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The Wealth of Indian Nations

Stories of my ancestors interacting with families of the Northwestern Shoshone tribe enthralled me as a girl. The idea that the native people were self-sufficient and often helped the early settlers survive by trading goods, such as animal skins, and by sharing their knowledge of water sources and hunting grounds was inspiring. Today, however, many “First Nations” are stuck in a welfare state. PERC’s latest issue of PERC Reports looks at past and present trends in indigenous life, shining a light on how property rights and individual initiative can help create a higher standard of living and improve environmental quality on reservations and beyond.

PERC president TERRY ANDERSON points out that American Indians and First Nations people can reach back into their rich cultural heritage and find institutions that rewarded individual initiative. The key is for tribes to take this initiative again and for Congress to give tribal nations the rights that were once theirs.

Why is it that reservations are so poor asks JOHN KOPPISCH with Forbes. People are quick to point to alcoholism or underdeveloped land, but as Koppisch wisely writes, “those are just the symptoms. Prosperity is built on property rights, and reservations often have neither.”

Tribal governments can help solve the poverty problem. ROBERT MILLER draws on his experience as Chief Justice of the Grand Ronde Tribe and as a citizen of the Eastern Shawnee Tribe to explore how native governments can establish the laws and court systems necessary to attract investment.

In the past, native nations built their economies via extensive trade networks. Arctic tribal historian, JOHN BOCKSTOCE, reveals how the Eskimos and Chukchi in the greater Bering Strait region had been trading for thousands of years before the Russian and American trading vessels arrived.

Beyond North America, IAN BOISVERT, with BlueSky Mediation & Law and a former PERC graduate fellow, introduces the idea of “Tradable Occupation Rights” for the Maori in New Zealand. Creating these rights would offer both commercial and customary ocean users a market to resolve conflict and promote more efficient uses of resources.

This special issue of PERC Reports is made possible by the generous support of the M. J. Murdock Charitable Trust. PERC is continually grateful for their investment in tribal issues and free market solutions.

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In Praise of Forest Service Fire Tactics

The U.S. Forest Service is not the same Smokey Bear Forest Service of the past. Originally, the agency sought to preserve sustainable timber harvests by preventing all fires. Wildfire experts have shown that decades of fire suppression helped create forests unnaturally dense with fuel. Today, the Forest Service is much smarter with its fuel management choices.

In the wake of the 2012 Colorado fires, which destroyed hundreds of homes and will cost an estimated $450 million in damage, PERC President and Hoover Institution fellow Terry Anderson and PERC associate Sarah Anderson take a look at the motivating forces behind Forest Service fuel management policy. While most people think of fire suppression when considering wildlife management, Terry and Sarah focus their research on fire prevention strategies.

The duo’s ongoing research at PERC looks at how the internal organizational changes and external political, economic, and ecological environments have translated into changes in the actions of Forest Service personnel. Despite the negative attention the Forest Service receives when a large fire rages, Terry and Sarah find that the Forest Service deserves some praise for their fire tactics.

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Professor Ostrom Will Be Missed

The mood at PERC is somber this morning due to the news of the loss of an extraordinary woman. Elinor Ostrom was the first woman to receive the Nobel Prize in Economics.

Ostrom received the 2009 Nobel Prize in Economic Sciences for her groundbreaking research demonstrating that ordinary people are capable of creating rules and institutions that allow for the sustainable and equitable management of shared resources. She shared the prize with Oliver Williamson, a University of California economist.

The recipient of numerous international awards and honorary degrees, Ostrom was selected in April as one of the Time 100 for 2012, Time magazine’s annual list of the world’s 100 most influential people. In May, the IU Board of Trustees renamed the Workshop in Political Theory and Policy Analysis to honor Elinor Ostrom and her husband and colleague, Vincent Ostrom, who founded the center in 1973.

Ostrom’s work on Governing The Commons certainly influenced PERC early on. Donald Leal, for example, wrote Community-Run Fisheries: Preventing the Tragedy of the Commons in 1996. Leal highlights her groundbreaking research focusing on the factors that induce a community of users to cooperate and defend their rights to steward a resource.

No doubt her contributions will continue to shed light on free market environmentalism. “Calling on Communities” is a chapter inspired by Ostrom’s research and will appear in the forthcoming edition of Free Market Environmentalism.

She is survived by her husband and by an international extended family of colleagues, collaborators, staff and friends who worked closely with her during an extraordinary 50-year career. Read more here.

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Whatever happened to SO2 trading?

A decade ago, Dan Benjamin wrote that tradable permits seem to offer the advantages suggested by their proponents: “The total costs of achieving the current SO2 cap are at a minimum—and surely lower than under command-and-control. Perhaps now some serious consideration will be given to environmental protection systems in which there is even less administrative control by the government.”

Indeed, this scheme was considered by most economists to be the poster child of cap and trade. As Terry Anderson and Gary Libecap write in the Daily Caller by 2007 annual SO2 emissions dropped to 8.95 million metric tons at a cost of $747 million, “one-third less than it would have cost had the EPA used standard command-and-control regulation. The system worked beautifully—for a while.”

Today, however, the sulfur dioxide scheme is dead. The cause of death, according to Anderson and Libecap, is regulatory manipulation.

The Clean Air Interstate Rule and subsequent rules from the Obama administration have significantly undermined the sulfur dioxide trading scheme by preventing the use of 12 to 14 million pre-2010 banked allowances for future trading and changing the ratio of allowances per ton of sulfur emissions from 1:1 to 2:1 for 2010–2014 and to 2.86:1 for 2015 and beyond.

Not surprisingly, sulfur dioxide allowance prices began falling in 2005 from $1,600 per allowance and hit an all-time low in April of $0.56 on the spot market and $0.12 on the seven-year future market. For all intents and purposes, the EPA’s taking of banked allowances and manipulation of the trading ratio wiped out billions of dollars worth of assets held in the form of allowances.

The original SO2 trading scheme, according to Benjamin, had some characteristics of property rights; for example, anyone was legally permitted to buy or sell allowances at market-determined prices: “Because the allowances are standardized (each represents the right to emit one ton of SO2) and the major potential traders (electric utilities) are likely to be well-informed, trade should be feasible at low transaction costs, just as we find in stock and bond markets.” But as Anderson and Libecap state, when allowances are not treated as property rights and are “given and taken at the whim of regulators,” the system fails.

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Trading Sheep for Grass and Fish in Patagonia

The big brown trout I was fishing for yesterday on the Limay River in Patagonia was nowhere to be found but I did manage to come across an old hang out of Butch Cassidy.

Being from Montana, where the Hole-in-the-Wall Gang pulled off their last job—a holdup of a Union Pacific train—before fleeing to South America, I was happy with this historical catch.

Legend has it that Butch became friends with Jarred Jones who ventured down to Argentina from Texas in 1887 to make his fortune. Jones didn’t find gold but he did manage to open a general store at the mouth of the Limay. The old store, which is now a friendly restaurant, still holds the shops books, old photos, and a frontier atmosphere of a century ago.

Jones earned enough money at the store to purchase two big ranches, which he fenced off with barbed wire—the first to be seen around these parts. Today, barbed wire is strung across much of the 98 million hectares of the Patagonian Steppe to enclose vast quantities of sheep.

Unfortunately, a flock of sheep can gobble up great expanses of native grasses, and in southern Argentina, they’re clearing some serious vegetation. In addition to vegetation loss, overgrazing equates to lost habitat for other animals, and damages waterways with runoff and silt from erosion, which affects the fish, which affects tourism.

Paradoxically, sheep—the slayers of grasslands—could become the saviors of the same landscapes and in turn protect fish and other species. It turns out that because the plants of the grasslands co-evolved with herbivores, such as guanacos, a little munching is good (and necessary) for the flora. It is also true that companies that have environmental components to their business plans and seek to create goods from natural products, including merino wool, would like to see grasslands flourish for the long term. And tourists like me who want to fish and recreate in Patagonia would be willing to pay a price premium for this outcome.

Enter The Nature Conservancy, Patagonia, Inc. and Ovis XXI. Armed with scientific knowledge and market tools, this trilogy is working to conserve more than 15 million acres of land in Patagonia by 2016. Ovis XXI works directly with the woolgrowers. These consultants know the industry, and how to raise sheep without destroying grasslands. The Nature Conservancy brings its science-based knowledge and environmental credibility to help build the sustainable grazing standard through planning and subsequent monitoring of conservation outcomes. And Patagonia Inc. brings the market perspective—buying the wool, networking with others in the supply chain, creating the final products, and using its brand strength to help publicize Patagonian wool.

The majority of the land targeted by the Patagonian Grasslands Conservation Project is privately owned, and remains in large and undivided properties of intact native grasslands. Because most landowners face ongoing political and economic challenges that affect their ability to stay in business, an incentive is needed to gain commitment from landowners to manage resources sustainably. In this case, the carrot comes in the form of a payment to ranchers for grazing less sheep and or for using more modern and environmentally friendly grazing practices.

In November 2011, the first shipment of sustainable wool (29 tons) left Patagonia for Asia to be turned into socks for Patagonia, Inc. So far this scheme has worked to place two million acres under sustainable grazing agreements. Time will tell if the environmental protection purchased by conservationists from sheep ranchers will protect grasslands and associated waterways in the future, but signs look promising. Stay tuned…

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Trade a Tortoise

Two years ago in PERC Reports Todd Gartner wrote about his efforts at “helping the American Forest Foundation develop a market-based habitat credit trading system in portions of Georgia and Alabama. The incentive-based framework will complement other efforts in the region to keep the eastern population of the gopher tortoise off the Endangered Species list.”

Today, Gartner, in collaboration with Josh Donlan and James Mulligan of Advanced Conservation Strategies, are ready to launch their first pilot transactions.

Here is how the gopher tortoise candidate conservation marketplace is being designed and piloted:

  • An interested and eligible private landowner (the “seller”) receives a negotiated payment to conserve, manage, or restore longleaf pine forests capable of supporting healthy populations of gopher tortoises on his or her property. In so doing, the landowner generates gopher tortoise habitat credits.
  • The entity paying the landowner (the “buyer”) receives the habitat credits in return. The buyer may use the credits to offset the impact on gopher tortoise habitat elsewhere, in order to meet a voluntary net zero biodiversity impact commitment.  Or, the buyer can save the credits for later use to meet offset requirements if the species is listed under the ESA. Other buyers may purchase credits simply to spur gopher tortoise conservation.
  • A gopher tortoise habitat credit is the currency that can be bought and sold. The number of credits on a parcel of land is determined via a science-based and peer-reviewed method to ensure a net conservation benefit for the tortoise when used as offsets for future impacts. The credit price includes funds to manage and monitor the habitat, along with a negotiated profit margin for the seller.
  • The USFWS approves the crediting methodology and maintains agreements with buyers and sellers. The agency may also provide federal-level assurances to both the buyer and seller. This regulatory certainty allows buyers to preemptively buy credits that can be used toward offsetting future impacts if the species were to be listed.

With 87 percent of southern forests in private ownership, protecting species like the gopher tortoise requires an innovative approach. The gopher tortoise conservation marketplace is testing a new strategy, which provides financial incentives to private landowners who manage their woodlands for habitat and candidate species.

If you would like to learn more about market-based approaches for conservation, such as the approach Gartner began formulating as a PERC Enviropreneur Fellow, then apply to PERC’s Enviropreneur Institute by March 5.

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The 10,000 Mile Diet

Publishers Weekly recommends The Locavore’s Dilemma: In Praise of the 10,000 Mile Diet, co-authored by former PERC fellows Pierre Desrochers and Hiroko Shimizu, as a book to watch for in 2012.

Check out Shimizu’s piece in  PERC Reports where she outlines three myths about eating local.

  • Myth 1: Eating locally produced food reduces our environmental impact.
  • Myth 2: Local food is inherently safer.
  • Myth 3: Local food promotes economic growth and social justice.

“In short, the best way to reduce the carbon footprint of agricultural production is to produce food where it can be done most efficiently and to engage in international trade. Selecting food based on its affordability, availability, and quality is a better way to help the planet than focusing on food miles.”

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Hunting Endangered Species

The scimitar horned oryx, the addax, the dama gazelle – endangered animals one would expect to encounter in Africa. Yet, as some Texas ranches are proving, helping to bring back large numbers of these endangered species can be a profitable pastime. As this 60 Minutes segment shows, by allowing a number of these animals to be hunted for a high price, exotic wildlife ranches have achieved a major feat in wildlife conservation. A billion dollar industry, supporting more than 14,000 jobs, exotic ranches have worked to bolster the populations of approximately 125 different endangered species.


The funds collected from hunting a small percentage of the endangered animals gives ranchers the money they need to continue to run their ranches. Thus, hunting endangered species in Texas has provided economic incentives for ranchers to continue to conserve and protect the species.

Read Terry Anderson and Shawn Regan’s article, “Shoot an Elephant, Save a Community,” to see how assigning economic value to animals in Africa is also working to conserve wildlife.

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Just Say No to Embalming

In this two minute video the Insitute for Justice points out the injustice of the Government making entrepreneurs “do useless things for no reason?”

Verlin Stoll has built a successful business because he offers low-cost funerals while providing high-quality service.  His business is one of the few funeral homes that benefits low-income families who cannot afford the big funeral-home companies.  Stoll wants to expand his business,  but Minnesota refuses to let him build a second funeral home unless he builds a $30,000 embalming room that he will never use. Stoll and the Insitute for Justice are fighting back.

There are other reasons to think about avoiding embalming fluid writes Joe Sehee, founder of the Green Burial Council and PERC Enviropreneur alum. In “Green Burial: It’s Only Natural” Sehee writes:

In the United States, deathcare has become a $15 billion industry—and a wasteful and toxic one at that. Each year we bury:

—Enough embalming fluid (now made up of formaldehyde, a known carcinogen according to the World Heath Organization) to fill eight Olympic-size pools;

—More steel (in coffins alone) than was used to build the Golden Gate Bridge; and

—So much reinforced concrete that we could construct a two-lane highway from New York to Detroit.

Joe Sehee, Karen Eller, and others have been successfully promoting green burial around the country. You may laugh and think this sounds like just another eco-trend, but it is the way most of humanity has cared for its dead for thousands of years. The idea calls for returning to the earth without the use of non-biodegradable toxins or materials. As Sehee asks, “remember that ashes to ashes thing?”

Green burial is not a new concept, what is new is that it is being done in conjunction with restoration planning and conservation management techniques, providing a new tool for protecting endangered habitat at a time when innovative, market-based solutions are needed.

In the end, economic viability and ecological sustainability are capable of co-existence “and that may be what it’s going to take to make ‘ashes to ashes, dust to dust’ once again meaningful,” says Sehee.

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The Case for Economics and the Environment

Don’t miss Gernot Wagner’s latest piece in the Washington Post. Wagner teaches at Columbia, is the author of But Will the Planet Notice? How Smart Economics Can Save the World, and is an economist at the Environmental Defense Fund.

Wagner points out that it has become acceptable to say that markets don’t work, just look at “the demise of Lehman Brothers and the subsequent swoon of the global economy.”

The next time you hear someone say this, you can tell them they’re wrong for two reasons: Lehman Brothers is more a symptom of what happened rather than the underlying cause, and it was guided by much larger forces than itself. Markets, in fact, work all too well. They are an aggregator of wishes and desires, however misguided they may be.

Furthermore, how can we say that markets don’t work when we are “far from having anything approaching a free market?”

Fossil fuel subsidies and various other loopholes and distortions make the playing field uneven. More significantly, we violate one of the most basic tenets of economics, that there is no free lunch. In reality, it turns out, we all get a steady stream of free passes. It starts in the financial sector, where the benefits of bankers’ actions are often and almost entirely privatized: They pocket the bonus if the bet pays off. But the costs are socialized: Bankers pay but a tiny fraction of the costs of their failed bets; society pays. The fundamental mismatch, as evidenced by the collapse of Lehman Brothers, has enormous consequences for the rest of us.

So what can be done? Perhaps more people should study economics. When people think about economics, Wagner writes, “their minds turn to business and finance. But economics goes beyond these fields, and the difference between business and economics goes beyond size.” Economics is about a way of thinking.  “Economics is organized common sense,” and as Wagner points out, “If there is anything we need right now to guide our economy and the planet out of this dual malaise, it’s more common sense.”

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Urbanization for Population and the Planet

National Geographic recently launched its “Seven Billion Special Series“–a year-long series on global population. I hesitantly read the first article expecting more of the same old gloom and doom but “The City Solution”  offers a refreshing take on why economists and environmentalists can embrace cities.

With Earth’s population headed toward nine or ten billion, dense citites are looking more like a cure–the best hope for lifting people out of poverty without wrecking the planet, writes Robert Kunzig.

Harvard economist Edward Glaeser supports this point of view in his new book, Triumph of the City where he writes, “There’s no such thing as a poor urbanized country; there’s no such thing as a rich rural country.” Poor people flock to cities, according to Glaeser, because there is more money and cities produce more because “the absence of space between people” makes it cheaper to move goods, people, and ideas. Moreover, city dwellers tread lightly:

Their roads, sewers, and power lines are shorter. Their apartments take less energy to heat and cool…and they drive less.

The fear of urbanization has not been good for cities, countries, or for the planet. The author suggests that it is a mistake to see urbanization as evil rather than as an inevitable part of development. People (and planners) should no longer look at cities as tumors “but as concentrations of human energy…to be tapped.”

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What To Do With That Christmas Tree?

Once the holidays are over and the glitter and glam is stripped from the fir, chances are the Christmas tree ends up in the trash. Perhaps the trees could be useful even after they lose their glow. Why not turn them into woody biomass for energy? A few companies, such Biomass One, are doing just that.

Biomass One, which has been recycling Christmas trees for the past four years, estimates it will receive 4,500 trees this year. According to Biomass One Vice President Gordon Draper, this amount “equals out to approximately 56 dry tons of wood biomass, which can provide about an hour and a half worth of power to the company’s wood-fired cogeneration power plant.” This is only a tiny amount compared to the 325,000 dry tons of wood it grinds up annually to power the plant. And an even smaller amount compared to the woody biomass the state of Vermont is using to heat schools and other public buildings.

Burning wood for energy is, of course, an ancient technology, but as Steven Bick points out in a new PERC case study, wood can provide an economic and environmentally viable solution for high heating costs in many parts of the country.

Bick goes on to explain that beginning in 1985, the state of Vermont developed a program using mill waste to power boilers in public schools. At the time, most schools in the state were heated with expensive electricity. Replacing electric heaters with wood-powered boilers resulted in considerable savings in heating costs. Vermont is now home to nearly half of the facilities in the United States using woody biomass for heat. Other states are starting to replicate Vermont’s success and few  private companies, including Lockheed Martin, are beginning to convert to woody biomass heating.

“Thermal energy from woody biomass is not a panacea to all heating needs,” writes Bick, “but Vermont and other cold locations have proven it is a viable and renewable option.”

You can read the case study here.