The columnist George Will once called Milton Friedman “America’s most consequential public intellectual of the 20th Century.” Friedman’s work has had a major impact in most areas of public policy, including discussions about environmental quality. Earlier this year, Richard Stroup, visiting professor of economics at N.C. State University, discussed “Milton Friedman, Economic Freedom, and Environmental Quality” for the John Locke Foundation’s Shaftesbury Society. He also highlighted Friedman’s influence during a discussion with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: We should first explain that one of the reasons that you are qualified to speak on this issue is that, before coming to N.C. State, in some of your other work at the federal government level and in Montana, you were considered one of the founding people behind free-market environmentalism. What is that?
Stroup: Well, it is basically Milton Friedman’s economics applied and some additional ideas from public choice and Austrian economics and law and economics. But Milton’s work really is the basis originally for the idea of free-market environmentalism. The main point is to hold people accountable for what they do in the context of doing so. When you do that, then they can have freedom. People can have freedom if they are accountable. Markets do a pretty good job almost all the time – never a perfect job – but usually a pretty darn good job when property rights are present and enforced. Part of the entrepreneur’s job, as a matter of fact, is to create property rights and create protection for the resource once the resource becomes valuable enough to justify the efforts to establish those rights. That is part of free-market environmentalism – to encourage emerging resources, things that are newly valuable, to be able to get the kind of protection that property rights can bring, and to produce the kind of value that marketable property rights in a market economy can produce from those very resources.
Kokai: One of the things that you mentioned in your presentation that I found interesting is that some people who reluctantly accept the idea that markets work, for some reason don’t accept that they work for the environment.
Stroup: It is often surprising. I mean we, out in Montana, working in Montana for all those years at PERC – originally the Political Economy Research Center, and now the Property and Environment Resource Center – have ourselves been sometimes surprised to learn just how … well the market has worked in a lot of cases. It doesn’t always work. It seldom works without the help from, for example, government courts and mechanisms to help enforce contracts and so forth, so that even in Milton Friedman’s free-market system, government plays a very important background role, but it’s more like an umpire and less like the boss telling everybody what to do.
Kokai: So for folks who have the idea in their head – free-market environmentalism sounds good, but how does it work – let’s take an example of some type of environmental problem. How would it work under the system that most people are familiar with, and how might it work differently if markets had a greater share?
Stroup: There is the [case of how to handle a byproduct such as sludge], where the whole idea is to prevent people’s rights from being violated by upwind polluters or upstream polluters. And in that case, the market approach there really is calling on the courts and the sheriff to, when necessary, to stop violators of rights from doing the damage, violating rights and thus doing damage. But in turn, that sometimes requires the creation or the establishment in law of what may have been simply custom before. That is the idea of common law or private law. How have people been doing it? Have they been protecting themselves? What sorts of risks is one expected to take or expected to bear from one’s neighbors just by the nature of being where you are and doing what you do and what everybody around there does? If you are in old-time cattle country, the rules are going to be a little different than if you are in downtown New York City. They have different rules.
But the whole idea all the time is to try to make sure that people’s rights, as commonly viewed in that area, are not being violated. That tends to protect the environment. For example, in England where some fishing rights are privately owned – rights for fishing for salmon in streams or in estuaries and, as well, for trout – they are privately owned by the riparian owners. The people who own the land on the stream own the rights to fish out to the middle of the stream. Those rights can be sold to clubs, for example. People who value [them] the most will own them and get to use them and also get to protect them. It turns out that the English were protecting – for example, by protecting the trout, when the fishing rights owners found upstream cities were dumping really bad pollution, sewage, into the stream and damaging the trout, that gave them both the incentive and the rights to go to court to say, “Hey, stop. We want injunctive relief here.” They banded together, and they got that result. Not everybody joined the team to get that result, but enough did that, by golly, the people most affected and the people most passionate about the damage – they got the result. So these people stopped undue pollution in those streams in the course of protecting their own fishing rights. That was long before Earth Day and long before there was an EPA. So we like to point out that, unlike [in] the United States, that could happen there because the fishing rights were privately owned. Here you cannot own fishing rights in a stream like that.
Kokai: It sounds as if this also leads to more flexibility in the outcome that will be best.
Stroup: That’s right. Because if you buy out the riparian owners – if trout fishing is valuable, but it turns out that you have an even more valuable use that will involve polluting a stretch of that river – if you’ve bought out every riparian owner on that stream and if you impair the fishing then, after they have voluntarily sold to you, then you can switch the use. If owners don’t want to sell, they don’t have to sell. It’s up to them. So there is flexibility here to change uses, and it happens all the time. Uses that, at a low price, are just loved and hung onto ferociously – once large benefits are exchanged, you’ve got the possibility of buying them out. When that happens, both sides have to be better off. Otherwise there would be no trade. It is a voluntary trade – free market.