The Legacy of Milton and Rose Friedman’s Free to Choose
Economic Liberalism at the Turn of the 21st Century
October 23–24, 2003
A Conference Hosted by the Federal Reserve Bank of Dallas

Session 2 Q&A

Q: Both of you have had considerable experience in the trenches, arguing for free market environmental alternatives. What do you think is the primary source of the hostility to the idea? Do you think it’s theoretical, ideological, or theological?

A: [Terry Anderson] I’ll take theological. And when I say theological, I guess I would make sure that it is understood by that the notion that there is a right and is a wrong. If we look at different uses of public lands, or uses of water, you name the resource, the notion is there that somehow my wanting to use a piece of land for one purpose (let’s say something I like to do or am passionate about, like hunting) is not necessarily something that’s accepted by people who say that is a bad unequivocally. It’s bad because it’s bad not necessarily for themselves but for the environment. So the argument goes, and I find that a very effective tool used by many people in the environmental debate. That is, I don’t want this stuff just for me, I want it for the environment, I want it for nature and therefore I am not being selfish and indeed I am willing to sacrifice some to get this better environment. And I think that’s very much a theological kind of debate that exists. I have taken out of my remarks the simple point that most economists focus on these issues by saying it’s a question of competing uses for scarce resources. The question then becomes what processes will sort out those competing uses. But if your belief is that this is not a matter of competing uses, it’s a matter of impacting this thing called the environment versus using it for your own self interest, then you win the debate on that theological note.

A2: [Richard Stroup] I have a couple of answers. One is simply the fact that environmental problems are taught as market failure. The assumption is that property rights make people more selfish. I think precisely the opposite is true, and I think we can probably demonstrate that. But with people who care most about a clean, healthy, and attractive environment, I think it’s a problem not understanding what markets are about. At the second level, I think there is sort of a theological problem. A friend of mine says, to criticize superfund as being inefficient and ineffective is a little bit like criticizing holy communion on grounds of nutrition. It’s not about nutrition, you see, it’s about, in the case of cleaning up the environment, to some folks, it’s about contrition. I think that’s a tiny minority of the people out there, but they are a vocal, intellectual minority with a strong voice. I think, frankly, we need to separate them. We need to drive a wedge between them, on the one hand, who are going to be very difficult to deal with. I don’t know how quite to deal with them, but I don’t think there’s very many of them either. If the people who are true environmentalists, who want a clean, healthy, and safe environment, come to realize that these other folks are working against their interest, I think that the support for these intellectual types is going to shrink dramatically.

Q: There have been many questions regarding the future of wetlands. With the impending destruction of wetlands, how do states, or the United States government, I guess, form policies that can successfully prevent further destruction but still allow for development?

A: [Stroup] I supervised a small PERC project by a fellow who had been a lawyer and was now going back for his Ph.D. in natural resources. He looked at the 404 program or the Army Corps of Engineers, which has to do with preservation of wetlands, and what he found was two interesting things. One is that when the Corps was deciding what lands were wetlands for purposes of being under their jurisdiction? There was no evidence that they paid any attention whatever to the criteria of wetlands, except for the court deciding the minimal legal definition, which typically meant certain kinds of plants had to grow there or something of that sort. Now, the same people in the same offices, when they’re deciding which acres can be used, which acres can be applied to mitigation so that well, okay, you can develop these acres, wetlands, if you replace them with twice as many acres over here with certain functions. Now that very same agency, the very same folks, are paying very strong attention to the criteria for wetlands; the functions that they perform. If we can just somehow hold these people accountable for delivering results and quantifying the results they deliver, not the acres, but rather the environmental results, the criteria, the functions, then I think the program will be much more efficiently run and much more realistically funded.

A2: [Anderson] If I can just add to that, picking up on this point of accountability. As I mentioned, the person at PERC held up his paper and said, “It is about property rights.” That’s what these issues are about. If these are valuable outputs to be produced from wetlands, then with property rights, markets can effectively produce those. A favorite example of mine is an organization called Delta Water Fowl, which was interested in wetlands, as you can guess, because wetlands produced water fowl. They developed a program called adopt a pot hole, a program whereby duck hunters could actually adopt wetlands in Canada in the Prairie Provinces that produce ducks. When you adopt your pot hole, not only do you get a certificate saying you’ve done good, but you get a report on a quarterly basis of the number of ducks being produced and the other kinds of species that might be there. Needless to say, that’s holding people accountable, and the people who purchase those things don’t purchase them if they don’t get what they want. But the property rights are clear. These are properties that belong to farmers, and the duck hunters want the results. So again it’s a question of trying to think of property right mechanisms that can make this happen, rather than simply waving our hands and accepting that it’s market failure, as Rick said.

Q: To what extent are positive environmental outcomes the result of more environmental laws and regulations, whether they take the command and control approach of the EPA or a more market-based approach? And secondly, are extractive industries like mining more prone to pollute?

A: [Anderson] Well, I’ll start on the first point about environmental quality resulting from legislation. It’s very instructive to look at what was happening to all measures of air quality and water quality prior to the passage of the Clean Water Act and Clean Air Act. The trends in all cases were downward and downward, that is, improved quality so less pollutants into these two media. The pollutants were falling dramatically prior to the Clear Air and Clean Water Acts. After the passage of both those acts, the slope changes quite dramatically and flattens out. In other words, we’ve gotten less increase in environmental quality on those two measures since the passage of those two acts than we were getting prior to that. Now, you can question why we were getting the improvements, and some of them were coming about because of local communities and states passing laws that had some impact. And you could argue that we were picking the low-hanging fruit, namely the easy ones to get, so you would expect us for any dollar spent to get a lot more improvement than we would later on. I think both these arguments hold some sway in the debate, but in addition to that, prior to the passage of the Clean Air and the Clean Water Acts, it’s quite clear that the common law was doing a great deal to resolve these problems. And we need to understand again, related to Rick’s point about the income effect on environmental demands—I always like to put this in the context of my grandfather migrating from Serbia to work in the mines of Montana in the early 1900s and try to imagine what he would have said if we had told him we were going to spend what we do now in Montana, roughly $2,000–$3,000 an acre, to reclaim land. He would have thought that was about the most insane kind of thing, regardless of the property rights. Today we spend, mind you, $2,000–$3,000 an acre, a lot more than the land is worth after it’s reclaimed. But that aside, the point is when these demands started to arise, under the common law, many of these polluting kinds of things were being taken care of, and the extractive industry is a case in point. Rick mentioned Elizabeth Brubaker’s book. There are a number of publications that document the kinds of cases that were being decided through the common law, which basically involved protecting people’s rights against aggression from others.

Q: Which environmental organizations support market-based solutions?

A: [Anderson] Well, again, if Rick doesn’t mind, I’ll start. I quipped the other day that if you want to know whether a group supports generally the notion of free market environmentalism, check its zip code. If it’s a Washington, D.C., zip code, they probably don’t. They like having control of the levers of power in a central place, as do many of the lobbying organizations. That said, I think that there’s growing receptivity amongst some of them and I would take a moment to relate to you two meetings I had early in the Bush administration. When people knew that I had been on an advisory team to the president, they assumed that somehow I had a direct line to people in Washington. Which may have been true until PERC published a report card on the mid-term of the president which gave him a C-. I was asked to publish an article at the time and gave him a D. I don’t get phone calls returned. At any rate, having been a part of that team, I received phone calls from two organizations, the Audubon Society and Environmental Defense, and was asked, if I were in New York anytime soon, could I please meet with both of those people in separate meetings. And so I did. I met first with the person from the Audubon Society, and we talked about market approaches, and I used the example of grazing on public land, something that many environmentalists support. And I said look, ranchers have very secure permits to graze on these public lands. If we want to get rid of them, simply make them transferable and let those people who don’t want grazing purchase the permits. And John Flicker said, yeah, that would really work, but you know, they shouldn’t have those rights. And I said, well, let me grant you that maybe they shouldn’t. Let’s not debate that. Would you agree that if we had tradable permits, we could reduce grazing? Yes, but you know, they shouldn’t have those rights. We went on like that for half an hour, and finally I went from that issue to the next. I met the next day with Fred Krupp, president of Environmental Defense. In the same discussion, he said some people will argue they shouldn’t have those rights. The time has come to simply abandon the debate of whether they should or shouldn’t and get on with taking the status quo rights and moving forward. So I have become a rather good champion for Environmental Defense. They’re working with PERC on the issue of individual transferable quotas in fisheries. We’re doing joint programs. I went with one of the Environmental Defense people early on to Washington, D.C., at the request of Interior Secretary Gail Norton to speak to all the water people. They were kind of looking for the fur to fly as we came in, but we basically sang from the same music. Get the property rights right. Get them secure, make them transferable, and many of these problems will disappear. So there are a few even 900-pound gorillas, but get to the local level where people want results and they’ll buy into markets quite quickly.

A2: [Stroup] I think that’s very well put. The local people by and large care about a clean, healthy and attractive environment. We can do business with these folks. It’s the same thing we want. But if you’re talking about simple political control and big budgets, it’s a different problem. And if you look at the local Bozeman reps or the Montana reps of some of the big famous environmental groups in Washington, it’s very difficult to have a decent conversation with them because what they’re interested in is control in Washington, end of story. That’s not true across the board, I’m sure, but in my experience, that’s the way it is. Folks locally care about the local environment just like all the rest of us do.

Q: As usual we want to give the last word to Milton and Rose if they want to take it.

[Rose]: I’ll let you take it.

[Milton]: I believe in environmental quality through property rights. Free market environmentalism is where we should go. And you people have been doing a great job in that respect.