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Q&A with Matthew Turner on Road Congestion and Transportation Policy

It’s been another busy summer at PERC, with our summer fellowships bringing together an all-star cast of scholars to Montana to research topics relating to free market environmentalism. This week we continue our Q&A series with economist Matthew Turner, a leading expert on road congestion and transportation policy.

Matthew Turner is a 2012 PERC Julian Simon Fellow and professor of economics at the University of Toronto. His research focuses on the economics of land use and transportation. We thank Matthew for taking time to answer our questions. For more PERC Q&As, visit the series archive.

Q:  At your latest PERC workshop you presented new research, co-authored with Victor Couture and Gilles Duranton, entitled “Speed.” What aspect of speed are you looking at and why is it important?

A:  Bakeries in the Soviet Union used to hand out bread for free to the first in line while those at the back wait for the next batch. This was wasteful. It meant time was spent waiting that could otherwise be used for something else, and it gave bread to people with the most time on their hands rather than to the hungriest or the hardest working. We allocate highway space in much the same way. The commuter who arrives on the road at 7:00am gets to travel, but the one who arrives at 7:30am needs to waits in a traffic jam until road capacity becomes available. Just as for the old Soviet bakery, this leads to a lot of time wasted in traffic jams and assigns scarce rush-hour capacity to people willing to wait in traffic, who might not be the people who value rush hour travel most highly.

In our research we are try to understand the determinants of  driving speed in order to estimate the value of time lost to waiting in traffic. Since road travel, one way or another, accounts for about 18% of gdp, the value of this waste is a big number. We also want to develop a basis for making guesses about what a good road pricing system would look like.

Q You claim there are sizable welfare gains to be had from more sensible transportation policies? What sorts of policies are we talking about? Taxes on driving?

A:  Our research suggests that the failure to price access to roads leads Americans to waste tens of billions of dollars worth of time each year sitting in traffic. Yet roads are congested only part of the time and even our biggest and busiest cities have unused road capacity off peak. If we impose tolls on congested roads at congested times, we give people an incentive to shift their travel to an uncongested time when we have surplus road capacity. This saves people from waiting in traffic and will likely increase the capacity of our road network.

QAre there areas where congestion pricing has worked? Could it be implemented on a wide scale in the United States?

A:  Stockholm, London, and Singapore, and a handful of U.S. roads and bridges have congestion pricing programs. In these places we see big increases in travel speed in response to pretty small charges for peak hour road use. With that said, the devil is in the details. So far, these programs are expensive to administer and it is easy to imagine ways that they could create problems. Rather than aiming for wide scale application to the United States we ought to encourage pilot programs in congested cities like New York, Miami, Seattle, Boston and Portland. As we gain experience administering congestion pricing programs we can apply them more widely.

Q In earlier research you find that widening and building more roads actually creates more traffic. What is “The Fundamental Law of Road Congestion” and what are its implications for transportation policy?

A:  In this project we examine the relationship between the stock of highways and arterial roads in large U.S. cities and the total amount of road travel in these cities. More precisely, it examines the relationship between a city’s total lane kilometers of highway and arterial road and total miles driven within the city in a year. We find that a one percent increase in road lane kilometers causes almost exactly a one percent increase in driving. We also find that changes to the stock of buses in a city’s public transit network do not affect driving.

This means that we should not expect either road or transit expansions to alleviate traffic congestion in the long run. The only policy that we know to be effective at reducing traffic congestion is congestion pricing.

QWhen might investments in public transportation or road building be worthwhile?

A:  Even though road and transit expansions probably won’t reduce congestion on our roads and highways, they will allow more people to move around. We want to evaluate transportation infrastructure on the basis of the value of these extra trips. If a new subway line allows an extra 50,000 people to work downtown, we need to decide if the extra economic activity downtown justifies the cost of the train. The same is true of road expansions. We don’t have good answers to this question yet. Generally, it looks like expansions of highway and subway capacity are so expensive that it is going to be difficult to pass this test, especially in the countryside where rural state senators like to send federal highway funding. On the other hand, making investments that squeeze more capacity out of existing roads and tracks in big cities is going to be easier to justify.

For more from Matthew Turner on transportation policy, read his article in the Fall 2010 edition of PERC Reports.

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Q & A with Godwin Nnanna on the Niger Delta and Pollution

Godwin Nnanna is the investigations editor for Business Day, Nigeria’s leading financial daily based in Lagos. He has been a journalist since 1997 and has won a number of international and local journalism awards for his writings. Godwin has spent the last week at PERC as a Media Fellow, exploring free market environmentalism and property rights.  His research at PERC focuses on the Niger Delta and the persistent issue of gas flares and oil pollution.

Q: What is a gas flare? How frequently do they occur?

A: Gas flaring is essentially the burning of the gas that comes with the crude oil that we make gasoline from.  It is often the cheapest and easiest thing to do to associated gas during exploration, but obviously not the best thing to do. In the oil producing region of Nigeria this is a common practice despite the fact that we have had laws against it for over three decades.   In most oil producing communities in the delta, the flare tunnels are quite ubiquitous endlessly pumping out huge toxic flames into the air.  You see them everywhere exploration activities take place, some on farmlands, others right behind the houses of the villagers.  Some are laid on the ground, others mounted like huge Olympic torches.  To think that this has been the order for over 40 years is worrisome, very worrisome indeed.

Last October, I did a story after visiting the region titled ‘Legacy of waste’ chronicling how a nation with the world’s sixth largest gas deposit continues to waste such a huge economic product because of a lack of genuine commitment on the part of the stakeholders.

Shell, the leading explorer in the region records that there are about 110 flare locations in the region.  I don’t know how true that is.  All I can say is that there are enough to make Nigeria the worst culprit among OPEC nations.

Q: What are some of the associated risks of gas flares? How much gas is lost every year?

A: They have very terrible health implications for the communities.  You see all kinds of strange ailments when you visit these places.  You observe people with all kinds of tumor, bronchitis, respiratory and eye problems.

Figures vary but estimates are that Nigeria loses between $3 to $10 billion annually to this act.  Again, I am not sure of the figures, but imagine what $5 billion could do for the economy of the Niger Delta suppose that’s the figure.  The price of gas has been on the rise and yet we continue to waste such an important energy source in a country where many people cook with firewood and where electricity is hard to come by.

Q: Gas flares were outlawed in 1979, and yet they continue to occur. Why is this?

A: Weak institutions, corruption.  We are not saying over-regulate, we are simply saying ensure that basic environmental standards are conformed with.  There are global best practices and it makes good business sense to conform to them.  I’ve been reading two books since my arrival here.  One of them is Why Nations Fail by two Cambridge professors, one from MIT and the other from Harvard.  As I read that book, I reflect on Nigeria.  The authors alluded to the fact that the key distinguisher between prosperous nations and poor ones are institutions.  Where institutions are weak, poverty is endemic.  Obviously, the argument of these professors won’t be surprising to anyone who knows the Nigerian situation.

Q: How does the Nigerian federal government control resources?

A: The revenue from oil goes to the central government from where it is shared.  The center retains a portion while the rest is shared among the 36 states that make up Nigeria.  The oil producing states get slightly more because of a derivation formula that gives them an additional 13% for the oil produced from their communities.  This has been a subject of huge debate over the years in Nigeria.  While the oil producing states want more, others states are saying “no, what you have is enough”.

Q: What are the effects of this centralized control?

A: One of the biggest injuries oil has inflicted on the Nigerian system is that it has created a large dependency culture.  Most of the states do nothing but wait for monthly allocation from Abuja. Same with the local governments.  This has crippled innovation and the results are obvious in the huge unemployment and poverty rates in these states.

Nigeria was not always this way.  In the 50s and 60s when oil wasn’t much in the scheme of things, the regions thrived on the basis of their agricultural strengths.  Each region had its comparative advantage and there was deliberate effort to build on it.  You might have heard of the Kano groundnut pyramid in the north, and the cocoa and palm oil production in western and eastern Nigeria respectively.  These regions were economically strong on the basis of what they produced.  Today, except perhaps for Lagos, I doubt if there is any state that can survive without oil money. No prosperous nation anywhere in the world that I know or have read about operates such a monolithic economy.

Q: How can these gas flares be put to better use? What will need to occur to turn this pollution into economic prosperity?

A: We must reduce the flares drastically if they cannot be entirely stopped.  I read a BBC report recently that went by the title ‘Nigerian gas profit up in smoke’.  There is a huge energy deficit in the country and it is time genuine commitments are made to solve that problem.

Power is the key to stimulating entrepreneurship.  At the moment we are a ‘generator generation’.  Every average Nigerian, as a matter of necessity, makes an investment into a generator no matter how small.  So we have the biggest market for generators.  Visit any place in Lagos and you’ll see a block of four flats with at least four generating plants.  Some households have 2 or 3. It is not so even in some smaller countries in the region.  I lived in Accra, Ghana for almost 5 years without needing to buy a generator, but in Lagos, everyone owns one.  You can achieve real economic development this way.

Nigerians are very entrepreneurial; all they yearn for is basic infrastructure.  This presents a challenge as well as a huge investment opportunity.  We’ve seen in states like Lagos, attempts to forge public-private partnerships in infrastructure development.  That needs to be expanded.  Such opening up is required in many other sectors.  One of our challenges is that we have so much government yet so much less of the basics that that institution ought to do partly because of too many leakages.

Q: What have you taken away from your time at PERC?

A: I think what strikes me about PERC is the philosophy I see at work here.  Here is a group of people who essentially see opportunities in places where many out there see huge problems.  I have been covering the environment for a while and the widely held perspective out there is that economic growth and the environment  don’t go together.  PERC thinks differently.   I had a chance to speak with Dino Falaschetti and I like his perspectives on one of his papers “Growth is Green,” which in many ways is an expansion of the concept of free market environmentalism for which PERC is known.   This is a thought pattern that isn’t common.  The other thing quite fascinating is the warmness of the people here.  It’s remarkably amazing.

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Q&A with Shira Kronich on Peace Building Through Wastewater Treatment

PERC Enviropreneur Institute 2011 alumna Shira Kronich is working to find solutions to shared environmental problems in the Middle East. As a project manager for the Arava Institute of Environmental Studies in Southern Israel, Kronich coordinates the first UNDP trans-boundary Israeli-Palestinian project, “Peace Building through Wastewater Treatment.” The tensions in the Middle East are exacerbated by the scarcity of clean water, as well as from the polluted wastewater that traverses geopolitical boundaries. By encouraging environmental cooperation, Kronich is working toward peace and sustainable wastewater development.

Q: What is the current situation regarding wastewater in the West Bank? How does this affect Israeli aquifers?

A: The Palestinian Authority’s centralized wastewater collection networks do not service the majority of residents in the West Bank, where only 54 percent of wastewater is collected and about 90 percent of sewage produced  is discharged untreated into the environment. Generally, the cesspits that are used for storing wastewater are unlined―allowing sewage to percolate into the ground and pollute the groundwater. In addition, most of the pits are emptied with vacuum tankers that often dump the waste in open areas or in valleys. Roughly 60 million cubic meters of raw sewage are discharged into the environment in the West Bank every year. This degradation not only poses serious environmental and public health risks, but also causes cross border conflict as the sewage generated upstream in the West Bank flows downstream into Israel. As the raw sewage flows downstream it hinders Israeli attempts to rehabilitate surface and groundwater, further reducing already limited transboundary water resources.

Q: What services does “Peace Building through Wastewater Treatment” provide? 

A: Our project is a pilot program, which if extended, will represent a sustainable and comprehensive wastewater infrastructure solution for Al ‘Oja village in the West Bank. This project is grounded on a decentralized and collaborative approach. Collaboration is envisaged by combining Israeli and Palestinian expertise in wastewater treatment and reuse. The cross fertilization of ideas will allow for both Israelis and Palestinians to resolve the wastewater treatment problem in the West Bank to the benefit of both parties. In short, this project has two outputs: improved wastewater management systems in the targeted communities and promotion of dialogue between Palestinians and the Israeli.

Q: How will solving wastewater disputes help relieve tensions in the region?

A: A guiding assumption for the project is that relationships yield partnerships, regional environmental projects, and inter-municipal agreements and thereby reduce conflict. If such relationships can be replicated, then local communities will share the responsibilities―costs and benefits―from joint wastewater treatment projects. There is great benefit in rethinking the water scarcity situation in Israel and Palestine, not from a national view, but rather from a supra national perspective. The gap in public perception, understanding, and policy is still large in relation to issues traditionally regarded as national, such as water distribution and wastewater infrastructure. The project aims to strengthen dialogue between the Palestinians and Israelis at different levels through the transfer of knowledge and training activities.

Q: What did you take away from PERC’s Enviropreneur Institute?

A: The access to very experienced and knowledgeable professionals for information exchange and guidance was immensely positive. Additionally, it was rewarding to meet new people and broaden my professional network. Market-based solutions and a sounder understanding of the need for incentives, has helped me develop my project and I hope to slowly implement these issues into my work in the Israeli-Palestinian context.

Applications for PERC’s 2012 Enviropreneur Institute are now open. The deadline to apply has been extended to March 12th. For more information, watch the video and visit www.enviropreneurs.org.

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Q&A with Enviropreneur Kelly Sands Siragusa on Conservation Banking

Kelly Sands Siragusa is the Conservation/Mitigation Manager for Corblu Ecology, LLC, a private firm in Atlanta, Georgia, that specializes in ecosystem restoration and mitigation banking. Siragusa came to PERC’s Enviropreneur Institute (PEI) in 2011 to focus on emerging market-based approaches for nutrient reductions and water quality improvements for Total Maximum Daily Load implementation. She soon discovered the lessons from PEI applied evermore to existing Corblu projects. In particular, Siragusa has applied insights from PEI to the development of a conservation banking program in the Etowah River Basin for three federally listed fish species.

Q: What are the endangered species issues in the Etowah River Basin? What are the challenges to implementing protection for these species?

A: The Etowah River Basin has experienced tremendous growth pressure from metro-Atlanta and five of the fastest growing counties in the country. As a result, demands placed on water resources and increased urbanization have led to aquatic habitat loss and diminished habitat quality. The three listed aquatic species targeted by this initiative, the Cherokee darter, Etowah darter, and amber darter, are especially vulnerable to land-use changes. Mitigation for adverse impacts has primarily been provided through on-site actions such as stormwater management to minimize impacts and, in some instances, off-site mitigation handled on a case-by-case basis. Corblu identified the need and opportunity for a conservation banking program to provide additional conservation in the watershed.

Q: Why conservation banking?

A: Federal guidance has recommended the use of conservation banks under the Endangered Species Act as a means to conserve listed species in instances where impacts are unavoidable. A conservation bank is basically privately or publicly owned land managed for its natural resource values. In exchange for protecting the land, the bank operator is allowed to sell habitat credits to developers who need to satisfy legal requirements to offset their environmental impacts. In short, conservation banking shifts the administrative burden of managing projects to private entities specialized in the field. Often these approaches provide superior outcomes and are more cost effective than traditional mitigation approaches.

Q: How will Corblu develop a conservation bank to provide listed species protection in the Etowah River Basin?

A: Corblu has worked with the Southeast Ecological Service Center to develop a framework for conservation banking in the basin and to develop the proposed Deerleap Preserve Conservation Bank―the first of its kind in Georgia and the region. The proposed conservation bank will provide protection and management of 940 acres of pristine occupied stream habitat and associated riparian and upland habitat in the headwaters of the Etowah River. The bank is being developed in accordance with federal guidance and will provide conservation credits for the target species.

Q: Did the lessons from PEI in business planning help you gain a more comprehensive understanding of how to participate in these markets?

A: Attending PEI helped me think critically about factors pertinent to establishing sustainable markets and successful projects. The case studies presented at PEI provided real-life examples of project implementation, creative funding sources, and adaptive management. Lessons on the importance of economic incentives, for example, reinforced the need to assure that credit methodology adequately incentivizes participation in the market while also providing the needed environmental benefits. Most importantly, PEI drove home the importance of balancing conservation and business and looking for win-win scenarios for both people and the environment.

Applications for PERC’s 2012 Enviropreneur Institute are now open. The deadline to apply is March 5th. For more information, watch the video and visit www.enviropreneurs.org.

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Q&A with Steven Medema on the Coase Theorem and Environmental Economics

There has been plenty of confusion surrounding the work of Ronald Coase since his article “The Problem of Social Cost” appeared in 1960 – so much, in fact, that two scholars wrote in 1992 that the so-called Coase theorem has “generated a negative externality for economists.” To clear up some of the confusion, we talked with Steven Medema for the next installment of PERC’s Q&A series.

Few know more about the legendary economist and his impact on economic thought than Steven Medema. He is the author of many books and scholarly articles on the history of twentieth-century economics, with an emphasis on the work of Ronald Coase. His latest book, The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas, was awarded the 2010 Book Prize by the European Society for the History of Economic Thought.

Medema is a professor of economics at the University of Colorado Denver and a 2011 PERC Lone Mountain fellow. For more of PERC’s Q&As, see the series archive.

Q: Ronald Coase’s 1960 article on “The Problem of Social Cost” had a tremendous impact on economics, including PERC’s work on free market environmentalism. What is the “Coase theorem” and how has it evolved in economic thought?

A: The Coase theorem tells us that if property rights over the relevant resources are well-defined and the costs of transacting are zero, parties who disagree over the use of those resources will negotiate to an efficient solution, regardless of to whom the property rights are assigned. The upshot of the theorem is that private negotiations or other market-like processes can efficiently resolve social cost (“externality”) problems such as those associated with air and water pollution. Of course, transaction costs are never zero, and much of the discussion of the theorem over the years has attempted to work out the possibilities and limitations of negotiated solutions when transaction costs are positive. Though much of the early reaction to the theorem was negative, the discussion has evolved into one that focuses somewhat less on the theorem per se (that is, with its highly restrictive assumptions) and somewhat more on departures from these conditions and how Coase-theorem-like processes may be operative under more realistic conditions.

Q: Over the years, people have come to refer to a hypothetical world of zero transaction costs as a “Coasian world.” Is this view accurate?

A: Those who refer to such a world haven’t read Coase very closely. The world of zero transaction costs is a fiction—but a sometimes useful fiction, not unlike a vacuum in physics. It was also a bedrock assumption of mainstream economics for ages, including of the economics against which Coase was reacting in “The Problem of Social Cost.” What Coase showed was that, in the world of neoclassical economics, government regulation was unnecessary for an efficient resolution of social cost problems. If property rights are assigned over the resources in question and there are no costs of transacting, the parties will efficiently resolve the problem through negotiation. So, Pigovian remedies are unnecessary in a Pigovian (costless transacting) world. But Coase’s emphasis was on the fact that the costs of transacting are not zero, and nor are the costs associated with government action to deal with social cost problems. The evaluation of how society should deal with such problems thus involves a comparison of the benefits and costs of alternative courses of action—including the possibility of allowing the problem to persist if the costs of “curing” it are worse than the disease itself.

Q: We hear a lot about the Coase theorem in environmental economics. How has the Coase theorem impacted discussions of environmental economics and environmental policy?

A: I think that its central impact has been in the way of making scholars—and later policy makers—aware of the possibility of using the exchange process to deal with social cost issues. Of course, the Coase theorem is an idealized construct that does not reflect the world in which we live. But by showing how property-rights-based solutions can generate private, efficiency-enhancing moves, the theorem opened the door to the subsequent analysis of exchange solutions in the real world, and thus to both theories and policies that employ such a framework.

Q: You suggest that the Coase theorem is widely recognized among environmental economists and taught in most textbooks, yet its relevance is often viewed as extremely limited. Why is this so? Why then are so many environmental economists interested in Coase?

A:  My sense is that most environmental economists see Coase as important because he emphasized that social cost problems are ultimately problems related to incomplete property rights. This makes Coase’s analysis the natural starting point for the analysis of social cost issues. The rub comes in where one goes from there. Some continue to hew to what we might call a “Pigovian” line—emphasizing that regulatory mechanisms or taxes are necessary to correct the problem—while others are more interested in exploring whether markets or market-like mechanisms can be utilized to resolve the problem. But there is broad general agreement that social cost problems have their roots on the property rights side, and this viewpoint owes to Coase.

Q: Discussions of environmental economics often center around externalities. Coase avoids this term. How has Coase’s work influenced the way we think about external costs?

A: My sense is that, at a minimum, he impressed upon some that social cost problems, or externalities, are reciprocal in nature. One can view this in two ways. First, it takes two to tango. That is, if A is generating smoke that harms B, B may be said to be as much the “cause” of the harm as A, since B could mitigate damages by, e.g., moving away. Second, A may be imposing harm on B, but to restrain A’s activity in favor of B is to impose harm on A. Some see this as a “right-wing” sort of point, but it is not. It actually has a long history in jurisprudence and was held by none other than J.R. Commons, a prominent Institutionalist economist and Progressive in who worked during the first half of the twentieth century. But value judgments often get in the way of sound reasoning when it comes to things like externalities, so not everyone has gotten on board with Coase’s notion of reciprocity.

Q: Critics of Coase often contend that transaction costs in markets are too high for Coasian-type bargaining to occur: negotiations can be costly, multiple parties can be affected, and information is diffuse. This is no doubt often the case, yet transaction costs are also present in the political process. How do these costs affect the way we understand Coase’s relevancy to environmental policy?

A: If one adopts an efficiency-based perspective on these things, the point to be taken is that there is no such thing as a determinate optimal solution to social cost problems. One can only come to grips with these things on a case-by-case basis, weighing the benefits and costs associated with alternative courses of action and recognizing that both markets/exchange and government activity have associated with them certain costs—often substantial. Coase is not about the Coase theorem; he was a strong advocate of comparative institutional analysis and that, at a minimum, economic benefits and costs have an important role to play in evaluating policy options. With this came a great concern about the costs associated with government action—costs that he (rightly) believed had been underplayed or ignored in the theory and practice of social cost policy.

Q: Why are concerns about equity so prominent in environmental discussions of Coase?

A: Probably because Coase focused so heavily on efficiency. But there was good reason for this—it was the language in which the welfare economics of social cost issues had been discussed for a half-century. And as we all know, there are plenty of occasions when the dictates of efficiency collide with some people’s sense of what is “right.” The very possibility that the “victims” of pollution should bribe the factory owners to reduce their pollution levels is anathema to many. Interestingly, though, Coase talks about larger concerns (“aesthetics and morals”) toward the end of “The Problem of Social Cost.” But since most readers failed to pay attention to his arguments beyond the Coase theorem material (the first 15 pages of a 44-page article), they didn’t seem to notice this.

Q: What can we take away from Coase’s work and apply to the area of free market environmentalism?

A: I believe that there are two key insights. The first is that markets/exchange can work to resolve certain social cost issues. The question is which ones, and this can only emerge from careful and patient study. The second is that neither markets nor government are panaceas. Both generate imperfect solutions, and the question is that of which of these imperfect solutions is best for dealing with the problem at hand. This, too, can only be determined from careful and patient study. Unfortunately, too many economists and policy makers do not want to hear such things. But “create markets” or “we need government to solve the problem” takes us nowhere. These are difficult problems, and we seldom find that difficult problems have easy solutions.

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Q&A with Bruce Pardy on Natural Law, Markets, and Ecosystems

Our Q&A series continues this week with Bruce Pardy, a professor in the Faculty of Law at Queen’s University in Kingston, Ontario, Canada. Pardy has written extensively on matters of environmental law and governance, including ecosystem management, environmental assessment, civil and regulatory liability, climate change, and water law. He has taught at law schools around the common-law world, including Canada, the United States, and New Zealand.

Professor Pardy is a 2011 PERC Julian Simon Fellow. He is currently writing a book called A Natural Law of Systems: Ecosystems, Markets, and the Meaning of Liberty.

Q: What is legal instrumentalism? How does it differ from the rule of law?

A: Legal instrumentalism is based upon the premise that the role of government is to solve specific problems by specific means. It is a “hands-on” way to govern. As the label suggests, legal instrumentalism says that law is important only as an instrument to achieve the “right” result. In other words, law is a means to an end, or a tool for the social good. The problem, of course, is that, like beauty, the right result lies in the eyes of beholder, and differs from person to person. Down that route lies the tyranny of the arbitrary rule of persons. The premise of the rule of law is that government decision-makers are not free to do as they think best because they are bound by generally applicable, abstract rules that bind governments as well as citizens. Brian Tamanaha of Washington University Law School has aptly pointed out that instrumentalism and the rule of law are the two core ideas of the American legal system, but in certain crucial respects they conflict. Although governments today widely claim to believe in the rule of law, their behavior is predominantly instrumentalist in nature.

Q: Thomas Aquinas proposed another category: natural law. What is natural law and what are some difficulties that arise in its application? Conversely, what occurs in the absence of natural law?

A: The premise of natural law is that there are objective moral truths that apply to all human beings upon which laws should be based. Natural law purports to contain inherent, substantive limits on what legislatures and judges can do, because it is a “higher” law, based upon universal and immutable moral principles, whose purpose is to reflect what is good for human beings. The problem is that the many volumes of moral reasoning produced by philosophers and legal theorists over the centuries illustrate the opposite truth: moral standards are personal, arbitrary, subjective, and cannot be proven to be otherwise. Since natural law claims to be based upon moral absolutes rather than public opinion, it is not sufficient to establish their validity by pointing to majority opinion or public consensus. The agreement of a majority of people about moral absolutes simply means that they agree, not that the moral absolutes that they believe in are, in fact, absolute. Twenty years hence public opinion may have shifted, but by definition moral absolutes never do. If the real criterion is majority opinion, then the principle of basing laws upon universal morality is a fiction. But in the absence of natural law, law is a vacuum, able to be filled by whomever is powerful enough to take the reins. What is needed is an objective, non-arbitrary set of principles on which law can be based.

Q: What do ecosystems and markets have in common?

A: Markets and ecosystems run themselves.  These systems are not just collections of things, like widgets or frogs, but consist of elements interacting in a complex web of relationships and patterns that together amount to phenomena different from the sum of their parts. They operate according to their own immutable characteristics and rules, and share important features. They are organic and evolutionary, changing through time, rather than existing in a fixed or static state. They arise spontaneously, and their fundamental rules have not been created or invented by human beings, and cannot be changed by government design. All participants are equally subject to their forces; systems do not play favorites.

Q: In your paper, “The Hand is Invisible, Nature Knows Best, and Justice is Blind” [PDF], you write that, “Human action can affect the outcome of system processes, but it cannot change the nature of those processes.” Does this eliminate the need for laws that apply to markets and ecosystems?

A: The immutability of ecosystems and markets does not mean that there cannot or should not be laws that apply to them. Calling these systems “immutable” does not mean that they are impervious to external forces, but only that their internal principles are independent of state regulation, moral argument, or personal preference. Their protection is not a mandate to be performed “in the public interest.” It is not because someone has deemed them to be socially valuable that the law should provide for their operation. These systems exist. People live within them, because they cannot do otherwise, and depend on them for survival. They follow their own rules, because they can do nothing else. They cannot be manipulated or changed to behave differently, and efforts to do so are misguided. Instead, legal rules and principles need to account for the manner in which they operate.  [Read more…]

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Q&A with Michael Higuera on Enviropreneurship and Land Conservation

This summer PERC welcomed sixteen conservationists from around the world for its 11th annual Enviropreneur Institute. The program works with environmental entrepreneurs, or enviropreneurs, who seek a better understanding of how business and economic principles can be applied to environmental problems. For two weeks, participants have the opportunity to interact with leading experts in the field of free market environmentalism, including those who have researched and applied markets and property rights in their environmental work.

Michael Higuera of The Nature Conservancy attended this year’s program. He works for TNC in Boulder, Colorado, where he protects land through conservation transactions across the state. Michael began his career practicing transactional law in Denver, but discovered that finding solutions and bringing people together resonated with him more than the process of litigation. We thank him for answering our questions. For more of PERC’s Q&A series, see the Q&A archives.

Q: What types of conservation transactions are you currently facilitating?

A: I am primarily responsible for obtaining conservation easements on large ranches (over 10,000 acres) in eastern Colorado in order to preserve shortgrass prairie and protect native bird and wildlife species.  These transactions are funded by private donations, landowner donations, and public funds from sources such as the lottery, the Division of Wildlife, and federal programs.  In addition to that responsibility, I am working with a small group of people to determine ways to bring private capital into our conservation work and land transactions.  We have been exploring ways to engage the private sector in acquiring properties with significant biodiversity value and are considering using an investment vehicle such as a real estate investment fund. The fund would manage the properties for a profit while also protecting their biodiversity by placing a conservation easement on the land.  The sale of the conservation easement would help the fund acquire the property at a lower basis thereby increasing the operating return on its investment.  Similarly, my project at PERC’s PEI program sought to find ways to work with oil companies to manage drilling operations in an environmentally sensitive manner.  The common element between the real estate fund and the oil company ideas is finding market-based incentives that make it attractive for those ventures to promote conservation on their properties.

Q: What might some incentives be for the companies to conserve land tracts used in part for drilling?

A:  We cannot use a conservation easement to address drilling for oil because mineral rights are very different than surface rights which can be protected by easements, but my idea was inspired by the success of the conservation easement as way to facilitate the acquisition of property rights that are valuable to TNC’s mission to protect biodiversity.  The crux of my project at PEI was exploring ways to create incentives for oil companies to work with conservation organizations like TNC to plan their projects to avoid sensitive areas and minimize impacts.  The most ambitious way to do that would be for companies to create a product that is differentiated in the marketplace from others by the way in which it was extracted.  We certainly see this in the organic food market, fair trade certifications, and in the forestry markets.  Unlike the conservation easement model that relies in part on public funding and tax incentives, this model would rely on the consumer to pay for the conservation benefits.

A conservation drilling plan would provide protections for biodiversity. which is a win for TNC and others who value nature.  It could also be a win for the oil company by allowing them to differentiate their product, increase market share, and command a premium at the pump.  Consumers who want to be part of the solution would win too.

Q. You’ve discussed the possibility of an eventual fourth pump at gas stations nationwide.  What would this new “conservation gasoline” be, and how would it work?

A:  The fourth pump is really the home run for this idea and represents something that I think needs to happen in conservation more generally.  It represents a way to empower consumers with choices.  If conservation is important to people, then people need to step up and vote with their dollars.  Part of the reason that I have come to this conclusion is because I have more faith in people’s ability to make change through the market than at the ballot box.  The lobbying efforts of the oil industry have proven pretty effective at limiting new regulations.  Consumer demand and pressure at companies such as Walmart (that’s now carrying organic food and taking steps to be energy efficient) have resulted in some amazing changes that I do not think could have originated from a legislative process.  Another reason this kind of consumer or market-generated conservation has the potential to be so powerful is because it creates self-funded conservation that does not rely on public funding and, if it is successful, it ends up being replicated by competitors who see that it creates value.  This kind of domino effect is where you really end up having change happen on its own and at scale.  This will also become more important as we enter a time period of less and less government spending in response to the budget crisis.

Q. What challenges lie ahead in creating market incentives for oil companies to conserve land?

A:  There are a lot of challenges but the fun thing about working at an organization like TNC is that the possibilities for results at scale are what drive and inspire us, not the hurdles that lie ahead.  I think that the primary challenges are building a cooperative relationship with an industry that has not seen it in its interest to proactively work to promote conservation.  Another key challenge will be developing a market for this type of product in a market space that did not previously exist.  It will be critically important to create a market that has a mechanism to assure consumers that their dollars are making a difference on the ground and really advancing conservation while at the same time that mechanism needs to be user friendly for the oil companies.

Q: What did you take away from PERC’s Enviropreneur Institute that will help you with developing your project?  

A:  I came away from PERC with a fresh way of looking at problems and new tools for doing so.  Additionally, I forged relationships with a great network of people who renewed my enthusiasm for my work and with whom I hope to collaborate in the future.  I think PERC also helped deepen my understanding of markets, incentives, and property rights as a way to advance conservation.

For more from Michael Higuera, see his earlier post “What does it mean to be an environmentalist?

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Q&A with Bruce Yandle on Economics and the Environment

This week’s Q&A is with Bruce Yandle, a distinguished professor at Clemson University and George Mason University and a senior fellow at PERC. Yandle’s contributions to the field are numerous. He was one of the early pioneers of environmental economics as a distinct sub-discipline in the 1970s and has authored or edited 14 books on regulation and environmental policy.

Yandle was the subject of a recent interview on environmental economics in the Region Focus magazine by the Richmond Federal Reserve Bank, part of which appears below. For more PERC Q&As, see the Q&A archives.

RF: How did you become interested in the economics of the environment?

Yandle: What some people refer to as the “externality revolution” was occurring in economics when I was a doctoral student in the late 1960s. In addition to that, there was the revolution that was formed by the rise of public choice as an analytical device, primarily associated with Gordon Tullock and James Buchanan’s 1962 book, The Calculus of Consent. Both were associated with a move from normative to positive economics and empirically-based studies. I wrote my dissertation on externalities in housing and the rise of what were then called slums and the programs that were addressing them, urban renewal. So I began writing on property rights and external effects, and that led naturally into questions of water quality, air quality, pollution, and so forth.

My direct link into questions of the environment as we think of it narrowly –water, air — was a colleague I became associated with at Clemson by the name of Hugh Macaulay. He was writing on, as he put it, “dirty water.” So when I joined that faculty, there was a senior faculty member who was working on this. I thought, my work transfers directly. I just have to change the names on the axes from “housing” to “water,” then I’ve got my model.

RF: In your writings about environmental economics, you’ve described a “systems approach” and a “process approach” to environmental policy issues. What do you mean by these terms?

Yandle: A systems approach is where the “brightest and best” get together and look at a problem and come up with what they believe to be the best solution. They describe the system that can be installed that will lead to a solution of the problem and so it tends to be top-down.

In a process approach, you identify goals and outcomes, develop some rules of the game, and then let the process take hold, holding accountability with respect to outcome. You don’t tell people how to do things; you say this is the outcome that must be achieved, or it’s going to be costly for you.

RF: You have been a proponent of the process approach. But aren’t there success stories that the systems approach has enjoyed?

Yandle: There are success stories in both camps. The process approach is by far the oldest because common law is a process approach where there are rules of property, rules of liability, rules with respect to pollution that have been around for centuries, so that one cannot impose costs on his neighbor without your neighbor’s permission, or your neighbor has a cause of action against you. At common law, people downstream hold property rights to water quality and people upstream cannot destroy that with impunity. Basically what protected air and water quality in the United States up until the late 1960s was the process approach based on common law, with a lot of state and local ordinances and statutes supplementing it. So there are wonderful success stories there. That is, somehow we all survived until the 1970s without having a systems approach imposed from the top for the environment in a consistent way.

There are transaction-cost problems and enforcement-cost problems that lead to situations where people will understandably develop a systems approach. Generally, when you have crises, systems approaches tend to take over — that is, we move to hierarchies, just as we are seeing now with Japan and nuclear power.

There are some wonderful success stories: EPA is now promoting process with respect to river basin management approaches for water quality and we’ve got some pretty interesting success stories going on there. They are, I would say, hampered inasmuch as they are promoting it within the context of technology-based, systems-approach standards based on inputs, and that’s because of the statutes under which they operate. The statute says you will define “best available control technology” and require it of all users of these particular streams. We have gotten to the point now where the EPA is identifying maximum loads that can be imposed on a stream; that’s an outcome. Then EPA says, OK, members of this watershed community, tell us how you would like to achieve that goal. That’s a process.

RF: You mentioned transaction costs. How much of an obstacle are transaction costs to environmental protection under the process approach?

[Continue reading at Region Focus…]

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Q&A with Randal Rucker on Bees and Colony Collapse Disorder

There has been plenty of bad news about bees lately. Reports of colony collapse disorder (CCD) predict disaster for honeybees and the pollination services they provide. Based on the thousands of news stories on CCD, as well as two recent films, one is likely to conclude that honeybees are quickly going the way of the dodo.

But what do the data reveal? Are honeybee numbers falling? Is honey production in a tailspin? This week Randal Rucker, professor of economics and agricultural economics at Montana State University, answers these questions and more. Professor Rucker is a Lone Mountain Fellow at PERC working on projects related to pollination markets and colony collapse disorder. He has published research on various issues related to agricultural policy, contracting, and natural resource management, and is co-author with Ernest C. Pasour Jr. of Plowshares & Pork Barrels: The Political Economy of Agriculture.

We thank Dr. Rucker for taking the time to answer our questions. For more of PERC’s ongoing Q&A series, see the Q&A series archive.

Q: How is colony collapse disorder (CCD) affecting bees and beekeepers?

A: With CCD, a beekeeper will check his hive one day and find it to be healthy.  When he comes back to check it again, those hives that have been hit by CCD will have few or no adult bees present.  The queen often remains, the colony contains food, and there is brood remaining.  The adult bees are nowhere to be found.

CCD has increased the costs of beekeeping.  Commercial beekeepers now make more splits (see below) going into the winter.  If a beekeeper does not get hit by CCD, then he probably has more hives in the spring than he had going into the winter.  If he gets hit by CCD then he may lose half or more of his colonies.  In this case, if he has contracts to pollinate almonds in the spring, he will have difficulty fulfilling those contracts.

Q: Why do you think the media portrayed CCD as a “crisis” and in turn the public presumed that government action is desirable or necessary?

A: CCD is a crisis for those beekeepers that get hit hard by CCD.  In aggregate, however, our research suggests that most market indicators have not changed noticeably since the onset of CCD.  Colony numbers have not fallen, honey prices have not risen, package and queen prices have not shown dramatic increases, and honey production and yields have not been affected.  With the exception of almond fees, pollination fees have not changed much since the fall of 2006 when CCD first appeared.  Our analysis suggests that almond pollination fees have risen (by roughly 10 to 15 percent) since the appearance of CCD.

Why has the media portrayed CCD as a crisis?  Possibly because most people do not understand how beekeeping and pollination markets work.  There has been limited acknowledgement in the press that beekeepers lose bees every winter and that they know how to deal with those losses.

Q: How is CCD affecting pollination markets?

A: As indicated above, most of the market measures you can think of that might indicate a crisis have not changed much.  The back-of-the-envelope calculations we have done to date suggest that the increase in almond pollination fees we have found probably causes the retail price of a $7 one pound can of Blue Diamond almonds to increase by about three cents.

Q: How do beekeepers adapt to increased mortality in their bee colonies?

A: There are several methods by which commercial beekeepers can increase their colony numbers to offset the potential increase in winter mortality since the onset of CCD.   Our surveys of Washington and Oregon beekeepers suggest that the most frequently used method has been splitting and re-queening.  Beekeepers can split a healthy hive by taking up to half the colony’s population, and placing those bees in an empty colony.  They purchase a queen for the new colony and have it delivered through the mail.  The process of transferring the bees to a new colony takes a good commercial beekeeper about twenty minutes.  Today, the queen might cost them $15 – $20.  Depending on how many bees were extracted from the original colony, it can be at sufficient strength to provide pollination services within a relatively short time period.  Within about six weeks, the new colony will be at full strength.

Q: What lessons can we draw from the adaptation of beekeepers?

A: Markets work.  Honey bees are resilient, and commercial beekeepers are savvy businessmen who have figured out how to respond to the problems caused by CCD.  The data on the market indicators mentioned above suggest that beekeepers have adapted to this new disease quickly.

Q: Steven Levitt and Stephen Dubner briefly discuss beekeepers in their recent best seller Super Freakonomics. They claim that fruit farmers and beekeepers create positive externalities for one another, and for that reason they set up shop next to one another. Is their assessment of the relationship between beekeepers and orchard owners accurate?

A: No.  There are commercial beekeepers who manage thousands of colonies and travel thousands of miles each year to provide pollination services to orchard owners and farmers with crops that require these services.  The classic story about beekeepers not receiving any benefits from the pollination services provided by their bees is a myth.  Our research suggests that the first pollination contracts were probably negotiated in the early 1900s.  Prior to that, the description provided in Super Freakonomics may have been accurate in some instances, although we suspect that at least as frequently orchard owners and farmers may have simply owned a few bee colonies to provide the (smaller scale) pollination services they required.

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Q&A with Matthew Kahn on Climate Change Adaptation

This week’s Q&A is with Matthew Kahn, a professor at the UCLA Institute of the Environment in the Departments of Economics and Public Policy, and the author of the recent book Climatopolis. Kahn is a 2011 PERC Lone Mountain Fellow and co-director of PERC’s recent workshop on climate change adaptation. He blogs at Environmental and Urban Economics.

We sat down with Kahn last week for a short video interview on how free markets can help us adapt to climate change. For more PERC Q&As, visit the Q&A archives.

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Q&A with Bart Wilson on Experimental Economics and Property Rights

Bart Wilson is a Lone Mountain Fellow at PERC working on a project investigating the territorial foundations of human property via experimental economics. As part of his research, Dr. Wilson actually placed the PERC staff in a virtual economic terrarium—results to follow!

His academic home is in the Economic Science Institute (ESI) at Chapman University as the Donald P. Kennedy Endowed Chair of Economics and Law in Argyros School of Business and Economics and the School of Law. Prior to joining the faculty at Chapman, Wilson was an associate professor of economics at George Mason University.

We thank Professor Wilson for taking the time to answer our questions. For more of PERC’s ongoing Q&A series, see the Q&A series archive.

Q. What is the Economic Science Institute?

The ESI is a group of economists who use the laboratory method of inquiry to explore why exchange systems work the way they do. We investigate how rules and orders form to create wealth, and we build and test new market mechanisms to squeeze out even more. In short, we are interested in understanding why humans are prosperous like no other species on the planet.

Q. Why study the origins of property in the laboratory?

Ordinary people, and especially economists, take the institution of property for granted, but we need look no further than the recent riots in the UK to see just how tenuous that institution is. A popular notion of property is that the government must grant rights to property before it can enforce such rights. But it is from watching our subjects in the laboratory making decisions for cold hard cash that we can come to appreciate that rules of property emerge in precisely the opposite way. To paraphrase in the context of property what Julius Paulus, a third century Roman jurist, said of rules in general, property rights are not derived from rules, but rules of property arise from our knowledge of what is right. In the laboratory we observe from the ground up how people negotiate the rules of property for their virtual community based upon what they consider to be the right thing to do. And more importantly, we learn from the failures, which happen frequently and often spectacularly so, the conditions under which rules of property do not emerge.

Q. In the past you have used a laboratory experiment to explore whalers’ rules of capture in the 17th & 18th centuries. What can we learn from 21st century undergraduates about 400 year old whaling norms?

In my first study on the origins of property in the laboratory, my co-authors and I found that roughly 1.5 out of 6 economies were able to successfully establish a convention of property and experience the gains from specialization and exchange that Adam Smith so famously articulated. It wasn’t from a lack of trying on our part. In three different treatments we gave our subjects tools, both carrots and sticks, which appeared to us to be sufficient to solve the problems that we observed, and not one worked reliably.

From that humbling experience, I thought that perhaps using economic history as guide we might be able to devise a more successful software platform. So we designed an experiment in which our participants could develop, without any suggestion from the instructions or interface, two different historical rules of capture that were recorded as being used for hunting two different types of whales at different times in history. Half of our subjects successfully implemented the earlier historical rule, but not once did the later rule take hold.

When reviewing the data, the first question we asked ourselves was, why did the subjects implement the earlier rule only half of the time? A deeper pass at the data revealed that if there were at least two bad apples (out of six) bent on preying upon their compatriots without remorse, no rule of capture ever emerged. When we subsequently implemented a procedure that weeded out the incorrigibles, every group implemented as predicted the first historical rule of capture, but not the second.

With those same participants we then changed, without announcement or cue, the characteristics of the prey such that the original rule would not efficiently settle the costly question of “Mine or Thine?” while hunting. The tools for the second rule of capture, however, could. In all of the sessions we saw evidence of increasingly costly conflict as soon as the type of whale changed. In other words, we watched the old rule break down. But as an another humble reminder that the conditions for respecting property shouldn’t be taken for granted, we saw little evidence of the second rule emerging to take the place of the first.

Our results indicated that not just any rule of property will do—rules emerge to fit the specific characteristics of the things themselves. Our experiment also showed that the rules of property that do emerge are dependent upon the path of history and, are sensitive to, as the 17th century philosopher Samuel Pufendorf noted, “the tempers of men.”

Q. Some scholars have criticized experimental economics for not giving the subjects time to think or the opportunity to consult with other people about their choices. Yet in most real decisions we get time to ponder and to talk to others. How do you get around this?

In all of my experiments in which participants must build their own institutions and socioeconomic orders from the ground up, a key feature of the software is a public chat room for open-ended communication. While providing such a forum is not sufficient for success, my co-authors and I have found these transcripts to be insightful windows into how our participants view the problems they need to solve. In the whaling experiment, the transcripts are littered with strident moral language following violations of what some perceived to be the right way to behave. Moreover, every group that was successful explicitly discussed the first rule of capture. The absence of discussion is also informative. For example, our subjects did not implement, though it was simple to do so, an equal distribution of prey post hunt, and the transcripts are markedly silent on such a proposition.

Q. Today you ran an experiment on the PERC staff investigating the territorial foundations of human property. Can you briefly describe the experiment?

In this virtual economic terrarium, ten avatars scavenge a plain for berries that grow in shrubs. Half of the avatars are of the large variety and half of the small variety. Each berry that an avatar consumes adds to the avatar’s health and the healthier the avatar, the more money it earns each second. Due to metabolism, the health of an avatar is constantly falling, and if an avatar’s health hits zero, the individual dies and disappears into the luminiferous ether.

The avatars’ habitat supports two types of shrubs, high-producing green shrubs of which there are only a few and low-producing brown ones of which there are many. An avatar all alone in a shrub can pick berries to its hearts content, but if a second conspecific enters the shrub, neither can pick any berries, and a standoff ensues (see picture below).

During a standoff each avatar can take any one of three actions: smile at the other avatar, hit the other avatar, or leave. If an avatar leaves, the remaining avatar can pick the shrub’s berries until another avatar (or the same one) enters the shrub. A hit reduces an avatar’s own health by one point but reduces the other avatar’s health by 3 points, if the aggressor is small, and by 5 points, if the aggressor is large. Smiling is costless.

Non-human animals adjust their fighting behavior to the quantity of resources available and to how the resources are distributed. Non-human animals resolve disputes over resources through conventions of first-come, first-get basis. What do humans do? Does might make right? Does the healthier individual get the resource? Do people, without the aid of language, develop a convention to settle disputes?

We find that if resources are clumpy, as described above, then, yes, people will fight over them, but that if the resources are evenly distributed, i.e., there are no valuable green shrubs, then we observe a dearth of fighting. Moreover, when resources are clumpy a convention arises such that the prior resident won 76-84 percent of the standoffs with a same-sized intruder. When the resources are uniformly distributed, we observed no convention of prior residency. Notice again that the property right of a territory wasn’t derived from a rule imposed from the top down, but based upon the distribution of the resources; a rule arose, without any discussion of what was the right thing to do.

For more on this study, see DeScioli, P & Wilson, B. (2011). The Territorial Foundations of Human PropertyEvolution and Human Behavior. Volume 32, Issue 5, Pages 297-304. 

Bart Wilson runs a virtual economics experiment at PERC earlier today

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Q&A with PERC Enviropreneur Dave Wager on Tree Ring Pens

PERC welcomed sixteen conservationists from around the world for its 11th annual Enviropreneur Institute, June 26 through July 8, 2011. The program works with environmental entrepreneurs who seek a better understanding of how business and economic principles can be applied to environmental problems. For two weeks, participants have the opportunity to interact with leading experts in the field of free market environmentalism, including those who have researched and applied markets and property rights in their environmental work.

Dave Wager attended this year’s Enviropreneur Institute in Bozeman, MT. He is the owner, artisan, and forester for Tree Ring Pens, LLC. Prior to launching Tree Ring Pens, Dave spent ten years conducting Forest Stewardship Council (FSC) endorsed certification assessments on more than 100 forest management operations covering over 25 million acres of forestland across 16 countries.

Q: What are “Tree Ring Pens” and where does the wood supply come from?

A:  Tree Ring Pens are fine writing instruments crafted from dated tree ring cores. Each pen includes the full chronology (first through last annual ring) of a tree’s life. Through these annual growth rings, each pen shows 100+ years of natural history. As children we learned we could figure out how old a tree was by counting its rings. To foresters and scientists tree rings serve as an encyclopedia of past forest and climate conditions, providing information on tree growth rates, climate patterns,  forest fire history,  and many other ecological topics. The Tree Ring Pen was created to share this unique resource through a commonly-used object.  The wood for Tree Ring Pens comes from forest restoration projects in western Montana—specifically projects that aim to restore old growth forests.

Q: How did you come up with the idea for the Tree Ring Pen and how does it relate to forest restoration?

A:  My idea for the Tree Ring Pen was born more than a decade ago while conducting dendrochronology (tree ring) research as part of my master’s degree. People seemed fascinated by the information and history imbedded in tree ring cores, and I had been thinking of ways to share tree rings in a wood product. One evening, while working in a dendrochronology lab, it dawned on me that tree rings could be displayed in a wooden pen. The idea for Tree Ring Pens sat on a back burner until I discovered an opportunity to wed it with the need to thin overstocked forests in the western U.S. As a result of nearly 100 years of fire suppression, some forests, including rare old growth stands, are unnaturally dense, and are more susceptible to fires and insect/disease mortality. Without restoration treatments, old-growth forests in dry regions of the West are at considerable risk. Removing the encroaching conifers through forest thinning is needed to restore and help protect remaining old growth forests.

Q: Does the purchase of a Tree Ring Pen contribute to future forest restoration projects?

Dave Wager in action

A:  Tree Ring Pens are crafted out of small understory trees that are adding unnatural stress to old growth trees. Thinning out the small diameter trees improves the resiliency of the old growth stands. The aim is to direct Tree Ring Pen restoration efforts at small patches of old growth that are being ignored because they lack the economies of scale that make restoration thinning economically viable. A significant portion of the remnant old growth forests are in remote locations, steep terrain, and/or small isolated patches. Remnant old growth stands exist today, in part, because they were too inaccessible or too steep to be logged economically when widespread logging of old growth forests occurred. Ironically, the same cost challenges that explain their existence also serve as an impediment to their conservation. By crafting a fine product that displays tree ring history, the low value of the small diameter trees can be greatly enhanced to provide the necessary economic incentive to accomplish restoration. Additionally, Tree Ring Pens LLC is donating 5 percent of the purchase price of the sale of each pen to organizations working on forest conservation and restoration. [Read more…]