter. Does she eat in accordance with her ability to earn income? No. She earns in accordance with her needs, which is the Marxist notion of socialism. Perfectly good thing as long as it's done voluntarily. A club, a partnership, a business partnership, these were all voluntary socialist institutions and there's nothing wrong with them. On the other hand, you have the coercive socialism, which is Cuba, North Korea, the good old USSR, where you have things done on a coercive basis. So what's wrong with communism of the Soviet variety is not the communism part but the coercive part of it.

26:39If it was done on a voluntary basis where you can quit any time you wanted, there'd be nothing wrong with that. Similarly, voluntary capitalism would be laissez-faire capitalism, that would be the box I've called C, and D would be fascism or nazism, where you have a veneer of capitalism and a veneer of private property rights, but the whole thing is coercive. Okay, I've told you my three stories, I rest my case, take care.