Today is Earth Day, environmentalists’ annual celebration to raise awareness of supposedly pressing issues like climate change and pollution. Like many events of the green sort, reasonable people should be ready to be subjected to a barrage of denigrating capitalism and praising the state. Since greedy capitalists only care about profits, the state needs to ensure that the environment is clean, right?
Well, not quite. Actually, government action is the surest way to have an environmental Armageddon, and that’s an understatement. Take the former communist world for example, where 100% of the economy was in the hands of the state. In the USSR, massive irrigation completely dried out the Aral Sea. The drainage was so intense that the soil for the agriculture it was supporting became completely sterile and polluted with all the insecticides and fertilizers that were used.
In Mao’s China, the regime’s attempt to industrialize the country called the Great Leap Forward was not only a miserable failure but also accelerated erosion. Small-scale wood-powered furnaces were used to make low-quality steel on a massive scale. The pollution emitted from this disastrous program nearly wiped out the evergreen trees in the Sichuan region.
Despite some free-market reformations in the 1980s, China still has an all-powerful government controlling vast spans of the economy, opening the doors to corruption. Indeed, Professor Yuhua Wang of the University of Pennsylvania discovered that many polluting industries’ business leaders used to be local bureaucrats. As a result, they still have high returns on investment during high-smog days where officials try to limit industrial activity. So, ordinary citizens of major Chinese cities like Beijing and Shanghai should not expect to see a clear sky anytime soon.
However, this government-induced pollution is not limited to oppressive regimes. In fact, the US federal government is probably the largest polluter on the planet thanks in great part to its Department of Defense (DOD). From massive use of fossil fuels (80% of government energy use comes from the military), uranium-depleted ammunitions (which can cause cancer), and perchlorate (a rocket fuel which can inhibit child growth), the DOD produces more pollution than the five largest chemical corporations in the US!
Why are governments polluting so much? The answer is simple: it’s using resources owned by “the public”; in other words, no one in particular. This phenomenon is popularly known as the tragedy of the commons. When no one in particular owns a piece property, there are no incentives to preserve it. After all, would you voluntarily trash your own house? Your computer? Your car?
Niagara Falls’ Love Canal, built by Hooker Chemical in the 1940s to dump toxic chemicals, provides a telling example of the tragedy of the commons. Since the company didn’t want to be sued by neighboring people, they made sure the canal was solidly built and didn’t leak. However, problems emerged when the government bought the land through eminent domain and completely neglected its maintenance, causing leaks of chemicals in the water supply.
Capitalism, defined as a system of clear property rights and voluntarily exchange, is what environmentalists should advocate for. With well-defined property rights, people can negotiate with each other to achieve an optimal level of pollution. This phenomenon is known as the Coase Theorem, named after the late Anglo-American economist Ronald Coase.
This theorem works in reality. The city of New York, for example, gets its drinking water in the Catskills Mountains, some 100 miles to the northwest. In order to minimize the filtering costs, the city pays upstream farmers so they can limit their pollution of rivers. This way, everyone is a winner.
So for Earth Day, reasonable people should do the right green thing and advocate for more capitalism. Only through well-defined property rights can we effectively limit and control pollution. Asking for more government intervention is akin to throwing oil on a blazing fire.