THE FREE-MARKET ENVIRONMENTALIST Environmental Quality/Economic Prosperity - An Achievable Ideal Volume 1, Number 1 An Introduction I thought that, perhaps, some personal background would be in order in this first issue. Following graduation from the University of California at Davis in 1979, I was employed as a geologist in an environmental consulting form. My career began with the water resources investigations associated with the Air Force's proposed mobile basing of the MX missile. In 1981, Reagan decided to use the existing, hardened silos rather than mobile basing. I hope national security was served because my job certainty certainly wasn't. I took my walking papers and enrolled in graduate school. After several years of graduate studies, I reentered the workplace and began focusing on ground-water contamination issues. This entailed interesting problems, such as oil slicks floating on ground water, surface pond leakage into subsurface soils, and contaminatiot migration in low- permeability ground-water aquifers. Eventually, I realized that our services were being rendered to "the environment" rather than to human beings. This is the crux of environmentalism ("The Toxicity of Environmentalism") George Reisman has summarized as follows: "The environment is considered to be a value in and of itself, apart from its relation to humab being." human being." FME is dedicated to providing an alternative to the environmental ethic by upholding the principle that the environment should serve human beings. Owning the Air: A Market Alternative to the Clean Air Act The value of free markets is widely recognized as their ability to produce those goods and services for which property rights are easily stipulated. Air has generally not been viewed as being amenable to the application of property rights. This article, an extension of the air rights example in FME December 1990, will demonstrate how property rights apply to air. First, let's review the present method of mandating standards. In late 1990, the Clean Air Act was amended. Amond other things, the revised Act mandates reductions in volatile organic compounds (VOCs) from tailpipe exhaust. The mandate is based on the assertion that VOCs cause the formation of ozone, one of the principal components of smog. The EPA has been striving for years to reduce VOC emissions from automobiles. In fact, from 1974 to 1988, VOCs were reduced by more than 40 percent in American urban areas. However, the average level of ozone INCREASED slightly during that time. The EPA has estimated that controls on nitrogen oxide and hydrocarbon emissions will add $100 to the price of new automobiles. However, a Brookings Institute study has shown that regulations that raise car costs slow the turnover of cars, leaving more old cars on the road. These cars burn fuel less efficiently and generate higher emissions. Pre-1981 cars now account for 83 percent of all VOC emissions. (Warren Brooks, "Will Senate Declare War on Family Autos?" Human Events, Feb 3, 1990; and Rose Gutfeld, "Clean Air Proposal Eventually May Add As Much as $600 to Car Sticker Prices," Wall Street Journal, Oct 11, 1990.) Air pollution is a complex issue. As such, it requires a principled approach that allows the incorporation of new information while insuring flexibility to address the problem. These requirements can be met by a free market. What Is Pollution? The first thing required is a better definition of pollution. Today, pollution is commonly considered to consist of industrial wastes that adversely affect human life. However, this definition is too narrow. It needs to be expanded to include non-manmade sources because nature is also a polluter of the environment. Edith Efron (The Apocalyptics, Chapter 4) lists numerous examples of natural pollution including the following: * Radioactivity of uranium in the earth's crust * Sulfur dioxide (SO2) that occurs naturally in air. * Metals such as arsenic, that are emitted from plants and degassing of the earth's crust * Asbestos contained in the earth's soil and rocks. * Hydrocarbon emissions from forests which exceed man's contribution to the atmosphere sixfold. These facts may seem surprising, but are understandable when we realize that, strictly speaking, man does not create new matter; he merely reforms it. Elements from wastes in industrial processes are not created out of thin air; rather, they are merely different forms or combinations of elements that already exist. In this context, the question becomes: If pollution exists in nature outside of man's influence, how do we define it? Pollutants can be defined in relation to their affect on human life. Elements in the natural or manmade world that adversely affect human life should be considered pollutants. Counter to prevailing perceptions, industry, for the most part, reduces pollution. When we modify and control our environment, we can reduce our exposure to pollutants. In fact, increasing industrialization has actually increased our life span. The average American life span has increased from 47 in 1900 to 74 years today (Elizabeth Whelan, 1985, Toxic Terror, p. 255.) The optimum solution to pollution is usually more technology. Simply by living in a house we remove dust and other airborne aerosols from our immediate environment. Switching from a 1000-megawatt coal-burning plant to an equivalent size nuclear plant reduces the plant waste from 3 million tons to 50 tons of waste per year (Dixy Lee Ray, 1990, Trashing The Planet, p. 134.) However, let's suppose for some reason, other than government regulatory restrictions, a switchover to nuclear is not feasible. Or, alterna- tively, most of a region's air pollution is from automobiles rather than heavy industry such as coal-burning power plants. In this case, continued population growth and the associated air pollution could have a net affect on some people. To prevent this, property rights need to be established for air. The Father of Property Rights John Locke is properly considered the father of property rights. In the 17th century, he defined two key concepts underlying property ownership: exclusivity and transferability. He noted that until there is a demand for a resource, it belongs to the "commons." Locke realized that people who find or develop new resources must develop a method to exclude their newly claimed property from the commons. In the case of land exclusiv- ity, it could be established by fencing the property. Transferability, allows owners to trade their property. This is often facilitated through the use of legal contracts. An additional feature of ownership is, of course, liability. When we use or sell our property, we must not infringe upon the rights of others. For instance, if a piece of machinery malfunctions and injures someone during normal useage the equipment manufacturer can be held liable for the injury. Now we have a framework from which we can apply property rights to air. To apply exclusivity, we define rights for those aspects of air that are in demand, such as ozone concentrations, VOCs, etc. With adequate foresight, the new owners of an undeveloped area could stipulate air rights prior to the start of development. In already developed areas, one method for initiating a market for air rights is an auction. Initiating the Market for Air To initiate the market for property rights a limited government presence is appropriate. In a free society, government's function is to protect individual rights. If the rate of growth of an area proceeds ahead of the evolution of the appropriate property rights, some individuals may have their rights infringed. Without the stipulation of rights, people can use a resource without being fully liable for their actions. The government, by initiating the auction, in this limited context, is taking action to prevent rights violations. For the sake of simplicity, let's assume that a few large companies purchase the available air rights for the area. At this juncture, the the rights (exclusivity) and liability belong to those companies. These companies can, in turn, sell (transfer) those rights in the form of effluent fees or permits. (The same principles apply if a large number of individuals or companies purchase the air rights. The difference is that the legal contractual arrangements will become more complicated.) Let's use VOCs as an example. A company owning rights to VOCs can add or subtract VOCs so long as there is no harm to others or their prop- erty. The owner needs to understand the nature of his property in order to dispose of it responsibly. In the case of air, this probably means conducting some sort of scientific investigation to understand the local physical and chemical reactions that affect VOC concentrations. The owner needs this knowledge to know what levels of VOC effluents are safe. Knowing this he can use the resource responsibly and thereby avoid liability problems. Using this knowledge, the owner can assess an effluent fee to individu- als wishing to purchase access to this resource. If the fee is too low, effluents in an area may become too high and as a result human health may be adversely affected. This would cause the owner incur liability. His potential liability, therefore, provides the appropri- ate motivation for him to maintain a monitoring program and optimize the fee. Transferability of the air rights can be accomplished by several methods. For mobile sources of VOCs, (automobiles, etc.) access to the resource (transfer) can be accomplished by a highway toll. For stationary sources, businesses can be metered as with utilities. Market competition would insure that fair fees are charged for the air rights. Overcharging would make a company vulnerable to competitive pressures, such as corporate buyouts, as with any other type of business. This approach is flexible and open-ended, as is the case in any free market. For example, highway tolls may work well in areas of high density but not in those of low density. Or, nature's pollution constributions in a certain area may far exceed man's and rates could be lowered accotdingly. The participants in the air market would determine how best to buy and sell the rights, as with any other commodity in the free market. In other instances, the government would need to intercede to provide further definition to the property rights of the parties involved. For instance, during monitoring, new chemical reactions might be discovered which indicate one owner's effluent is reacting with another owner's effluent, thereby necessitating redefinition of their respective air property liability. The Moral Case for Air Rights Decisions pertaining to the disposal of property are complex. Evalu- ation of an action's costs vs. benefits require individual judgement. A government agency can never know the values and specific context that an individual considers when making a judgement. As a result, when the government mandates controls it must rely on force to uphold them. But force is not a valid substitute for individual judgement. This contra- diction is the source of the economic inefficiencies associated with controls. The Clean Air Act is one more example of this principle failing to work in practice. This is why government needs to be restricted to the principle of preventing the use of force in human relationships. Market forces can flourish when property rights are well defined. In cases where property rights are infringed an impartial arbiter, i.e., the government, is needed. As I indicated in my opening remarks, FME will challenge the idea that the environment is a value apart from its relation to human well being. This idea is the fundamental moral principle underlying the environ- mental movement. (George Reisman, "The Toxicity of Environmentalism," 1990, The Jefferson School of Philosophy, Economics, and Psychology.) An alternate moral outlook was developed by Ayn Rand. Her ethical system is founded on the principle that human beings must pursue values to sustain life. In her system, nature is a value only in relation to human life. In evaluating the facts of nature, man considers the conditions of his life, and then places a value on nature. Depending on his context, he may want to keep it in its natural state, or pave it over with a four-lane highway. What do these moral outlooks have to do with air pollution? Rand's system gives a theoretical grounding for dealing with uncertainty in air pollution issues. Nature does not provide us with automatic knowledge of how to pursue our values. We are not programmed like animals. No one knows all of the chemical and physical parameters and reactions that occur in the atmosphere. The EPA has proven that by the fact that when VOCs emissions were reduced ozone levels increased. Yet, it is in our nature to continue to try to improve the conditions of our lives, which in turn means the use of industry with its associated air efflu- ents. Earlier is was stated that monitoring of urban areas would be necessary to establish appropriate levels of effluent. Deciding the level and extent of monitoring is a complex issue. Liability gives incentives for implementing a monitoring program. Anyone who disposes of their property, in this case an air effluent, must be responsible for it. But at a certain point, the costs of monitoring outweigh their benefit. Does the owner monitor every street, or every other street, or every 1000 feet, etc.? Eventually the owner must decide on a level of monitoring considering the relevant, available facts. If private property rights for air becomes a possibility, environmentalists will undoubtedly challenge it by claiming that no one can know for certain what will happen in the atmosphere. And they will be right. This is where Rand's principle of acting to sustain life, even in the face of uncertainty, must be invok- ed. It allows industry and the owners of air effluent rights to act on the knowledge they have. They will be innocent until proven guilty. It will be up to the environmentalists to prove that certain levels of effluent are harmful. Fortunately, there is a historical practice to support this theory: namely, the +200 years of industrial development that have occurred since the industrial revolution. People in technologically advanced countries live longer at a higher standard of living than nonindustrial- ized countries. Pollution reduction is possible by using higher levels of technology. These are facts, and when we combine them with Rand's moral outlook we have a supporting theory. In other words, property rights for air is the appropriate approach based on theory and practice. Summary To develop a comprehensive case for air rights we need both a theoreti- cal basis and practial application. The theory rests on the idea that values are rooted in life and the environment is a value only in relation to human life. This idea frees us to use the environment even though there is a level of uncertainty involved in our actions. In order to prevent one person's actions from infringing on another's, the principle of property rights must be applied. Government's function is to uphold the institution of property rights and arbitrate disputes over their boundaries. The use of property rights allows for a free market for the use of effluents in air. Air rights are economically efficient because they are based on property rights which allow individual choice in the market. The Case For Privatizing Science It is a common perception that scientists represent the highest height of objectivity and rational thought. Indeed, to be a scientist requires an unfailing commitment to the principle of objectivity. Observation to hypothesis, to experimentation, to peer review, and eventually to publication can be a grueling process for the scientist in pursuit of new insights into nature. Unfortunately, changes in 20th century philosophy have exacted the price of objectivity from scientific pursuits. In the early 20th century, the principle that the individual should serve society was becoming increasingly accepted. This principle formed the basis of political systems in Communist Russia and Nazi Germany. Although England lagged somewhat behind, in 1945 Winston Churchill was defeated and the socialist Labor party came into power. In the U.S. Franklin Roosevelt and his "braintrust" of the 1930s and 1940s promulgated the "New Deal" and its alphabet soup of government agencies. Rex Tugwell, one of the leading architects of the "New Deal," commented: "We are turning away form the entrusting of crucial decisions ... to individuals who are motivated by private interests." (L. Peikoff, The Ominous Parallels, 1982, p. 279) This thinking began creeping into the world of science in the 1930s. In 1939, J. D. Bernal wrote that science has a "social function." This sort of thinking gained momentum with the realization that technologic- ally advanced weapons could bring an early conclusion to World War II. Funding of the Manhattan Project brought scientists such as Robert Oppenheimer into the public eye. Subsidized Science Begins In 1963, the Office of Economic Cooperation and Development (OECD) recommended the development of a national science policy. OECD recommended that scientific activities be "coordinated through a central agency, and that it be integrated with public policy." Between 1963 and 1973, federal spending on general science more than doubled from $263 to $726 million (T.D. Long, ed., 1975, Science Policies of Industrial Nations, chapters 1 and 7.) Science and its offspring, technology, can indeed fulfill a social function. In terms of national defense, the use of science and technology protects the public. That so few American causalties have occurred in the war with Iraq directly relates to the U.S. military's overwhelming technological superiority. Science also has a social function in the context of a free market. When people are free to apply science and technology to their lives, products and services can be developed more efficiently and at lower cost, thus enabling more people to purchase these same good and services. However, these are not the functions currently envisioned for science. By the 1960s, "serving society" had come to mean acting in an altruistic and nonprofit-seeking manner. For science to serve, it followed that it should be Federally funded. In a market situation, consumer demand drives the flow of resources. However, when a government funds an activity, that activity is, by definition, removed from market forces. Individual choice and the supply and demand of the market no longer function. The vacuum they leave is instead filled by a "consensus." The Scientific Consensus In a subsidized area of study, government administrators allocate its funding. Since the administrators are not experts in these fields they must rely on "established" experts. Because they lack even the know- ledge to pick qualified experts they must rely on reputation. (Ayn Rand, "The Establishing of an Establishment," Philosophy Who Needs It, 1982.) When the large-scale science funding was beginning in the 1960s the "established" environmental "experts" included Rachel Carson, Paul Ehrlich, Barry Commoner, and the like. According to them, the earth has an "egg-shell delicacy" and the "unity" of life is very fragile. These are the principles of holistic biology and resource economics and they form the foundation of thought for the environmental "scientific consensus." (See FME Dec 1990 for details.) Other more general philosophic ideas were also incorporated into the scientific establishment in the 1960s. For several centuries, Western philosophers, such as Immanuel Kant, had been promulgating theories that had undercut man's independent ratioanl faculty. Kant said the senses were not valid. This led to the idea that reality was subjective rather than objective. These ideas were being promoted by scientific philosophers in the early 1960s. Sir Karl Popper stated that scientific discovery was not a rational process, but that in validating theories there was objectivity. Popper's student, Paul Feyerbend, took thingws even further: "Scientific method ... is but an ornament which makes us forget that a position of anything goes has in fact been adopted." In 1962, science philosopher Thomas Kuhn wrote The Structure of Scientific Revolutions, that has since been widely read in the scientific community. Kuhn discussed how scientific paradigms (comprehensive theories) came to be accepted. He stated that scientists "...must have faith that the new paradigm will succeed with the many large problems that confront it, knowing only that the older paradigm has failed with a few. A decision of that kind can only be made on faith." (James Lennox, 1981, "The Anti-Philosophy of Science," The Objectivist Forum.) >From Theory to Practice Let's review the effects of these ideas on the practice of science. It is illuminating to trace their effects in a particular field. Edith Efron (The Apocalyptics, 1984) has done this in the field of cancer research. (Page numbers enclosed by parentheses in the following paragraphs refer to Efron's book.) Efron identified Umberto Saffiotti as one of the National Cancer Institute's (NCI) leaders in developing public policy in the 1970s. Saffiotti developed the regulatory approach for testing chemicals as potential carcinogens. The basis for his approach is exemplified by the following statement: "I consider cancer as a social disease, largely caused by external agents which are derived from our technology conditioned by our societal lifestyle and whose control is dependent on societal actions and policies." (p. 84) His use of language should be carefully noted. He didn't say "the evidence indicates," but rather "I consider." The form of his statement appears to be more of a philosophic pronouncement than a scientific statement. What Saffiotti neglected to state is that nature is FULL of carcinogens. Carcinogens occur in soil, plants, and the atmosphere. Cancer existed long before modern civilization. Evidence of cancerous tumors have been found in Egyptian mummies and dinosaur skeletons (p. 135-176). What makes a substance toxic, is the dose (p. 344). For instance, sunlight is necessary for human life, but excessive exposure to the ultraviolet rays in sunlight can cause skin cancer. These facts had been published in the scientific literature for years at the time of Saffiotti's pronouncements on how the government should regulate cancer. Nevertheless, Saffiotti stated that the most prudent policy regarding the approval of chemicals for general use is to "consider all agents, for which the evidence is not clearly negative under accepted minimum conditions of observation, as if they were positive... In other words, for a prudent toxilogical policy a chemical should be considered guilty until proven innocent." (p. 85). In other words, industry is bad and nature is good. But at the time of his statement, in 1976, few industrial chemicals had been tested for carcinogenic properties (p. 85). Clearly, Saffiotti allowed ideology to warp his scientific judgement. A competent scien- tist, in the absence of adequate data, does not make wild speculations about the dangers of industrial chemicals while ignoring the data on natural ones. In 1978, Joseph Califano, the Secretary of Health, Education, and Welfare, (HEW) released a draft report on the hazards of occupational cancer. The report was released WITHOUT SCIENTIFIC PEER REVIEW. The study predicted approximately 2 million deaths over the next 30 years among workers in industries that involved exposure to asbestos. Initially, the only authors of the study listed were the National Cancer Institute (NCI) and the National Institute of Environmental Health Sciences (NIEHS). Four days after the report's release, list of "contributors" was issued that included two administrative heads of agencies. In terms of scientific convention, this still amounted to an authorless study since no one took primary responsibility for the work. The contributors were merely listed in alphabetical order. The number of deaths stated in the HEW study was 1,000 TIMES greater than any risk assessments present in the scientific literature at the time of the study's publication (p. 437). The scientific community was outraged. At a meeting organized several days later by NCI they vented their anger and frustration: * Richard Peto stated that 4 million men said to be employed in the asbestos industry were "all being treated as though they had been asbestos insulators for years. It's comical." * Michael Shimkin said that the estimates "are a good deal higher than might be legitimately based on scientific knowledge we now have" and called the public release of the unreviewed study "a tragic mistake." The central flaw in the study was that everyone working in the asbestos industry was assumed to be in the same risk category as those workers in the highest risk category. This methodology was so grossly flawed that the study was quickly discredited in the scientific community. Releasing an authorless study for publication without peer review indicates some motivating factor other than the pursuit of scientific knowledge. Now let's see who Califano released the report to. If some- one thought that an industry was inherently bad or destructive, how would they go about discrediting that industry? Why not approach one of industry's traditional adversaries, the labor unions, and tell them that the activities of that particular industry were putting workers at high risk? And then why not add a heavy dose of media attention to really stir things up? Sound good? Apparently it sounded good to Califano because that is EXACTLY what he did. The report was released to the AFL-CIO and to the mass media on September 11, 1978 (p. 438). In retrospect, it is clear that Califano's action was blatantly coer- cive. He flagrantly disregarded scientific convention by releasing what was essentially an anonymous study. He acted on his vested interest as a government regulator by portraying the government regulatory apparatus as the protector of the worker. The trumped up numbers should have caused a scandal. And, in fact, they DID cause a scandal, but a peculiarly silent one. Within several years of the study's release, several comprehensive rebuttals of the study were published that recommended that the study be treated as a "contam- inant" of the scientific literature (p. 446). Why didn't the public find out? Because the controversy stayed within the scientific community. The environmental consensus had the "moral high ground" by portraying themselves as protectors of the worker. The published rebuttals appeared only in scientific publications and primarily in foreign countries. Scientists in the U.S. who might have publicly criticized the study were kept on a leash by controlling their funding. In fact, no scientist on any federal agency payroll publicly repudiated the study (p. 442). In contrast to the moral imperative of the workers, any criticism by industry could be dismissed as self- serving. David Rall, head of the NIEHS, simply dismissed the criticism of the American Industrial Health Council (AIHC) as "what might be expected from industry." (p. 440.) This sort of intimidation is not restricted to cancer research. In November 1990 the California ballot carried "Big Green," a sweeping environmental initiative. Senator Petris and Assemblyman Campbell warned the University of California that its state financing would be in jeopardy in research on the economic effects of "Big Green's" proposed ban on pesticides was published before the election ("U.C. Warned Over Research on Big Green," S.F. Chronicle, Oct. 31, 1990.) The Free-Market Antidote The "socialization" of science has been a disaster in theory and in practice. Today, Saffiotti's "paradigm" on cancer risks is accepted as truth and as a result costs industry and consumers millions of dollars by impeding the use of industrial chemicals. The asbestos scare perpetrated by Califano put the Manville Corporation, the country's largest producer of asbestos, into bankruptcy. A personal injury settlement trust set up by the Manville Corporation is expected to pay out 2.5 billion dollars over the next 20 to 30 years (Dixy Lee Ray, 1990, Trashing The Planet, p. 83.) Ideology entering the halls of science is one of the most dangerous things that can happen to a society. Science as a specialized field of study effectively prevents the layman from having an intelligent opinion on scientific issues. Even scientists become layman outside of their specialized fields. Science should serve society within the context of a free market. The diversity of the free market prevents the establishment of a coercive consensus. It will also act as protection against Kuhn's view of scientific paradigms. Consumers of goods and services, scientific or otherwise, are not interested in the intellectual conformity proposed by Kuhn. They want a return on their investment. Scientists who think independently and are willing to question the ruling paradigms, when necessary, will be the ones funded by the market. In a free market, an additional effect will be an improvement in the quality of scientific research. Since the beginning of subsidized science, the quantity of scientific papers has skyrocketed, but the quality of research has gone down. In 1958, James D. Watson became an associate professor at Harvard University while publishing 18 papers, including a landmark paper on the structure of DNA. Today it is not unusual for a scientist in a similar position to have published 50 to 100 papers. This greater volume of papers has been due to the intrusion of government funding into scientific research. With the increased funding, larger numbers of people have entered the sciences, and coauthorship of papers has increased enormously. Yet, most of these papers contribute little to scientific knowledge. This is evidenced by the fact that few of these papers are ever cited again by future researchers (Broad and Wade, 1983, Betrayers of The Truth, p. 54.) Summary The effects described above are the result of the attempt to put into practice the principle that science is a "social product." If it is a social product, it follows that scientists should not go against the prevailing wisdom of society, i.e., scientific paradigms. And if it is a social product, it follows that scientists should be responsive to society's needs, i.e., be government funded. So if scientists, in essence, can't challenge their society, but still must serve it, they are left with studying issues of marginal importance, and the scientific literature is left with an ocean of marginal publications. The theory doesn't work because it can't work. Just as individuals must act on their individual judgement to live, scientists must act on theirs to perform meaningful research. A commitment to objectivity is the scientist's greatest research tool. Nature's laws are not subject to majority vote. Science is not a "social product." There are scientists who will exercise their independent judgement no matter what barriers are put in their way. These heroic individuals fuel our industrialized society with their ideas and discoveries. We need to free these people by privatising scientific research. Feedback Several readers of the December 1990 essay took issue with my presentation of resource economics. They pointed out that some resource economists display a free-market orientation. I agree. The most well known group is probably the Political Economy Research Center in Bozeman, Montana. However, I was referring to the predominant view endorsed by ecologists and mainstream environmentalists. Although, free-market environmentalism is beginning to grow, it is still a minority viewpoint. I will try to address issues as comprehensively as possible, but this will necessitate concentrating on the predominant views to a certain extent and addressing other views as space allows. I greatly appreciate the feedback from readers. Discussion and debate of issues can lead to new insights. Please continue to write in. --------------- Reproduction is permitted for the purpose of bringing the views of FME to new readers, so long as copies do not serve as a continuous unpaid subscription to the recipient. Copyright: The Free Market Environmantalist 1572D Sycamore Ave., Box 329, Hercules, CA 94547 Mike Gemmell - Editor/Publisher Subscriptions $48/year, single issues $4.50