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NOTE Environmental Problems, Libertarian Solutions

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Unlike some people, I consider environmental problems very serious and very challenging.

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I remember reading a cartoon one day, I think it was in New Yorker,

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and there was this mother and daughter, a young little girl in an outdoor restaurant,

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and they were eating soup and the mother, you'd think the mother would say something like,

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well hurry up dear, eat your soup before it gets cold.

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But instead she said, hurry up dear, eat your soup before it gets dirty.

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And this is certainly apropos and indicative that we really do face environmental problems.

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Other instances of it, I remember when I first came to LA, my eyes were tearing and I wasn't sad or anything.

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It's just that the air was, you know, too rough for the delicate eyes of us East Coasters where I was at the time.

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When we have situations where lakes catch on fire, Lake Erie caught on fire,

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I mean, there's something wrong when a lake catches on fire, it just doesn't fit.

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And certainly the Love Canal issue is another indication that there's something seriously wrong with our environment.

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So I consider myself an environmentalist in the sense that I'm trying to come up with solutions to grapple with this problem,

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to understand it, to analyze it and to ultimately solve it.

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However, where I differ from many environmentalists as I'm sure you can appreciate

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is that I don't think that the cause of the problem is greed or profits or property rights

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or capitalism or anything like that. Obviously, I think that the reason we have these problems

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is because of the lack of those institutions of property, profits, etc. We published this

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book. I have one copy. I think we had about 50 copies and they all sold out. The title

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of the book is Economics and the Environment, A Reconciliation. And we're very serious about

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and not that word reconciliation.

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And the way we see the environmental problems being reconciled

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or the differences between left-wing environmentalists and right-wing environmentalists

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or libertarian environmentalists better yet

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is by using prices, property rights, profits, incentives, economic incentives

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as a means to attain many of the goals

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of the Ends of the environmentalists, the mainstream environmentalists.

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Of course it's impossible to reconcile with all so-called environmentalists.

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Peter Beckman spoke the other day of the watermelons, people who are pink on the inside and green

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on the outside.

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The way I see this is that these people have been for many years urging that we embrace

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socialism.

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In Eastern Europe they've done it for four decades, in the Soviet Union for seven. They

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gave it a good shot. I mean, you know, seven decades. If it can't work after that, it can't

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work. But these people have something sort of like a death wish, only they don't have

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the decency to go off by themselves and commit suicide. They want to take the rest of us

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with them. They don't want to do it directly. They want to do it either via socialism or

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now via environmentalism. Namely, they've got the same old lemonade stand, only they've

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have changed the signs and instead of peddling Marxist socialism, they're now peddling environmentalism

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as a way of attaining the similar goals of centralization and totalitarianism.

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But there are other people with whom it's impossible to reconcile and these are the

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people, I guess the tree huggers, these are the people that say, you know, we have to

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love the trees or the salamanders or whatever it is and what do you mean cut down a tree?

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How do you like to be cut down? Trees have rights, they have as many rights as people, they have more rights than people, so it's very difficult to make any sense with them.

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However, most of the environmentalists, I think, are people that see things like the air and water getting dirty, and many people say it's capitalism, and they're vaguely disturbed by this, and they're looking for solutions.

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And these are the people, I think, that are open to analytic devices, open to rationality.

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And these are the people to whom we mainly have to address ourselves.

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Of course, it's also impossible to reconcile economics and the environment with some people on the right.

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Ayn Rand, for many years, has been associated with the view of the tip of the cigarette as sort of rationality

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and Kissing Smokestacks, a little perverted, but I mean, you know, I'm not against it on

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sexual grounds, rather on environmental grounds. I think that smokestacks are, to me, more

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of an embodiment of violations of property rights, trespass, rather than embodiments

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of civilization and industrialism. What I want to do today is address six or eight different

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and environmental issues. I don't know that I'll have time to do justice to them all,

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but I'll at least try to briefly mention them. The ones I have on my list are air pollution,

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species extinction, oil spills, recycling, the greenhouse effect in the ozone layer,

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and overpopulation. But before I address these, I wanted to introduce three principles, three

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These are the principles of libertarian or economic analysis of environmentalism.

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And they are private property, the tragedy of the commons and externalities and the internalization thereof.

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Let's start out with private property.

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The way I see the environmental problem, it's almost totally a problem of trespass.

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Consider the following. Suppose I take my garbage, my egg shells, my orange peels, lemon rinds, whatever, and I take it and I dump it on your front lawn.

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This would clearly be seen as a trespass. Is there a problem of people dumping garbage on other people's front lawns? No. I mean, the very idea is ludicrous.

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And the reason for that is that the government is situated or set up or willing to uphold private property rights.

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If anyone would be so swinish or stupid as to do that, the victim would just go to the court or the police and they would pretty soon put an end to that.

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The perpetrator would be carted off.

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But if the perpetrator takes the intermediate step of first incinerating his garbage and then sending the self-same garbage over to his neighbor's front lawn and laundry and lungs and all,

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But now, not in the form of garbage, but in the form of soot particles based on incinerated garbage, all of a sudden there's a problem.

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And this is why we have unclean air, and this is a violation of private property rights.

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So private property rights are certainly one key building block of the analytic framework.

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The second one is the tragedy of the commons.

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The traditional way that this has been illustrated is if you have a pasture and you're a sheep herder,

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And you notice it, and it's all used in common, like the Boston Common or the Commons from England.

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And you notice that your sheep are cropping the grass too close to the ground.

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So what you do is you take your sheep further away where it's more efficient, where the grass is higher.

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And what happens is that you don't benefit from this because somebody else will put his sheep on the place that you just vacated.

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So the incentives are all turned around.

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Let me give this another illustration.

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I have children aged 12 and 10, and imagine four or five of them all drinking some soda pop.

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They've each got their individual can, they've each got their individual straw,

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and they're sitting around a table and they're all drinking.

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What rate do they drink at? Well, whatever rate the 10-year-olds and 12-year-olds drink.

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Now consider a second scenario, where instead of giving each of them an individual can of soda and a straw,

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and a straw. We pour all the soda into a big bowl in the middle and we give them all a straw and we say,

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go get them kids. Now what rate are they going to be slurping that soda?

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I mean they'll be slurping it until they burst. The reason is the tragedy of the commons,

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because now it's owned commonly. There is no individual private property rights in that soda.

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They realize that if they take a breath, they'll miss out. Someone else will grab their soda.

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Whereas if they had it in their individual can, they could take a breath, they could talk, they

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They could act like normal civilized people or semi, you know, a little bit like that.

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But the reason they wouldn't be is not because they were afraid of losing their soda.

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So that's the tragedy of the commons.

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The third one is externalities.

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Now the analysis of many Chicagoan and otherwise free enterprise oriented economists is that

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the reason we have environmental problems is because of a thing called market failure.

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Whenever I see that phrase, I sort of bristle, you know, market failure, market failure,

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it's all nonsense.

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Now, some of the better ones, or the more free enterprise, or the more libertarian-oriented

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ones, say, yes, there is such a thing as market failure, but there's also such a thing as

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government failure.

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And if we try to set the government to solve the market failure, the government failure

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will be worse, so it will even be worse off.

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So that's a pretty sophisticated defense of the market, but I think there's a more basic

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Defense of the Market, namely, that there ain't no such thing as market failure in the

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first place.

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I'm reminded of another cartoon I once saw, two or three old cadres sitting around a boardroom

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and one of them was saying, well, you know, Jones, I've been on the board for 50 years

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and in all of my years on the board I've never seen an excess profit yet.

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Well, I've been in the economics biz for, God help me, 30 years and in all my 30 years

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I've never seen a market failure yet.

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Let me give you an example of some examples of what they think is market failure.

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For example, on highways, they think that when you have a crowded highway, when you,

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the marginal person or the extra motorist gets on the highway, he imposes costs on everyone

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else by crowding the highways, and that's what market failure is.

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But why don't we have market failure in movie theaters or dance halls, private dance halls

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or hotels like we're in now and the reason there is because you have private owners and they internalize these externalities, they make sure there is no market failure.

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If we had private highways and they charge peak load prices, the extra marginal person wouldn't be there imposing his costs on everyone else because the whole thing would be taken care of by the market.

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So market failure arises in cases where there's no private property rights.

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I'll give you another example. Incompatible uses of lakes. It's said and quite accurately

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said that there are incompatible uses of lakes. Many can come up to mind, for example, using

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a lake for an industrial sink, you know, pouring the end products of industrial process into

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the lake versus swimming. But you don't even have to get that far. I mean, you could even

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You can have fishing versus swimming, both sort of green kind of activities.

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You can't do both. The swimmers get caught with a hook or something.

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So they're incompatible uses.

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And what the mainstream economists say is that each one is imposing externalities on the other.

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And this is a case of market failure.

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We'll have too much or too little boating or dumping of waste.

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In other words, people can't make their demands known because there is no market.

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If you had a private lake, what the lake owner would do is he would say, well, okay, Mr. Industry, how much do you want, how much are you willing to pay if I let you dump crap in this lake, which means I can't use it for anything else?

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And then he says to himself, well, how much am I likely to make if I give it to boaters and hotels and developers that want to use it for green or environmentally approved purposes, and then whichever is higher, he'll develop that lake in that way, and there'll be no market failure.

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Okay, with that introduction, let me now turn to the first of the six or eight topics that I've got in mind.

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And the first one is air pollution.

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Now, I've done a bit of reading in the history of law in these subjects, and my main sources here are Ronald Coase and Horowitz.

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I forget his first name. He's a legal historian from Harvard.

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And what I learned from my readings here is that up until the 1830s and 1840s in Great Britain

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and in the United States and peripherally in many other countries as well,

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if we had what I'm now calling trespass, this would be summarily dealt with under the old laws of nuisance.

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If somebody is polluting someone else or if a railroad is running by and setting off sparks on some farmer's haystack,

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Or if a manufacturer opens up a plant and inundates some little old ladies washing with soot particles, what the victims would do is they'd go to court and they'd say, look, they're violating my property rights, my sanctified private property rights, and I'd like damages and I'd like an injunction to get them to stop it.

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And pretty much the courts would almost always grant injunctive relief.

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But around the 1850s a new philosophy took hold in the western industrialized countries and the new philosophy was that there's something more than stinking, sniveling, selfish private property rights and that is the public good, you know, spelled with a capital P and a capital G and you had a drum roll whenever anyone mentioned public good. What did the public good consist of? The public good consisted of economic wealth. And how could we get economic wealth?

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So the next time some plaintiff came to the court and asked for

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injunctive relief and asked for damages, the court would say, you know, you're

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being selfish and greedy by insisting on your lousy property rights. We're going

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to give them carte blanche to do as they will with your property. And as you can

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And what they would do then is they would give them the right to pollute, the right

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to invade other people's property rights.

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And what this did to the industrial structure is it shifted us from what would have been

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in a non-pollution-intensive way of production to a pollution-intensive way of production

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because under the new legal regime, what incentive did the manufacturer have to engage in smoke

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prevention devices?

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Much less, because he couldn't be sued for not.

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What incentive did he have for engaging in the use of high-grade coal, which was not

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as polluted as the low-grade sulfur coal?

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Very little incentive.

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There was a libertarian businessman or a Christian businessman or a moral businessman or a person

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that refused to invade other people's private property rights and he said, well, yes, all

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my competitors are now going to be using the air as a free good and other people's property

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as a free good. But I am virtuous. I am not going to do that. I am going to engage in

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smoke prevention devices, research and development in new technology, high-grade fuels. What

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What would happen to him? He'd go broke, because presumably he had no comparative advantage

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or competitive advantage otherwise. He was just as good as every other manufacturer. Now,

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by indulging in his moral behavior, he would consign himself to bankruptcy. So anyone that

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was like that, and I don't know if they were already, disappeared, and the whole thing

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Everything was perverse, we had the wrong incentives imposed.

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Well what should we do?

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What should we do about the problem now?

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The obvious answer is to bring about a regime of property rights, to bring about a system

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where, I mean the government takes upon itself the monopoly position of being the lawgiver

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and instead of giving law as it's supposed to be under private property principles, it's

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giving the exact obverse.

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What I'd like to do is read very briefly from this book as to the solution of this problem.

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We have tried, quote, we have tried many remedies in the past.

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We have tried to dissuade polluters with fines, with government programs, whereby all pay

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to clean up the garbage produced by the few, with a myriad of detailed regulations to control

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the degree of pollution.

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Now some even seriously propose that we should have economic incentives to charge polluters

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is a fee for polluting and the more they pollute the more they pay by the way this is the so-called

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free enterprise economists but that is just like taxing burglars as an economic incentive to deter

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people from stealing your property and just as unconscionable these are not my words I wish they

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were they're Martin Anderson's and I quote them in the introduction to the book well I think that

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says it very clearly that we don't want to have prices for this what we want to do is uphold

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We don't want to have cost-benefit analysis or anything like that, or Monday morning quarterbacking on the part of jurists.

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What we want is the good old-fashioned private property rights to reign supreme.

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And if they do, according to the analytic machinery I'm offering here, that will solve the pollution problem.

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Okay, I'm now going to move on to species extinction.

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And you'll appreciate that there's much more to be said on any of these,

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but we can only go so far in the time allowed.

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Species extinction.

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Daniel Arap Moi, the leader, supreme leader of Kenya,

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recently burned three and a half million dollars of ivory tusks.

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Kenya is a very poor country. Why did he do this? The reason he did this was to publicize the fact that poachers are killing elephants in a very unsavory way, and it really is sort of a disgrace and a debacle.

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What they do is they go to herds of elephants and they machine gun them, they kill the whole

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lot of them.

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Not only what you would consider prime stock but also pregnant elephants, young elephants,

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baby elephants, along with the old ones that would be more sensible to call.

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Not only that but then what they do is they take these chainsaws, these power saws and

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And they cut off their tusks and they leave the rest of the animal to rot in the jungle.

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Thus leaving the meat, which is precious to the people there, and the elephant skin, which

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is also precious, just leaving it and running off.

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And it's really a very unesthetic, very unappealing way to deal with elephants.

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And you can understand why people are very upset about this.

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And naturally the analysis of these people is that what is the cause of this?

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Well, the best way I have to illustrate the utter fallaciousness of this analysis is to consider the buffalo and the cow.

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Now, as far as I'm concerned, I'm an ignorant economist, I'm not up on this biological niceties.

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The buffalo and the cow are the same animal. They both smell, they both have horns, they both moo, they both give milk, they both have tails.

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If you crash into one of them you're in trouble, either one of them, the same animal.

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Now why is it that the buffalo came within a hair's breadth of extinction and the cow, I mean the cow and the word extinction don't belong in the same sentence,

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they don't belong in the same paragraph, they don't belong in the same page or even the same book, it's just ludicrous to think of cows becoming extinct.

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The reason couldn't be anything biological because, as I say, they're indistinguishable biologically, at least to we non-biologists.

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The reason is the tragedy of the commons. The buffalo were owned in common. You couldn't put in fences.

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You know, when I was a kid, I used to watch these western movies and, you know, get revved up,

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and you could always tell the good guys from the bad guys because the good guys had the white hats and the white horses

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The White Horses and the Bad Guys usually had a mustache and black hat and a black horse.

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And the good guys were always trying to fight to open the range, to save the range, and

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they would sing these stupid songs like, home, home on the range, where the deer and the

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buffalo roam, and all that crap. Well, that was socialism. Only, that was land socialism.

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Only at, you know, at age six, I was a little too young to appreciate the niceties. And

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The good guys were the ones who wanted a fence in the range, namely privatize it.

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And they didn't have any songs, unfortunately.

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They were wearing the wrong hats and they were sort of grubby, you know, pushing plows

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instead of riding off on white horses.

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So Hollywood strikes again, you know, perverting the intellect of a generation of people.

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The reason that the buffalo were in trouble is, by the way, there used to be hundreds

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Millions of thousands, millions of them, you know, when they would run over the plains,

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when I was a young man, I witnessed this in the 1840s or so, the whole ground would shake

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and there were just millions of them and eventually what happened is that people would shoot them

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just for the tongue, which was considered a delicacy.

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And the reason they treated them so ridiculously, so uneconomically, so irrationally, so unenvironmentally

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or so non-ecologically, however you want to phrase that, the reason they did that is they

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They couldn't own them. It was just like the kids' slurping soda.

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The only way you could get one was by kill it now.

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You couldn't brand it and other people respect it.

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You couldn't fence them in.

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The only way to get it is to kill it.

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And so why not kill it for its tongue?

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It's economically rational with the price of a zero.

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The price system was failing to reflect the true costs and the true values.

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In contrast, who takes a machine gun to his lower 40 pasture and starts shooting cows?

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I mean, the very idea is ludicrous. On the contrary, if a cow is having a difficult birth,

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you get, at three in the morning, you get there and you bring a vet to save that cow

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because if the cow brings a healthy calf, not only do you have the healthy calf but

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you have the healthy cow who can give you more calves and each one is of value to you.

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This is why on the Soviet Union they leave the tractors to rust out on the collective

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farms and this is why nobody tends to the ailing cow because they don't have the economic

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Well, to get back to the buffalo, the reason that people are killing the buffalo is not because they have valuable tusks. That's the level of analysis that we reach in Newsweek and Time Magazine. You know, these things are valuable. That's why they're being killed. Cows are valuable. They're not being killed. If we privatize these elephants, if we had big elephant farms, okay, they'd be a little bigger than the ordinary barnyard. They'd have to roam around. So maybe it would be 10 square miles. It doesn't matter. And there are other values that we can use.

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As far as I'm concerned, the elephant is just a big cow with big ears. And if we treated them economically the same way, that would end the problem.

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Contrary to popular belief, the animals that would be in danger in a free, rational society would not be the animals that human beings had some value for.

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It would be animals like the locust or the anopheles mosquito or the AIDS bug if there is a bug that causes it or things that people don't really want around too much.

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So if you're really worrying about extinction of species, don't worry about things that have value for people

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because if we have a free enterprise system and privatization, we will have all the incentives

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we need to preserve things that we have value for, worry about things that we, you know,

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some creepy crawly buggy grubby kind of a thing. Those are the things we have to worry

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about. However, we even have solutions here on the private enterprise. Now you remember

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that, what was it, Star Trek 4, where they got ticked off at the human race because somehow

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I remember seeing how the whales became extinct and these super-duper monsters came by and said,

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well, you've killed the whale, so we'll kill you. I'm just giving a shorthand version of the movie,

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some of the dramatic points missing. So what they had to do is go back to the 1980s, Spock and all those people,

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and grab some whales and bring them back to 2500 or whenever it was.

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There are reasons that we would have to preserve animals, maybe not because of fear of some super beings in 500 years,

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but there are institutions right now that would benefit by having a shelf or a stock of animals that might otherwise be extinct.

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The two groups that I can think of are pharmaceutical companies and universities, hopefully private universities.

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What would a pharmaceutical company want with a creepy-crawly kind of a grub?

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Well, maybe one day there'll be some disease in a century from now that can only be cured by extract of this bug, and it would be nice to have it around.

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Well, if they think so, let them invest their money in keeping these species alive.

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And also universities, biology departments or biochemistry departments or what have you that want their students to be able to dissect not only frogs but also these other more endangered species.

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So, in the free enterprise system, we have the possibility of saving species if people have some value for these species, but the whole thing is human-oriented.

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I mean, you know, if I see two condors, and they're the last two condors, and there's a fire, and I can rescue them, and I see two little human-being children, and I can rescue them, there's no doubt who I'm going to rescue.

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I'm sort of a human pervert or a humanist pervert.

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I see animals only as instrumental,

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and the whole Earth only as instrumental for human beings,

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not as things in and of themselves.

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Babies first, condors a long way second.

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An interesting thing occurred with the crocodiles

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and alligators, I can never tell them apart either,

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I'm really weak on biology.

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It used to be that they were on the verge of extinction,

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and then Florida and Louisiana

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and some of these other southern states changed the law that prohibited the farming of these wildlife animals.

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By the way, it's illegal to have farms for elephants and rhinoceroses and other things like that.

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But they allowed farming and the herds have tripled and quadrupled and quadrupled again and they farm these things.

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They feed them with special mush. I've got it somewhere in my notes. It's real great stuff.

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It's called ground swamp rat, croaker and vitamin fortified dried food.

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I mean, it's not my thing, but the crocodiles get off on that.

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And they sell them for $39 a linear foot and they use the skin and people eat this stuff.

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I mean, it's beyond imagination, but they do.

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And as a result, since human beings have a value for them, they're in no danger of extinction whatsoever.

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The only problem is that the environmental types, the green-o, pink-os, or the watermelon types,

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still think that these things are extinct and refuse to buy alligator handbags and alligator shoes,

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even though there's no problem anymore.

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And they'll buy leather shoes, or at least some of them.

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The others will throw blood at anyone that wears that.

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Okay, the next one is the oil spill question.

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The Exxon Valdez dropped 10 million gallons of oil off the coast of Alaska.

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And this was the third biggest oil spill in the history of oil spills.

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The second biggest was off the Yucatan in 79,

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and the biggest was the Amoco-Cadiz off of France in 78.

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But there were thousands of others that we don't really hear that much about.

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Now, there are some people, again, these are the people that kiss smokestacks and say,

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Well, this is no real problem. The amount of oil that was dropped by the Exxon Valdez

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was to the ocean as one millionth of a drop of oil is to a swimming pool. It's virtually

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nothing and the pools will clean it up and in 10 years we'll never even know that there

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was an oil spill. Well, okay, I suppose it's nice to put things in perspective, but the

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way I see it, this is a violation of private property rights. And it's, again, aesthetically

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So I look at it a little differently. I'm not trying to sweep this problem under the rug. I'm not trying to say that this is not a problem. I'm saying that it is a problem, but that the solution for it is not an attack on greed, or corporatism, or anything like that. It's rather a question of what is the solution.

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and Upholding of Private Property Rights.

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Again, we have something that is not owned.

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The oceans.

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The oceans are not owned.

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So of course people treat things that are not owned

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and that they don't have to pay for.

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They treat them at the price that they're faced with.

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If it's a zero price and you're told in effect

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that it's a garbage thing, well you treat it like garbage.

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That's the economically rational thing to do.

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Anyone who didn't do that would go broke.

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Just like the case of the moral businessman who didn't want to pollute other people.

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The solution for this is to privatize the oceans.

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If I owned a patch of ocean, I would tell people, well sure, you want to come here with

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a single hull?

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Fine.

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Here's your price.

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You want to put a double hull?

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Cheaper price.

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This is very similar to what happened in the early cases of private road ownership.

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They had different prices based on thickness of wheel and heaviness of cart.

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If you had a wide wheel that served sort of as a steamroller and preserved the road,

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then you paid less than if you had a very thin wheel upon which you could go fast, but

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you'd break up the road.

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So the market was taking care of these problems, but there is no market in the oceans.

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Not only is privatization of the oceans important from the point of view of oil spills, it's

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also important from the point of view of overpopulation, which I'll get to later.

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Three quarters of the Earth's surface is the ocean, and as far as the ocean is concerned,

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we are about 100,000 years backward in development compared to where we are on the land. We're

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in the hunting and gathering stages on the ocean. We haven't even begun to farm, except

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in very minuscule ways right on the coast in some special instances where they're now

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having fish farming. But the whole ocean should be privatized, it should be rationalized,

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So I think that it's very much the case that if we had privatization of the oceans, this would go a long way towards solving the problem of oil spills.

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and also we should not limit the damages of oil spillers

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to the value of the cargo and the value of the ship.

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We should more rationally include damages,

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damages to other people's property.

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If we look upon these things as violations of property rights

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I think we're on the right intellectual track.

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If we look upon them as excuses or due to capitalism

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we're on the exact opposite track.

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Okay, the next one is recycling.

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Now again, this is a gigantic topic

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and we could devote a whole hour to it, but let me just touch upon the thing very briefly.

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Let us suppose, again, I'm not a chemist so I don't know.

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Let us suppose that it's true what the environmentalists say,

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that plastic and styrofoam is very dangerous to the environment

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and that paper is biodegradable, it's environmentally friendly and all that.

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I'm reminded in this regard of a joke,

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There were four people marooned on this desert island and there were cans of food but no can opener.

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And the four people were a physicist, a chemist, an engineer, and an economist.

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And the physicist and the chemist and the engineer are going through all sorts of solutions and scenarios and permutations

359
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and, you know, how are we going to do it? Should we drop them, get a pulley, a lever, what, chemicals?

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Thereupon, they turn to the economist and say, well, how can you, Mr. Economist, help out deliberations?

361
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And he says, let's assume we have a can opener.

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Well, I think this is a very sound economic device when you are ignorant to just make certain assumptions.

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So I'm assuming for the sake of argument right now that what the environmentalists say is that plastic and styrofoam are evil, vicious, monstrous, and that paper is good.

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Later on, I'll take back that assumption.

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Now, put yourself in the place of a person who is at the supermarket checkout counter,

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and you've just rung up your groceries, and they've charged you the price,

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and they're about to bag it, and they say, would you like paper or plastic?

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Well, right now, the only incentive that you have is benevolence, or green philosophy, or something like that.

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The only incentive you have to prefer the paper, because they cost the same to you, is benevolence.

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There's benevolence, and we know what Adam Smith said about benevolence.

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It's not from benevolence that the butcher, the baker and the candlestick maker get you

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the awares.

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It's from a keen analysis of their own self-interest.

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This is a paraphrase.

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See the paper bag and the plastic bag each cost, say, a penny to produce.

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You don't pay for these things, but it's implicit in the cost, the total cost of your groceries.

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So you have no real incentive to do it.

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Why is it?

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Why is it that the price system is so screwed up that it doesn't reflect the true costs

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to the environment as we've assumed?

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The reason that the environment is so screwed up is not because of any market failure as

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many of my so-called free enterprise economists, colleagues would say.

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It's rather because the government has nationalized or municipalized an entirely different industry

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having nothing to do with this or at least not so obviously.

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And that industry is the industry of solid waste management.

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See, what the government now in effect says to us is, look, give us taxes and we'll take the tax money and we'll collect your garbage.

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That's it.

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So it's a package deal and they don't distinguish between these things. They have some command and controls where they'll pass laws forcing you to recycle bottles or this or that, but that's the Soviet style solution.

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Let's consider what the free enterprise solution to this problem would be.

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be. Namely, let's suppose that we had a completely private enterprise solid waste management

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industry. Not just a government one where they contracted out any of these services to

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private enterprise, but the whole thing. And now put yourself in the position of a person

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who owns a big plot of land and is contemplating going into business as a dump site. It's an

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ancient and honorable profession. There's nothing to be ashamed about. You know, we have to

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get rid of this stuff somewhere, so you're a dump site owner. Don't you say something

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I'll take the plastic. I'll take the styrofoam. But it'll ruin my land. I'll never be able to build houses on top of it. It'll be like a love canal. I'll never be able to put farming in after I've filled in this dump site. So I'm going to charge a price that reflects the true costs to me. Isn't that rational?

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Okay, well then what you'll do is you'll turn around to the private

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enterpriser who has the garbage truck who goes from curbside to the garbage dump

399
00:36:32.200 --> 00:36:36.320
and you say, this is the deal, you give me plastic and styrofoam I charge you

400
00:36:36.320 --> 00:36:40.880
five dollars per bag, you give me paper I'll charge you a penny per bag and he

401
00:36:40.880 --> 00:36:45.840
goes to the housewife and gives her this news and then when the housewife is back

402
00:36:45.840 --> 00:36:50.800
at the supermarket shopping checkout counter no longer is it a penny versus a

403
00:36:50.800 --> 00:36:57.800
It's not a penny, but rather it's a penny to buy the plastic bag and $5 to get rid of it for a grand total of 501

404
00:36:57.800 --> 00:37:02.800
under the numbers that I use in my chapter in this book, just for illustration,

405
00:37:02.800 --> 00:37:09.800
versus a penny to produce the paper bag and a penny to dispose of the paper bag for a grand total of 2 cents.

406
00:37:09.800 --> 00:37:13.800
Now I don't say that under this scenario no one will ever use plastic or styrofoam.

407
00:37:13.800 --> 00:37:17.800
They will, but only if it's worth more than 501, right?

408
00:37:17.800 --> 00:37:21.960
Because right now we use it promiscuously. We use it if it's worth more than two cents

409
00:37:21.960 --> 00:37:26.600
when the real cost of it is 501. So the price system, which is supposed to be reflecting

410
00:37:26.600 --> 00:37:32.600
true scarcities and true values, is not telling us anything. It's a Soviet style price system.

411
00:37:32.600 --> 00:37:39.600
We need perestroika in the solid waste management industry. That's why we have that problem.

412
00:37:39.600 --> 00:37:49.600
So again, it's not a case of market failure, it's a case of market non-existence.

413
00:37:49.600 --> 00:37:53.600
Okay, the greenhouse and the ozone situation.

414
00:37:53.600 --> 00:37:56.600
Again, we ignorant economists, we don't know the truth of this.

415
00:37:56.600 --> 00:38:03.600
I mean, Peter Beckman seems to know I have no idea where ozone, schmozone, I don't know from ozone, it's, you know, who knows?

416
00:38:03.600 --> 00:38:06.600
It's up in the air, that's all I know about it.

417
00:38:06.600 --> 00:38:10.600
So, I, oh, I forgot to, let me just get back to the plastic.

418
00:38:10.600 --> 00:38:15.600
I assumed, I left you assuming that the plastic and the styrofoam is deleterious.

419
00:38:15.600 --> 00:38:21.600
But there are people who say no. There's this guy, Rathje, who is, quote, a garbologist.

420
00:38:21.600 --> 00:38:25.600
I'm not making this up. He's a, it's a new profession called garbology.

421
00:38:25.600 --> 00:38:30.600
It's sort of like archeology, only instead of dinosaur bones, you dig deep into you know what.

422
00:38:30.600 --> 00:38:34.600
And what he says is that plastic and styrofoam is not a danger.

423
00:38:34.600 --> 00:38:41.000
And it might even be less of a danger than paper, in which case, instead of 501 versus 2 cents, it might be the other way.

424
00:38:41.000 --> 00:38:47.200
But then, people would have incentives to use the plastic and the styrofoam because it's more environmentally safe.

425
00:38:47.200 --> 00:38:55.600
So I'm not taking any stance, whether it's for plastic or paper, whether it's for nuclear or coal or anything like that.

426
00:38:55.600 --> 00:39:00.600
All I'm saying is let's have private property and full internalization of externalities and the market will decide.

427
00:39:00.600 --> 00:39:05.880
and it's not up to us to be central planners and say nuclear is good or nuclear is bad or

428
00:39:05.880 --> 00:39:11.720
plastic is good or plastic is bad and paper is good or paper is bad. That is a question for the

429
00:39:11.720 --> 00:39:16.760
market to decide. Sort of like saying should we have tail fins or not? Who the hell are we to say

430
00:39:16.760 --> 00:39:21.560
where there should be tail fins? Let the market decide, you know, whether cars should be painted

431
00:39:21.560 --> 00:39:29.960
pink, blue, red, whatever. Okay, greenhouse and ozone. Now there are two scenarios possible and

432
00:39:29.960 --> 00:39:32.960
There are combinations and permutations in between.

433
00:39:32.960 --> 00:39:36.960
One scenario is that there is a danger,

434
00:39:36.960 --> 00:39:40.960
and that if we use CFCs, we'll lose our ozone,

435
00:39:40.960 --> 00:39:46.960
or if we have industry, we'll have heat trapped and we'll all die

436
00:39:46.960 --> 00:39:51.960
of weather conditions similar to Mercury or Venus.

437
00:39:51.960 --> 00:39:53.960
Let's suppose that this is true.

438
00:39:53.960 --> 00:39:58.960
Let's suppose to just take one case that CFCs really do cause a dissolution

439
00:39:58.960 --> 00:40:15.960
Well, we have laws against murder. If I take a bullet and I shoot somebody, that's a big no-no. Even the government is against that. So that must make it right, right?

440
00:40:15.960 --> 00:40:25.960
Well, aren't I doing something similar? I start squirting stuff in my underarms or I have my air conditioner running and I'm killing them just as directly.

441
00:40:25.960 --> 00:40:30.360
Scientifically, now if that is the truth, then obviously we have to ban it. And if it's

442
00:40:30.360 --> 00:40:36.880
not the truth, if it can't be proven, then we presume that the person is innocent until

443
00:40:36.880 --> 00:40:41.680
proven guilty, but if it can be proven scientifically that this is true and this is out of my providence

444
00:40:41.680 --> 00:40:46.560
to decide, then it is equivalent to aggression against other people. And it's no problem,

445
00:40:46.560 --> 00:40:53.560
it's no intellectual problem for private propitarians or for libertarians. And to the extent that,

446
00:40:53.560 --> 00:40:57.360
But we don't really ever have to get to that situation.

447
00:40:57.360 --> 00:41:01.160
All we have to do is get back to this low-level kind of pollution where we say, you know,

448
00:41:01.160 --> 00:41:06.460
Mr. A is burning his leaves and the stuff is getting on Mr. B's property.

449
00:41:06.460 --> 00:41:09.960
And we stop those kind of invasions and we stop this smokestack stuff.

450
00:41:09.960 --> 00:41:16.160
You know, it used to be that smokestacks would be very short and people would...

451
00:41:16.160 --> 00:41:21.460
and the pollutants could only go so far with a, you know, two-story high smokestack.

452
00:41:21.460 --> 00:41:24.860
and they were granting injunctions to people with smokestacks.

453
00:41:24.860 --> 00:41:26.060
So you know what the courts came up with?

454
00:41:26.060 --> 00:41:29.260
They came up with this great idea, these geniuses.

455
00:41:29.260 --> 00:41:33.360
Let the smokestacks have minimum heights, you know, 400 feet up

456
00:41:33.360 --> 00:41:35.960
and then there's no more local problem of air pollution.

457
00:41:35.960 --> 00:41:39.160
It goes, you know, to China, it goes to Alabama, it goes wherever.

458
00:41:39.160 --> 00:41:42.760
So it's the bloody government that's causing the problem in the first place.

459
00:41:42.760 --> 00:41:48.360
But you see, the whole idea of a smokestack is only appropriate to a situation

460
00:41:48.360 --> 00:41:50.760
where we have a very low level of technology.

461
00:41:50.760 --> 00:41:53.160
Why does it have to be a smokestack open to the air?

462
00:41:53.160 --> 00:41:55.120
That means we're treating other people's property

463
00:41:55.120 --> 00:41:57.340
in a very cavalier way.

464
00:41:57.340 --> 00:41:59.780
Why shouldn't the smokestack end up with a little cistern

465
00:41:59.780 --> 00:42:03.080
where we grab the stuff back?

466
00:42:03.080 --> 00:42:04.820
And not just if it's profitable,

467
00:42:04.820 --> 00:42:06.940
but even if it's unprofitable,

468
00:42:06.940 --> 00:42:08.400
because we have to take into account

469
00:42:08.400 --> 00:42:10.400
the true cost of the manufacturing.

470
00:42:10.400 --> 00:42:13.080
See, this is another market failure, so-called,

471
00:42:13.080 --> 00:42:16.360
that the capitalist takes into account many of his costs.

472
00:42:16.360 --> 00:42:18.080
He takes into account the real estate costs.

473
00:42:18.080 --> 00:42:21.200
He takes into account the cost of raw materials.

474
00:42:21.200 --> 00:42:23.280
He takes into account the labor cost.

475
00:42:23.280 --> 00:42:25.800
He takes into account the other kinds of costs.

476
00:42:25.800 --> 00:42:27.960
There's one kind of cost that he doesn't take into account

477
00:42:27.960 --> 00:42:32.760
and that's the disposal cost of the raw material stuff,

478
00:42:32.760 --> 00:42:34.440
the garbage from his process.

479
00:42:34.440 --> 00:42:36.460
Well, he should take that into account too.

480
00:42:36.460 --> 00:42:38.160
It's not a market failure that he doesn't.

481
00:42:38.160 --> 00:42:40.600
The reason he doesn't is because the bloody government

482
00:42:40.600 --> 00:42:42.040
says he doesn't have to.

483
00:42:42.040 --> 00:42:44.360
If the bloody government said he had to,

484
00:42:44.360 --> 00:42:45.400
we wouldn't have that problem.

485
00:42:45.400 --> 00:42:48.640
Like right now you buy that chair for 50 bucks, say.

486
00:42:48.640 --> 00:42:51.120
50 bucks represents only some of the costs.

487
00:42:51.120 --> 00:42:53.680
Maybe the chair would cost 250 bucks

488
00:42:53.680 --> 00:42:55.520
if we took into account the other costs,

489
00:42:55.520 --> 00:42:56.920
the externalities costs.

490
00:42:56.920 --> 00:42:57.760
Am I out of time?

491
00:42:58.800 --> 00:43:00.480
Oh, I'm having so much fun here.

492
00:43:00.480 --> 00:43:02.120
Yeah, we are too.

493
00:43:02.120 --> 00:43:04.800
Okay, well, I've only got one more topic.

494
00:43:04.800 --> 00:43:08.120
I'll end my stuff on the greenhouse and the ozone layer

495
00:43:08.120 --> 00:43:09.560
and just consider overpopulation.

496
00:43:09.560 --> 00:43:11.480
I'll do that very briefly so we can get up

497
00:43:11.480 --> 00:43:12.320
for some questions.

498
00:43:12.320 --> 00:43:13.880
As far as I'm concerned,

499
00:43:13.880 --> 00:43:16.040
There is no problem of overpopulation.

500
00:43:16.040 --> 00:43:17.680
The whole thing is a crock.

501
00:43:18.640 --> 00:43:22.920
There is no poverty due to high population density.

502
00:43:22.920 --> 00:43:25.360
We have areas of the earth that are densely populated

503
00:43:25.360 --> 00:43:28.120
and rich, densely populated and poor.

504
00:43:28.120 --> 00:43:31.400
We have areas of the earth that are low density population

505
00:43:31.400 --> 00:43:35.180
and rich and low density population and poor, like Ethiopia.

506
00:43:35.180 --> 00:43:37.520
So there is no correlation, there is no causation,

507
00:43:37.520 --> 00:43:40.120
there's no connection between the two.

508
00:43:40.120 --> 00:43:42.080
And what I usually do when I debate someone

509
00:43:42.080 --> 00:43:46.760
and Environmentalism is I end with on the following note.

510
00:43:46.760 --> 00:43:49.720
I say there sits my opponent.

511
00:43:49.720 --> 00:43:51.720
He's gonna come up to the podium in a few minutes

512
00:43:51.720 --> 00:43:54.360
and he's gonna say that there is an overpopulation problem.

513
00:43:54.360 --> 00:43:58.160
Well, my opponent has it within his power

514
00:43:58.160 --> 00:44:01.420
to reduce the size of the population by one.

515
00:44:03.600 --> 00:44:05.620
He could off himself.

516
00:44:05.620 --> 00:44:07.580
By the fact that he's sitting there smiling,

517
00:44:07.580 --> 00:44:09.460
look at him, he's right there.

518
00:44:09.460 --> 00:44:10.920
It shows that he doesn't even take

519
00:44:10.920 --> 00:44:17.920
Walter, while I enjoyed the presentation of the talk, I really still feel like there isn't anything there I haven't heard from you, from these miniaturists who have been saying, we need to privatize the comments on this topic.

520
00:45:10.920 --> 00:45:16.320
So I just don't see anything practical happening to actually solve it. Does this allow intellectual discussion?

521
00:45:40.920 --> 00:45:45.920
There is a sense in which it's true that we really, you know, what can we do?

522
00:45:45.920 --> 00:45:50.920
We've got the truth. All we can do is bleed it as loud as we can for as long as we can until someone listens.

523
00:45:50.920 --> 00:45:57.920
But there are plenty of, you know, prestigious academic journals and professors and students who haven't heard this.

524
00:45:57.920 --> 00:46:04.920
So I think it's good that we have books like this and the other books of the other environmentalists that have been at this conference.

525
00:46:04.920 --> 00:46:14.920
But then she asks a standard point, she says it's impractical because how are we going to know how much garbage is in the big bag, maybe they're stuffing a lot of crappy plastic in this paper bag.

526
00:46:14.920 --> 00:46:30.920
Okay? Well, that I think is amenable to the solution and that is that the entrepreneurship, in one word, the entrepreneurs that figure a way out of that will prosper, the entrepreneurs that can't figure their way out of the paper bag, so to speak.

527
00:46:30.920 --> 00:47:00.920
The entrepreneurs that can't figure out how to do this don't deserve to be successful entrepreneurs, whether it's by weight or people, you know, when you go to the airplane, they have these rays that zap you and figure out if you've got, you know, maybe they'll get one for plastics, I don't know, maybe they'll hire people, maybe they'll impose penalties on the trucker. If we catch one bit of hidden plastic, we double your price kind of a thing. And then he goes back to the homeowner and says, look, you do this, it's

528
00:47:00.920 --> 00:47:05.640
Theft. You know, we have a contract that paper is this much and plastic is that much and

529
00:47:05.640 --> 00:47:09.920
here you're putting all this crappy, expensive to dispose of plastic in a paper bag. Who

530
00:47:09.920 --> 00:47:14.540
do you think you're fooling, lady? You know, and I'll sue you for it. So there are ways

531
00:47:14.540 --> 00:47:18.400
out of these problems and I really haven't heard that one so there is an original thought

532
00:47:18.400 --> 00:47:23.920
I got out of this. I'll incorporate this into my next talk but I don't think that that's

533
00:47:23.920 --> 00:47:26.920
an insuperable problem. Yeah?

534
00:47:26.920 --> 00:47:46.920
The property rights approach has been suddenly implemented, and you're a judge, and I'm still the owner of a car three pounds away for dirtying the air in my property among 100,000 other car owners.

535
00:47:46.920 --> 00:48:00.920
The second question is, how do you deal with the garbage response, even if the plane is suffering from the pollution from my car, I spend all my money and invest all my money based on the assumption that...

536
00:48:00.920 --> 00:48:02.920
Ask the question. We can't hear Michael.

537
00:48:02.920 --> 00:48:06.920
I'll interpret this as a great question. You'll love it. A little patience.

538
00:48:06.920 --> 00:48:36.920
Okay, the problem, the question posed or the challenge proposed to the private property rights system is given that there are hundreds of thousands of cars, millions of cars and here's a car in Alabama that right now is riding by and is infecting or trespassing some minute particle of dust on this gentleman's property or his lungs and how is he gonna know this guy in Alabama and how is he gonna get around the problem of what do economists call this?

539
00:48:36.920 --> 00:48:45.920
Transactions cost, right. That's another favorite one of my colleagues, my fellow colleagues who are supposedly free enterprise.

540
00:48:45.920 --> 00:48:49.920
You know, they have this thing like transactions costing. We're all supposed to genuflect it.

541
00:48:49.920 --> 00:48:54.920
You know, this is part of the market failure hypothesis. So there is something new under the sun.

542
00:48:54.920 --> 00:48:59.920
There are real live people that don't accept this. You know, it's not true that everyone accepts this.

543
00:48:59.920 --> 00:49:02.920
And this is a perfect case in point.

544
00:49:02.920 --> 00:49:08.920
My answer to this is one of internalization of externalities. The difficulty is that there are no private roads.

545
00:49:08.920 --> 00:49:15.920
If there were private roads and Highway 101 or the Block Highway or Jones's Highway, he would then say,

546
00:49:15.920 --> 00:49:20.920
Look, I'm responsible because they'll sue me. They're not going to sue every sniveling car owner.

547
00:49:20.920 --> 00:49:25.920
They're going to sue me for being a body house of pollutants.

548
00:49:25.920 --> 00:49:30.920
So I'm going to impose upon you, my customers, the requirement that if you want to get on my road, you've got to shape up

549
00:49:30.920 --> 00:49:35.920
Now, the second question is, how do we know whether it's from Alabama or Illinois?

550
00:49:35.920 --> 00:49:38.920
Well, they have this stuff, forensic medicine.

551
00:49:38.920 --> 00:49:42.920
And in forensic medicine, they've made all sorts of great strides technologically.

552
00:49:42.920 --> 00:49:45.920
Fingerprints is old hand, but they've got this DNA stuff.

553
00:49:45.920 --> 00:49:48.920
You know, you've got one little speck of blood of the victim on you,

554
00:49:48.920 --> 00:49:52.920
and we can hunt you to the ends of the earth and find you.

555
00:49:52.920 --> 00:49:54.920
Why is it that we can't do this with cars?

556
00:49:54.920 --> 00:49:57.920
The reason is we're missing 150 years of technology.

557
00:49:57.920 --> 00:50:06.160
If in the 1840s we would have said, yes, private property rights are supreme and they're not

558
00:50:06.160 --> 00:50:11.160
some sniveling thing that we can ignore in this march toward progress in the public good,

559
00:50:11.160 --> 00:50:16.400
then presumably a species that can get to the moon, that can have radar and all sorts

560
00:50:16.400 --> 00:50:22.360
of rays and stuff, could surely figure out a way of figuring out who's guilty for polluting

561
00:50:22.360 --> 00:50:23.360
what.

562
00:50:23.360 --> 00:50:25.720
Okay, so that would be my best answer to that.

563
00:50:25.720 --> 00:50:44.720
I have two unrelated questions. One, nothing you've said contradicts this but you haven't mentioned anything about the possibility of vending pollution rights for a particular type of pollutant in a particular area.

564
00:50:44.720 --> 00:50:46.720
Did you say vending?

565
00:50:46.720 --> 00:50:51.720
Having a market for the right to pollute a certain amount in a certain area.

566
00:50:51.720 --> 00:50:58.720
The second question is how does one deal with an animal rights extremist who would say,

567
00:50:58.720 --> 00:51:03.720
yes, if we privatized the buffalo and the elephants, they'd be treated like cows,

568
00:51:03.720 --> 00:51:07.720
but I don't like the way cows are treated.

569
00:51:07.720 --> 00:51:14.720
What does one say to a person like that who says treating anything like cows,

570
00:51:14.720 --> 00:51:19.720
including cows or flocks is immoral and must be stopped.

571
00:51:44.720 --> 00:51:50.360
See this book reflects both sides of this because the Fraser Institute policy is

572
00:51:50.360 --> 00:51:54.800
that when there is a dispute within the the broadly based free enterprise camp

573
00:51:54.800 --> 00:52:00.080
we do not have to take one side or the other for example if Friedman says he

574
00:52:00.080 --> 00:52:04.480
wants a 3% monetary rule and Hayek says he wants competing currencies and Mises

575
00:52:04.480 --> 00:52:08.240
says he wants the gold standard it is not incumbent upon us as a free

576
00:52:08.240 --> 00:52:11.680
enterprise oriented think tank to say well it's Hayek he's right the other two

577
00:52:11.680 --> 00:52:17.680
What we would do is we would give all three views and then I might have a chapter saying well it's Mises who's right.

578
00:52:17.680 --> 00:52:31.680
Well that's what we did in this book. This book has chapters from people like Terry Anderson and John Bodden and Jane Shaw and Rick Stroop and myself and Murray Rothbard who all clearly rabid free enterprises.

579
00:52:31.680 --> 00:52:36.680
And then it's got articles from people who take a different view on this.

580
00:52:36.680 --> 00:52:42.680
And in my chapter, for example, I slam it, and in my introduction I take both sides.

581
00:52:42.680 --> 00:52:51.680
So we do deal with the question, but I personally see it as a move away from a pure property rights,

582
00:52:51.680 --> 00:52:57.680
a principled libertarian position, to a sort of ersatz market, sort of a market socialism.

583
00:52:57.680 --> 00:53:01.680
I mean like this stuff with the, what is that, educational vouchers?

584
00:53:01.680 --> 00:53:09.680
I mean maybe it's better than the status quo, maybe tradable emissions rights are better than what we've got now, which is chaos, not anarchy, chaos.

585
00:53:09.680 --> 00:53:18.680
But it's not as good as a full free market and education, nor is it as good as a full regime of private property rights.

586
00:53:18.680 --> 00:53:21.680
One last question, gentleman there.

587
00:53:21.680 --> 00:53:29.680
Yes sir, isn't there a problem with the fact that the use of the court system for a particular private pollution

588
00:53:29.680 --> 00:53:35.680
might be hindered by the fact that the cost of the person participating in the cost system

589
00:53:35.680 --> 00:53:41.680
would outweigh his particular damages. The proof of damages is so difficult.

590
00:53:41.680 --> 00:53:43.680
Unless you use a class action situation.

591
00:53:43.680 --> 00:53:48.680
Well, you're asking the same question that he asked and I've answered that to the best of my ability.

592
00:53:48.680 --> 00:53:55.680
The thing about transactions costs, I mean, transactions costs deserve a whole hour of discussion and critique.

593
00:53:55.680 --> 00:54:00.680
I don't buy into the transactions costs. I don't think anything is wholly about transactions costs.

594
00:54:00.680 --> 00:54:06.680
I don't see transactions cost doctrine as a successful attack on the market system.

595
00:54:06.680 --> 00:54:10.680
I don't see it as showing a definitive case of market failure.

596
00:54:10.680 --> 00:54:13.680
But we're out of time, so I'll escape you in that way. Thanks.

597
00:54:18.680 --> 00:54:20.680
Thank you very much.