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Reconciling Economics and Ecology

G. Tracy Mehan offers an insight into the PERC Lone Mountain Forum: “Reconciling Economics and Ecology: The Foundation of Environmental Optimism,” currently being held at the PERC University Campus in Bozeman, Montana.

By Tracy Mehan

We are into the second session on “Reconciling Economics and Ecology,” under the guiding hand of the estimable Terry Anderson with a phalanx of experts and commentators from many disciplines. At this stage attempting any kind of synthesis would be presumptuous at best. The discussions have been informative, wide-ranging and heartfelt on the convergence and divergence of economic and ecological thinking.

The discussion on whether or not human beings are part of nature was truly stimulating if inconclusive. I recall the novelist Walker Percy’s observation that the scientist can know or understand everything but the scientist. Similarly, human beings can be both a problem and a solution to the challenges of reconciling economic growth and ecological function.

The noted writer, Matt Ridley, made what may be the one observation with which most attendees, including yours truly, might concur: both economist and ecologists, at least the right thinking ones, no longer believe in equilibria in either realm and view both systems as being dynamic, not chaotic, systems.

The conversation continues.

Update: Emma Marris, author of Rambunctious Garden, led the forum in a spirited discussion on ecology and future policy directions.  She emphasized the challenge of managing ecosystems in the face of uncertainty in a dynamic world including globalization and a changing climate.

Emma highlighted adaptive management as key along with the recognition that historic baselines no longer occupy any “moral high ground.”  She raised the question as to whether or not regulators will be as adaptive as the changing ecosystem demands which would challenge regulated property owners as well.  She also raised concerns as to whether or not “everyone gets a vote, not just every dollar” and that future generations count, too.  She expressed her bias for longer time scales in ecosystem management which drew many questions as to why this should be normative.

Many other participants raised issues of politically managed ecosystems versus private choice and management.  There was also lively debate over whether costs should be involuntarily imposed on property owners and taxpayers to involuntarily protect endangered species.

Emma expressed her agreement with the idea that richer is generally greener and that would actually impel us toward actions for the benefit of future generations which will be both.

This gives you just a taste of what was a very important discussion and debate over future policy directions.  Emma generally defended collective or community action against a preference of others for individual and voluntary actions or contractual approaches.

More to come.

Update #2: Earlier this week, Steven Hayward sat down with Charles C. Mann to discuss his work on pre-Columbian societies:

G. Tracy Mehan, III, was Assistant Administrator for Water at the U.S. Environmental Protection Agency, 2001–2003. He is a consultant in Arlington, VA, and an adjunct professor at George Mason University School of Law.

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Dispatches from “Conservative Visions of Our Environmental Future”

Today I am at Duke to participate in a conference on “Conservative Visions of Our Environmental Future,” sponsored by the Duke Environmental Law and Policy Forum, Nicholas Institute for Environmental Policy Solutions, Nicholas School for the Environment, Duke Federalist Society, Duke College Republicans and the Energy & Enterprise Initiative. The conference is being live streamed here, and I’ll be offering comments on the proceedings below.  [Read more…]

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Enviropreneur Showcase: GreenFaith

In an era of increased environmental degradation and strife, PERC Enviropreneur Institute (PEI) alum Reverend Fletcher Harper and his organization GreenFaith offer a unique look at environmental solutions and activism. Established in 1992 as a small and local organization in New Jersey, GreenFaith has grown to national proportions as an inter-faith environmental organization working with diverse religious groups to promote and mobilize environmental leadership.

Although religion and the environment may initially seem odd bedfellows, Harper is one among many* working to reclaim environmental stewardship as an integral part of the world’s religious traditions. Deep connections between religion and the environment already exist. For example, most of the world’s religions recognize the natural world as a source of revelation or site of sacred presence. Although presented in a variety of ways, human stewardship of this divine creation is part of the religious practitioner’s job description.

While hard science is needed to predict and study the physical properties and changes of the earth, anthropogenic environmental problems also require a close study of the beliefs and actions of those driving the environmental change. GreenFaith is calling on environmental leaders to not only preach good environmental standards, but to act on them. Through the GreenFaith certification program, congregations across the nation have reduced carbon emissions by 30 to 50 percent, financed solar energy programs, and decreased water consumption, to name a few.

GreenFaith has used lessons garnered from PEI to attract new congregations to their certification program by touting the benefits of financial savings. Economic incentives are therefore a major driving force in the “greening” of congregations. Harper points out that economics and religion, counter to popular belief, really are working toward the same objective: human flourishing.

“In the end, GreenFaith isn’t just about teaching people that God wants a healthy environment,” said Harper. “It’s about mobilizing the faith-based sector – one of the largest social networks in the country – to make it actually happen. PERC has helped us understand new tools and perspectives on how to achieve this goal.”

*See the Yale Forum on Religion and Ecology for further reference

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Does Burning Ivory Save Elephants?

by Michael ‘t Sas-Rolfes

This week marks the 62nd meeting of the Standing Committee of the Convention on International Trade in Endangered Species (CITES), taking place in Geneva, Switzerland. To coincide with this meeting, the World Wildlife Fund has released a “Wildlife Crime Scorecard” report which lists 23 countries in Asia and Africa that it claims could all do more to enforce trade bans intended to protect tigers, rhinos, and elephants.

But what about WWF’s scorecard? Unlike the governments it assesses, WWF has specifically purported to protect endangered species since its inception in 1961. It has also mostly endorsed the CITES trade ban approach to saving tigers, rhinos, and elephants for more than the last two decades, but the results of this have been unimpressive. Tiger numbers have plummeted, as have rhino numbers in all but a handful of former range states; elephants have fared slightly better since the ivory ban, but poaching is on the rise again. So while WWF can claim some individual successes with certain localized conservation projects, its broader policies on wildlife trade deserve closer scrutiny to see if they make sense.

For example, last month WWF commended the government of Gabon for burning a stockpile of almost 5 tons of confiscated ivory, estimated to represent the equivalent death of 850 elephants. Presumably the architects of this event think they can repeat the performance of the Kenyan government, which famously burned a pile of ivory (and rhino horn) back in 1989.

Kenya’s dramatic gesture had three effects:  First, as a media stunt it caught the attention of many people and helped to stigmatize the use of ivory products in the West. Second, this in turn appeared to reduce consumer demand (and therefore prices and the incentive to poach elephants). And third, Kenya was able to leverage this event as a means to raise significant donor funding.  (The funding benefits did not endure and other African elephant range states did not benefit in this way; instead many had to bear the cost of forgone ivory sales harvested from sustainably-managed populations.)

That was then, this is now. Ivory demand in East Asian markets has a deeper cultural imprint and was far less impacted by any stigma effect from the 1989 ban. With the rising affluence of East Asian consumers, black market prices and elephant poaching levels are increasing significantly.

Economists may disagree about many things, but one thing we do agree on is that if you reduce the supply of a product without a corresponding reduction in demand, prices will rise. In a 1990 peer-reviewed journal article*, economist Ted Bergstrom explains clearly why: If the goal is to protect threatened species, it does not make sense to destroy confiscated stockpiles, but rather to sell them back into the market to satisfy demand and restrain prices. If trade is already banned and consumers are still buying ivory, there is no reason to believe that reducing the supply will change their preferences. So burning ivory stockpiles at this time does not seem like such a great idea. Although intended to send out a message about the acceptability of buying ivory, this gesture may simply send out a different message to the market: that ivory is an increasingly scarce resource worthy of speculative investment.

WWF’s approach of constricting supplies is not restricted to elephants. It adopts similar policies toward tiger and rhino products. The same principles apply here and the black market values for such products only appear to be rising over time, with disastrous consequences for wild populations.

* Ted Bergstrom. “On the Economics of Crime and Confiscation.” Journal of Economic Perspectives 4.3 (1990): 171-178.

Michael ‘t Sas-Rolfes is an environmental economist based in South Africa and a 2012 PERC Lone Mountain Fellow. He is the author of Who Will Save the Wild Tiger? (1998, PERC Policy Series), a contributor to Tigers of the World: The Science, Politics, and Conservation of Panthera tigris (2010, Academic Press), and author of the recent PERC Case Study “Saving African Rhinos: A Market Success Story.” For more, visit his website: rhino-economics.com.

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Silent Spring at 50: Reexamining Rachel Carson’s Classic

After 50 years, Silent Spring is rarely read, but it is routinely cited as a canonical work in environmentalism. Rachel Carson is hailed as a near saint in the environmental movement. There is no doubt the book played a major role helping to spur the environmental movement in the 1960s.

A careful reading of Silent Spring, however, will leave one dismayed at the relentless negative view Rachel Carson had of a time of unprecedented prosperity and improved health standards. We joined a group of authors from various disciplines who looked at different aspects of the book in historical context. That book, Silent Spring at 50, will be published in September. PERC’s latest publication, “Silent Spring at 50: Reflections on an Environmental Classic,” gives a sample of the full work.

Among the issues discussed in the book are the following:

1. Pesticides often benefit both human well-being and the environment. When discussing the effects of pesticides, Carson was entirely negative, failing to consider how these products greatly expand agricultural output, thereby allowing less land to be dedicated to cultivation, as well as having saved millions from starvation in the decade before her book was published. Her claims, such as that one might die from exposure to one molecule of a pesticide, are presented as if scientific fact. Carson ignored the reductions in habitat loss, increased no-till farming, reduced erosion and agricultural runoff that can be attributed to increased use of pesticides.

2. Bird populations were not decreasing.  Silent Spring is most famous for what its title evokes—a spring with no birds, as they have all died due to pesticides. Yet Carson ignored well-known Audubon Society data that indicated increasing, not declining, bird populations in some locations she identified (see brown thrasher chart below). Could she have been unaware of the data? Not likely, since she was a long-time active member of Audubon.

3. There was no cancer epidemic. Carson asserted that one person in four in the United States would die of cancer, and that cancer was becoming epidemic in children, despite public health data to the contrary. American life expectancy had risen more than 20 years in the 20th century when Carson was writing, but she only discussed impending doom. It is true that more Americans were dying of cancer when her book was published than had in previous decades, but that was because Americans no longer died of other diseases. They were lucky enough, as we are now, to have lived long enough to die of cancer and other diseases that mostly afflict the old. Despite the furor in those days of the impending Surgeon General report on tobacco, Carson ignored the role of smoking in cancer. She never mentioned the widely-available evidence about tobacco, preferring to blame man-made chemicals for cancer.

Like her successors who consistently forecast doom for the planet and its inhabitants, Silent Spring is alarmist and suffers from technophobia. It resolutely refused to recognize the billions of people, us among them, whose lives have been so greatly improved by the blessings of modern technology.

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Where Free Markets Meet Faith

In contrast to the historical ideal of Manifest Destiny, in which the conquest of the land was held to be a biblical right imbued to God’s loyal followers, a contemporary breed of religious practitioners are working to combine faith and ecology in new ways. Often found under the movements entitled “ecotheology” or “green faith,” religious practitioners of all denominations and creeds are acting to conserve what they consider to be God’s creation, following tenets many believe are already in line with their religious practices.

PERC Enviropreneur Institute graduates Fletcher Harper (‘07) and Stacey Kennealy (‘10) are looking to these religious groups to take action and work toward improving environmental quality. While there doesn’t seem to be much in common between those placing their faith in markets and those putting faith in the divine, Harper and Kennealy’s interfaith coalition, GreenFaith, recognizes that incentives matter.

GreenFaith’s mission is to inspire, educate, and mobilize people of religious backgrounds to protect the earth as a moral and sacred responsibility. As Paul Schwennesen writes in the latest issue of PERC Reports, however, “simply insisting that people ‘do what’s right’ doesn’t capture the full measure of GreenFaith’s work; the group calls for their members to address the mundane as well as the celestial. Values need to be specific and actionable.”

Thus, GreenFaith has used lessons garnered from PEI to attract new congregations to their Certification Program by touting the benefits of financial savings, as well as engaging new and younger members. The major force driving GreenFaith’s success, therefore, has not been morals, but the promise of growth – and this strategy is having success.

“In the end, GreenFaith isn’t just about teaching people that God wants a healthy environment,” said Harper. “It’s about mobilizing the faith-based sector – one of the largest social networks in the country – to make it actually happen. PERC has helped us understand new tools and perspectives on how to achieve this goal.”

Read the full article here in the spring issue of PERC Reports.

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What Ever Happened With Colony Collapse Disorder?

There has been plenty of bad news about bees lately. In 2006, beekeepers reported the mysterious disappearance of abnormal numbers of honeybees from their hives over the winter. The affliction, now known as Colony Collapse Disorder, has gripped the attention of the media—and perhaps for good reason. Honeybees are responsible not only for the honey in your cupboard, but also the pollination of many of the crops produced in North America.

If you were to rely on media reports alone, you might be inclined to believe that honeybees and honey are now in short supply. Based on the recent documentaries about Colony Collapse Disorder, you might believe that crops are at risk of going unpollinated and that we are heading towards a different “silent spring”—one in which the familiar springtime buzzing of the bee is no more.

Yet, somehow, the honey is in the cupboard and farmers across the country are still able to supply food to stock our shelves, all with little or no economic impact from CCD. How can this be?

As two prominent agricultural economists, Walter Thurman and Randal Rucker, discuss in a new PERC Policy Series, the market response of beekeepers provided a solution to the problem. Despite early predictions that CCD would cause billions of dollars of direct loss in crop production, beekeepers reacted so swiftly that virtually no changes were detected by consumers. While overcoming the difficulties of CCD has been no easy matter, beekeepers have proven themselves adept at navigating such changing market conditions.

“The state of the honey bee population – numbers, vitality, and economic output – are the products of not just the impact of disease but also the economic decisions made by beekeepers and farmers,” writes Rucker and Thurman.

You can read the latest PERC Policy Series here.

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Abundance in 2012

In 1980, Paul Ehrlich, a world famous biologist and author, accepted a bet proposed by Julian Simon, an economist. The bet was to resolve an ongoing debate about resource scarcity. Ehrlich chose five metals (copper, chromium, nickel, tin, and tungsten) and hypothetically bought $200 worth of each. If the real price of the metals increased over the following decade, Ehrlich wagered, it was an indication of increased scarcity. Simon won the bet. The real price of all five metals declined, signifying less scarcity.

Timing is everything. As demonstrated in the figure, the prices of metals wax and wane over time following an overall downward trend. Regardless, Simon’s point remains true. It is human ingenuity that prevents us from running out of resources – even finite resources. The key is not that prices continue to fall over time, rather that prices reflect consumer desires, and producers, given appropriate institutions, will respond.

Prices do reveal scarcity by increasing which, in turn, encourages conservation, substitution, and increased innovation and supply. In the end, the problem of scarcity is resolved by market coordination as shown by prices that peak and fall through the course of history.

Originally posted at Environmental Trends.

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Fined for Failing to Do the Impossible

Back in 2007, Congress created a biofuels mandate under which oil companies are required to use a minimum amount of cellulosic ethanol each year.  The mandate was supposed to encourage the development of a domestic cellulosic ethanol industry.  This has not happened.  Several years after the mandate was imposed, there is still no commercial cellulosic ethanol production.  This gets the oil companies off the hook, right?  Nope.  As the New York Times reports, companies are still paying fines, totaling nearly $7 million, for failing to meet a blending quota for a substance that does not exist.  Were that not bad enough, this year the cellulosic ethanol quota will increase, as will the fines for failing to meet it.

Who would defend mandating the use of a substance that, for all practical purposes, does not exist?  Not the renewable fuel industry.  As the NYT reports, they acknowledge that commercial production of cellulosic ethanol remains years away.

“From a taxpayer/consumer standpoint, it doesn’t seem to make a lot of sense that we would require blenders to pay fines or fees or whatever for stuff that literally isn’t available,” said Dennis V. McGinn, a retired vice admiral who serves on the American Council on Renewable Energy.

The EPA, on the other hand, defends the mandate:

Cathy Milbourn, an E.P.A. spokeswoman, said that her agency still believed that the 8.65-million-gallon quota for cellulosic ethanol for 2012 was “reasonably attainable.” By setting a quota, she added, “we avoid a situation where real cellulosic biofuel production exceeds the mandated volume,” which would weaken demand.

AEI’s Ken Green has trouble making sense of the EPA’s rationalization:

So what’s most important about biofuel quotas is that they prevent us from over-producing a product that we can’t produce so we don’t weaken demand for the product that the government mandates we use.

As Green notes, Congress might as well have mandated oil companies blend gasoline with rainbows and unicorn sweat.

Originally posted at The Volokh Conspiracy.

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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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Happy Holidays and Merry Christmas!

  ‘Tis The Season

When PERC opened its doors in 1980, free market environmentalism (FME) was considered an oxymoron; environmentalists saw markets as an enemy, not an ally. Now, thanks to PERC, the largest and oldest think-tank focusing on market solutions to environmental problems, FME is being tried and tested around the world. In Africa, private land owners are protecting rhinos from poaching; in the Caribbean an alumnus of PERC’s Enviropreneur Institute (PEI) is working to help replant and regenerate dying coral reefs; and in the Gulf of Mexico, the Environmental Defense Fund has joined PERC in campaigning for property rights solutions to overfishing.

At 45°N and 4,820 feet elevation, PERC needs your help to keep its dedicated PERC staff warm this winter season!  Your tax-deductible gift will help fund innovative research, convene conferences, publish the results in PERC Reports and other venues, and add to the growing number of environmentalists implementing PERC’s ideas.

Here are some specific things that your donation to PERC can accomplish:

  • $25 will cover the cost of producing and distributing PERC Reports to one reader for one year;
  • $100 will pay for printing and distributing a PERC Case Study to 100 people;
  • $2,000 will provide a scholarship for a student to participate in PERC’s summer programs;
  • $5,000 will pay for a Lone Mountain Fellowship, which brings a professor to visit PERC;
  • $15,000 will give an environmental entrepreneur an opportunity to attend PEI and learn to apply FME to their work.

I assure you that your tax-deductible contribution will promote environmental quality with less government and more individual freedom. Now is the moment when improving the environment by utilizing property rights and markets rather than big government can truly benefit America as the nation works to deal with its fiscal crisis.

Sincerely,

Terry L. Anderson

Executive Director