The Conundrum of Free Markets and Environment

Yugank Goyal[i]

The viability of an individual in a society depends critically on the behaviour of other members. Interesting computational problems in agent societies include paradoxes that involve reduction of system throughput when more resources are added to an existing system. Other social dilemmas arise when myopic, local-utility-maximizing decision-making by individual members of the society lead to a loss of utility for everyone. Such problematic scenarios appear frequently in natural societies.

In an influential 1968 article, "The Tragedy of the Commons," biologist Garrett Hardin (1968) explained why a scarce resource "open to all" is subject to overexploitation. He used as an example a pasture open to all herdsmen for cattle grazing (a "commons"). Hardin pointed out that eventually the pasture will become overgrazed. The reason is simple. Each herdsman can capture all the benefits of adding more cows, while facing only a fraction of the costs--the harm caused by excessive grazing--since all users share the costs. The tragedy, notes Hardin, is that each individual is "locked into a system" of competition for grass that leads to ruin.

Since the influential article by Garrett Hardin, the tragedy of the commons has been used as a metaphor for the problems of overuse and degradation of natural resources including the destruction of fisheries, the over-harvesting of timber, and the degradation of water resources. Many policy analysts, scholars, and public officials agree with Hardin’s conclusion that the participants in a commons dilemma are trapped in an inexorable process from which they cannot extract themselves. Contemporary policy analysis of the governance of common-pool resources is based on three core assumptions that (1) resource users are norm-free maximisers of immediate gains who will not cooperate to overcome the commons dilemmas they face, (2) designing rules to change incentives of participants is a relatively simple analytical task, and (3) organization itself requires central direction.

At the very start of the arguments and viewpoints, let the subject of the talk be conceptualized. Predicate shall be dealt with simultaneously.

So what is environment, how is it endangered and what possible measures that could protect it, must be undertaken. Well, to the knowledge of many, I believe, defining environment wouldn’t be a mammoth task. So won’t be free economy. But there is a need to correlate both the entities.

Imagine a stretch of land enriched by a vast number of medicinal herbs as the domain of environment. And then assume that a group of people in a queue of buyers of the same land. Once the deal is done and the land becomes a private property of someone, separate from the government’s intervention as well, what we conceive is the emergence of free economy in the environment.

We shall explore the possibility of a synergic synchronisation of the existence of free economy in the environment; with special reference to its protection. On the very fundamental level, the environment can be divided into three mutually exclusive yet dependent domains viz. lithosphere, hydrosphere and atmosphere. We crystallize the research and findings stepwise in each of these domains.

DOMAIN 1: LITHOSPHERE.

This domain would encompass forests, flora, fauna, natural resources, and the like. Analyzing the effects on each of them, from any angle, will boil down to the same ‘natural’ tragedy of commons, alluded to earlier. The vast stretch of forest lands are getting slowly and slowly depleted from the face of the earth, mainly because they belong to all, or rather, belong to nobody; in a sense. National forests of the US are in appallingly poor health. An estimated 39 million acres are at risk to catastrophic wildfire and another six million are dead and dying from insect infestation. In contrast, many state and private forests are healthy and vigorous. A recent study by the Political Economy Research Center comparing national and state forests illustrates what efficient land management could mean. For every dollar the Forest Service spent between 1994 and 1996, it took in only 30 cents. State land management in 10 western states, on the other hand, netted $5.56 for every dollar spent. The Forest Service averaged 200 employees per acre while the states averaged only 40 employees per acre. Between 1988 and 1991, the state of Montana spent about $65 per thousand board feet of harvest to administer its timber program. During the same period, national forests spent about $140 per thousand board feet. A mile of road in national forests costs about $50,000, but in state forests the cost is only $5,000.

During man’s brief existence on this planet, his exploitation of wildlife has had a deleterious effect on the wildlife, the commons. With rapid population growth the natural greed of man grew strong, thus mocking at the idyllic harmony with nature as rapturously portrayed by the romantic and ethical environmentalists. But the question remained that why at some places the extinction rate was very high and at the other, it was negative. There is a need to ponder why do cattle and sheep ranchers overgraze the public lands but maintain lush pastures on their own property. Or why are rare birds and mammals taken from the wild in a manner that often depletes their population, while carefully raised and nurtured in aviaries, game ranches and hunting preserves. Or simply enough, why a dog is a ‘street’ dog outside, but a ‘pet’ inside? Clearly, two different forms of management is being referred to here. As a matter of fact, most of the salmon fishes in US have experienced perils of extinction, whereas in Iceland and some northern European countries, the salmon fishery is in much healthier shape because the rights of the salmon rivers is privately owned. The evidences suggest that there have been far fewer problems of vanishing wildlife in Britain than in United States (the example of famous red grouse in Britain and that of American prairie chicken is noteworthy here). All this is attributed to the egalitarian that US has sough to achieve, unlike the UK which is much better off. Another example of  how private ownership can successfully preserve wildlife is found on game ranches, hunting preserves, safari parks, and animal and bird farms. Many of the animals they preserve are rapidly disappearing in their native countries because of pressures of the exploding population. Problems are figuratively insoluble in common properties.

The natural resource curse was tremendously catapulted because the resources are; many a times; left to the general public to consume in their own way. It is imperative to note here that a free market essentially carries the shape of healthy competition as well, or else, the resource may fell to the hands of monopolistic tendencies to worsen the matters.

DOMAIN 2: HYDROSPHERE

The realms of fisheries exploitation and water pollution may fall under the category of environment abuse. Now here again, over-fishing in the oceans is a classic example of the "tragedy of the commons"-- overexploitation of an unowned resource. The United States government has controlled marine waters 12 to 200 miles from its shores by placing a morass of fishing regulations on fishers. Yet, at least a third of their fisheries are known to be overfished. Moreover, the regulations have resulted in hazardous fishing, the loss of millions of tons of fish due to poor handling and lost gear, and wasteful fishing investments. Foremost is the adoption of ITQs, or individual transferable quotas, which give fishers ownership of a portion of the annual catch. In New Zealand, these ITQs have become genuine property rights, increasing the value of fisheries and encouraging cooperation among owners in protecting the long-run future of the fishing areas.

The fact that such [self-]regulatory systems exist goes against the basic assumption . . . that fishermen are fiercely competitive and unable to work together for their mutual benefit. . . . It also weakens the assumption that a fishery which is not regulated by central authorities is not regulated at all." When resources that were previously controlled by local participants have been nationalized, state control has usually proved to be less effective and efficient than control by those directly affected, if not disastrous in its consequences.

But evidence from the real world suggests that the tragedy of the commons is not universal. In many places, local fishers manage fishing grounds, usually without much governmental interference, and they prevent overfishing. For the most part, these arrangements are "community-based, spontaneously developed and informally organized". The fact that a fishery (the term for a specific fishing industry) can be self-regulated gives us the dimensions and boundary where private and community concepts collide and community gain an edge.

A number of Native American communities were successful in preventing overfishing. They succeeded because of their closely knit communities and strict rules about access to fisheries. Tlingit and Haida Indians of Alaska, where each group had exclusive rights to its fishing locations and Indians of Washington State, who had salmon fishing rights similar to Tlingit; were examples in the form of lessons from the past. Amongst the Contemporary Community-Run Fisheries Maine's Matinicus Island and Nova Scotia's Port Lameron Harbor are the harbringer of prosperity here. The former case has operated successfully for over a century without official state recognition mainly owing to the strict control over who will be accepted into their fisheries (One must either live on the island or have island kinship ties or purchase property from a local fisher, who then becomes an informal sponsor. The approach is akin to an apprenticeship programme). The latter entails Local fishers see themselves as having exclusive rights to their territory, which extends eleven miles along the coast and more than thirteen miles seaward. They actively defend it against outsiders; also to avoid conflicts between local fishers using different gear, fishers divide their territory into different sectors, each allowing a specific kind of fishing gear. in a similar vein, Alanya, Turkey (Every day thereafter, each fisher moves east to the next site until the end of January. After January, each fisher reverses course and moves west to the next site. This gives everyone about the same opportunity to reach the stocks of fish, which migrate from east to west between September and January and from west to east from January to May) offers another idea. The catch here is that local community men will always have better ways to deal with their greed that in turn provides incentives for the cooperative tendencies and disincentives for the selfish. The thin line between the unregulated and government regulated fisheries goes blurred while citing effective examples where the Government Works With Local Communities. the Scotland's Private Salmon Fisheries (where Parliament has strengthened the commmuity's rights), Norway's Lofoten Fishery (where for nearly a century, fishers have successfully implemented their own fishing regulations, a responsibility delegated to them by the Norwegian government.), Japan's Fishing Cooperatives (government enacted "Working Rules for Fishermen's Associations," which transferred fishery management from the village guild to a "fishery association" made up of local heads of fishing families) need special mention in this regard.

The extent to which water pollution has risen, it can be exercised a halt upon by regulations, as of now. These have to be strict and enforcing to use new technologies to clean up the sewage before dumping it into the water bodies.  The whole essence of tragedy of commons lie in the fact that human beings re not angels. But they are rational. And so at quite a number of places, regulations have to play their role.

Domain 3: ATMOSPHERE

A foist glance on the elements of atmosphere would perhaps shake our perceptions of viewing the pollution, ozone depletion, green house effects etc. under the umbrella of free market. But this does not hold true for most of the cases. The public's information about business and the environment is poor and that this faulty information fosters the impression that business is evading its responsibilities. We need to develop an insight into the free market and not its manipulated discontents. Once our assumptions are reframed, the skewed image impregnated in the very social fabric of the common people will be replaced by a more lateral and rational thought.

If national regulation is bad, international regulation is even worse and therefore to be avoided at virtually all cost. But the Baptist and bootleggers approach that Kyoto protocol has assumed; needs a say. Durable social regulation evolves when it is demanded by both of two distinctly different groups. The theory’s name draws on colorful tales of states’ efforts to regulate alcoholic beverages by banning Sunday sales at legal out lets. Baptists fervently endorsed such actions on moral ground s. Bootleggers tolerated the actions gleefully because their effect was to limit competition. Bootlegger-Baptist strategizing about owls and scrubbers yields some interesting stories, but none more colorful than those that followed from the December 1997 Kyoto protocol.

Now a country which earns points and then sells it to the other in deficit can, very rationally, can be figuratively addressed to a private player in the business of carbon dioxide emission. Thus in the international regulation, different nation states start acting as private players. And so the atmosphere of a country is a private property of the same country, thus evading all consequences that could befell upon it owing to the common face that atmosphere would assume. However, a case involving distant effects like ozone depletion, free market fails to serve the purpose, and we need to take refuge in the regulations. The face value of regulations cannot be underestimated. They do intend in the right direction, question lies in making them more implemental, practical and unbiased. Alternatively, it can be surmised, that in absence of free market in atmosphere (chiefly attributed to the nature of atmosphere itself, that characterizes unbounded milieu, and difficult to be charted as property), it is subjected to the maximum abuse and the percentage of unalloyed to the polluted atmosphere will be minimum amongst all three domains.

In free market environmentalism, property rights context, pollution would be controlled between two parties bargaining with one another as to how much pollution is tolerable. I come to you and say, “Will pay you for an alternative well source or an alternative water source if I can avoid having to pay you damages for any stuff that I may put into the ground that enters your well.”

CONCLUSION:

A glance at the Economic Freedom Index (EFI) of different nations will make us realize that state of environment as an asset and as a property varies directly with the EFI of the country. Also, it has been proved that the environment of the United States is much improved over the past several decades, and business's pursuit of profits has been an important factor. Business’ environment record has been maligned by the economists and policy makers with a superficial idea. Over time, environmental quality has improved dramatically in market-driven developed countries such as the United States, along with a growth in industries and firms. When national incomes are low, air pollution is also low; but when incomes begin to rise, pollution increases initially and then declines. The fact that some claims against industry are false doesn't, of course, mean that industry is always right. But it does show that the issues are more complicated than most people think.

It is high time, we start realizing the harmony between the relations of the environment and free market lest the former gets trapped in the self deceiving policy issues and regulations. The world is driven by greed, and this greed acts as the invisible hand alluded by Adam Smith in Wealth of Nations. All our actions are guided by our own personal motives, which on satisfaction, actually do good to the whole society as well. What belongs to one is best taken care by him/her. What to no one, falls into disrepair. Environment in the common house is like a whore, where as in its home, it’s the respected mother, wife or sister. The idea lies in allotting it a home.