Market Solutions To Environmental Problems Urged

Tuesday, September 25, 2018
Image credit: 
Patrick Beaudouin

Image credit: 
Patrick Beaudouin

A greater focus on property rights and market solutions to environmental problems would better protect natural resources and give people a stake in their stewardship, says Terry Anderson, the John and Jean De Nault Senior Fellow at the Hoover Institution.  

Anderson is one of the founders of “free market environmentalism,” which involves using markets and property rights to solve environmental policy issues. In 2015, he published the third edition of his coauthored book by that title. Anderson is the author or editor of thirty-nine books, including most recently Unlocking the Wealth of Indian Nations (2016).

Anderson was recently interviewed about free markets and the environment.

What role should markets play in protecting the environment?

Markets reflect the value that human beings put on goods and services, and the environment is a valuable good. When we exchange money, other resources, or just plain goodwill with owners of water, land, forests, air, fish, and any other environmental good, we signal to the owner that environmental assets are worth conserving.

How can property rights protect natural resources?

Property rights give owners a stake in stewardship. Just as the owner of a car has an incentive to care for it in order to enjoy the services it provides, property rights to natural resources give owners an incentive to be good stewards. As the rancher’s adage goes, “If it pays, it stays.”

What are some of the successes of free market environmentalism?

Timber companies sustainably manage their trees giving us more trees than we had a century ago. Where governments such as New Zealand and Canada have established a “total allowable catch” for a fishery (e.g. salmon and halibut) and allocate tradable shares that catch, fishermen shareholders have stopped overfishing and taken actions to protect fish stocks.

Agriculturalists have cooperated with environmentalists when those groups have been willing to pay farmers to conserve water and leave it in stream for endangered species, or to pay ranchers to reduce grazing in areas where livestock might come into harm’s way with grizzly bears or wolves. In African countries where villages share in the profits of sustainable hunting, poaching is reduced.

What are the arguments against free market environmentalism?

The two main arguments against free market environmentalism are 1) the environment is a right that we should not have to pay for (in other words, “better dead than bred” is a slogan of animal rights groups), and 2) property rights are not always easy to define and enforce.

The first argument begs the question, who will supply environmental quality? The second does make market solutions problematic for the global atmosphere, but environmental entrepreneurs are defining and enforcing property rights for many other natural resources.

What areas of US environmental law would you change or modify? 

There are three obvious examples where free market environmentalism could do a better job.

Rather than penalizing resource owners with habitat for endangered species (e.g., forest owners who have spotted owl habitat), we could pay them to conserve that habitat.

We make national parks virtually free and therefore underfund them ($12 billion infrastructure backlog). Charging reasonable fees to visitors and retaining those fees where they are collected could go a long way toward giving parks more funds for taking care of our national assets.

Environmental regulations for clean air and water could be devolved to lower governmental units where citizens are directly affected by emissions. Rescinding the Waters of the US ruling that placed all waters of the United States under EPA authority and devolving water management to the states was a move toward letting local people determine how and how much to control emissions.


Clifton B. Parker, Hoover Institution: 650-498-5204, cbparker [at]