Terry L. Anderson

Frontiers of Free Market Environmentalism

To a Lonesome Dove cowboy driving cattle from Texas to Montana in the 1870s, the idea of fencing grazing territories would have seemed as ludicrous as flying to the moon. Not only would he have asked how you would do it, but he would have wondered why you would want to. With an endless sea of grass, there was no reason to be concerned about the tragedy of the commons, and even if the tragedy set in, fencing was not an option on the treeless prairie before barbed wire was invented.

Is Government Regulation the Solution

As discussed in Chapter 1, we have a multitude of demands for environmental goods and services. Whether it is clean air and water, tropical rainforests, habitat for polar bears, open spaces, controls on carbon emissions, whales, or energy conservation, we are willing to spend time and money on getting more of the environmental goods we want. The problems we face are how to respond to changing demands, how to tradeoff competing demands against one another, and how to balance these with the desires for other goods and services in the economy. Addressing these questions requires that environmental policies be efficient or as cost-effective as possible. This chapter examines the role of government regulations as a way of improving environmental quality – which is the traditional approach – and compares it to environmental markets. There are many different ways to produce environmental goods, ranging from markets with well-specified private property rights, the subject of Chapter 3, to governmental regulation, the solution considered in detail here. One reason for choosing government rather than markets is the potential for markets to fail in fully accounting for social costs and benefits. As discussed in Chapter 1, we have a multitude of demands for environmental goods and services. Whether it is clean air and water, tropical rainforests, habitat for polar bears, open spaces, controls on carbon emissions, whales, or energy conservation, we are willing to spend time and money on getting more of the environmental goods we want. The problems we face are how to respond to changing demands, how to tradeoff competing demands against one another, and how to balance these with the desires for other goods and services in the economy. Addressing these questions requires that environmental policies be efficient or as cost-effective as possible. This chapter examines the role of government regulations as a way of improving environmental quality – which is the traditional approach – and compares it to environmental markets.