Maybe We Don't Need Government to Save the Planet

Ronald Bailey lays out evidence for the environmental benefits of capitalism.

Environmentalism has traditionally been dominated by the left because government intervention was seen as the only way to protect the environment from the predations of heartless capitalists. But concern for the environment doesn't have to be equated with scorn for the free market. Economics is about the allocation of scarce resources, including natural resources. Believers in the superiority of the free market over government intervention* in allocating natural resources are free market environmentalists.

According to Terry Anderson, a charter member of the free market environmentalist movement,

the first premise of FME is that "wealthier is healthier," meaning that markets generate the wealth that gives us the wherewithal to solve environmental problems. Although many people mistakenly think that markets can only generate consumerism and other gunk, in reality it is markets that produce wealth and thus help the environment.

The second major premise of FME is that "incentives matter." Positive incentives can turn the environment from a liability into an asset for a resource owner. If we own the water and land, we have the incentive to manage and conserve them properly.

The key to the first premise is technological development and dissemination. In a market system, obtaining resources comes with an explicit cost born by the firm or consumer obtaining the resources. Technologies which either reduce the amount of a resource required or make it easier to obtain reduce the cost imposed by the use of the resource. While needing less of a resource clearly leads to an environmental benefit, ease of access generally won't at first. But as technology improves, the environmental impact of bringing resources to market declines as producers find more efficient ways to bring resources to market.

Furthermore, new technologies lead to new uses for the environments from which the resources are extracted, and, assuming an operational market and property rights, owners of land have an incentive to conserve it for, say, hunters or hikers. On top of this, property rights give the owner exclusive access to the property he owns, but no other. Thus, he has to figure out how to allocate his resources in such a way that he doesn't run himself into the ground.

Bailey points out what happens when property rights aren't respected:

It is true that rainforests in Indonesia, Brazil, and the Congo are still declining, but that is largely the result of a gigantic institutional failure. Governments do not recognize ownership of the land, so people rush to take what they can before the next guy can get it--the all too familiar process of an open access commons race to the
bottom.

*This is a general rule. Upholding property rights and the sanctity of contract are two examples of government's legitimate role in the economy.