How Property Rights Could Help Save the Environment

At the same time, the environmental limitations of property rights and markets should not be overstated

Guest post by Jonathan H. Adler, a professor at the Case Western Reserve University School of Law and a regular contributor to the Volokh Conspiracy.

In my past two posts I've made a brief case for approaching environmental problems from a property rights perspective. In the first post I noted that Garrett Hardin identified private property (or something formally like it) as a solution to the "tragedy of the commons," and suggested that this sort of approach has been under-utilized in modern environmental policy. In a second post I discussed how the recognition of property rights in fisheries have, in fact, prevented the tragedy of the commons in marine fisheries. This is because transferable property rights, where properly defined and effectively enforced, align an owner's incentives with the value of the underlying resource. Fisheries are in trouble the world over, but property-based management regimes are a demonstrated way to prevent overfishing and fishery collapse.

The creative extension of property rights to ecological resources could help address many environmental problems. Particularly in the case of natural resources, property rights are a viable and demonstrated means of enhancing sustainability, particularly when compared to the available political alternatives. For those interested in more on this general approach, I have two articles which discuss this general approach at greater length: "Free & Green: A New Approach to Environmental Protection" and "Back to the Future of Conservation: Changing Perceptions of Property Rights and Environmental Protection." Work by others along these lines can be found on the website of the Property and Environment Research Center (PERC), a Bozeman-based think tank at which I am a senior fellow.

At the same time there is increasing evidence that a failure to respect and protect property rights undermines environmental stewardship, particularly on private land. This is important in a country like the United States in which a majority of land is privately owned. This problem is most evidence in the context of endangered species. A majority of those species listed as endangered or threatened rely upon private land for some or all of their habitat. If these species are not saved on private land, they may not be saved at all. Yet the Endangered Species Act, in effect, punishes private landowners for having maintained their land in a way that is beneficial for listed species. The end result, as empirical research has shown, is a decline in endangered species habitat on private land. Greater protection of property rights could actually enhance species conservation, as I explain here. (And for more on the Endangered Species Act in particular, see this book.)

Whatever the benefits of property rights for environmental protection, they are no panacea. Where property rights are a particularly effective way of aligning incentives for resource conservation, the application of property-rights approaches to pollution problems is more difficult. In principle, a commitment to property rights should entail a commitment to protecting people and their property from unprivileged or unconsented to invasions. Imposing waste or emissions on another's land should be recognized as a violation of their rights. In practice, however, this can be difficult to do. Whereas it may be relatively easy to adjudicate disputes between neighboring landowners, such as when one neighbor's activities generate odors or smoke that interfere with the other, it is more difficult to address those pollution problems that involve numerous parties on either side of the equation, particularly if one believes tort litigation, in the form of common law nuisance actions, is the best way to address pollution problems. I explore these problems in greater depth in this paper forthcoming in Critical Review.

While property-based environmental strategies have their limitations, they should not be overstated. Quite often, "markets" or private enterprise are blamed for environmental problems that have other roots. Nobel laureate Ronald Coase noted this phenomenon in his seminal essay, "The Problem of Social Cost"), when he commented on those who blame nuisances, environmental and otherwise, on market failure.

When they are prevented from sleeping at night by the roar of jet planes overhead (publicly authorized and perhaps publicly operated), are unable to think (or rest) in the day because of the noise and vibration from passing trains (publicly authorized and perhaps publicly operated), find it difficult to breathe because of the odour from a local sewage farm (publicly authorized and perhaps publicly operated) and are unable to escape because their driveways are blocked by a road obstruction (without any doubt, publicly devised), their nerves frayed and mental balance disturbed, they proceed to declaim about the disadvantages of private enterprise and the need for Government regulation.

Coase's immediate point is that problems blamed on private markets often have political roots, such as when the government authorizes or encourages environmentally destructive behavior. Pollution resulting from government subsidies for favored industries is a good example. More broadly, this passage suggests it is important to consider the underlying institutional arrangements when diagnosing environmental ills. Consider the tragedy of the commons scenario discussed before. Even if the relevant resource users are for-profit corporations, it would be a mistake to label a commons problem as "market failure" or evidence of the environmental rapaciousness of free enterprise. The reason for the tragedy of the commons has little to do with capitalism or corporate entities and everything to do with the underlying institutional arrangements, and the lack of property rights in particular.

Environmental problems are difficult, and typically defy easy solution. Though I believe in property-based solutions to many (if not most) environmental problems, the viability of such approaches should not be oversold. At the same time, the environmental limitations of property rights and markets should not be overstated, particularly in comparison to the viable regulatory alternatives. In environmental policy we rarely have the option of pursuing a clearly identifiable "ideal" approach. Rather, our choice comes from the collection of second-best (and third-best, fourth-best, etc.). The question is not which approach is perfect, but which approach is better (or not as bad) as the others.