DRI-254 for week of 7-6-14: The Selling of Environmentalism

An Access Advertising EconBrief:

The Selling of Environmentalism

The word “imperialism” was coined by Lenin to define a process of exploitation employed by developed nations in the West on undeveloped colonies in the Eastern hemisphere. In recent years, though, it has been used in a completely different context – to describe the use of economic logic to explain practically everything in the world. Before the advent of the late Nobel laureate Gary Becker, economists were parochial in their studies, confining themselves almost exclusively to the study of mankind in its commercial and mercantile life. Becker trained the lens of economic theory on the household, the family and the institution of marriage. Ignoring the time-honored convention of treating “capital” as plant and equipment, he (along with colleagues like Theodore Schultz) treated human beings as the ultimate capital goods.

Becker ripped the lid off Pandora’s Box and the study of society will never be the same again. We now recognize that any and every form of human behavior might profitably be seen in this same light. To be sure, that does not mean employing the sterile and limiting tools of the professional economist; namely, advanced mathematics and formal statistics. It simply means subjecting human behavior to the logic of purposeful action.

Environmentalism Under the Microscope

The beginnings of the environmental movement are commonly traced to the publication of Silent Spring in 1961 by marine biologist Rachel Carson. That book sought to dramatize the unfavorable effects of pesticides, industrial chemicals and pollution upon wildlife and nature. Carson had scientific credentials – she had previously published a well-regarded book on oceanography – but this book, completed during her terminal illness, was a polemic rather than a sober scientific tract. Its scientific basis has been almost completely undermined in the half-century since publication. (A recent book devoted entirely to re-examination of Silent Spring by scientific critics is decisive.) Yet this book galvanized the movement that has since come to be called environmentalism.

An “ism” ideology is, or ought to be, associated with a set of logical propositions. Marxism, for example, employs the framework of classical economics as developed by David Ricardo but deviates in its creation of the concept of “surplus value” as generated by labor and appropriated by capitalists. Capitalism is a term intended invidiously by Marx but that has since morphed into the descriptor of the system of free markets, private property rights and limited government. What is the analogous logical system implied by the term “environmentalism?”

There isn’t one. Generically, the word connotes an emotive affinity for nature and corresponding distaste for industrial civilization. Beyond that, its only concrete meaning is political. The problem of definition arises because, in and of itself, an affinity for nature is insufficient as a guide to human action. For example, consider the activity of recycling. Virtually everybody would consider it de rigueur as part of an environmentalist program. The most frequent stated purpose of recycling is to relieve pressure on landfills, which are ostensibly filling up with garbage and threatening to overwhelm humanity. The single greatest component of landfills is newsprint. But the leachates created by the recycling of newsprint are extremely harmful to” the environment;” e.g., their acidic content poisons soils and water and they are very costly to divert. We have arrived at a contradiction – is recycling “good for the environment” or “bad for the environment?” There is no answer to the question as posed; the effects of recycling are couched in terms of tradeoffs. In other words, the issue is dependent on economics, not emotion only.

No matter where we turn, “the environment” confronts us with such tradeoffs. Acceptance of the philosophy of environmentalism depends on getting us to ignore these tradeoffs by focusing on one side and ignoring the other. Environmental advocates of recycling, for instance, customarily ignore the leachates and robotically beat the drums for mandatory recycling programs. When their lopsided character is exposed, environmentalists retreat to the carefully prepared position that the purity of their motives excuses any lapses in analysis and overrides any shortcomings in their programs.

Today’s economist does not take this attitude on faith. He notes that the political stance of environmentalists is logically consistent even if their analysis is not. The politics of environmentalism can be understood as a consistent attempt to increase the real income of environmentalists in two obvious ways: first, by redistributing income in favor of their particular preferences for consumption (enjoyment) of nature; and second, by enjoying real income in the form of power exerted over people whose freedom they constrain and real income they reduce through legislation and administrative and judicial fiat.

Thus, environmentalism is best understood as a political movement existing to serve economic ends. In order to do that, its adherents must “sell” environmentalism just as a producer sells a product. Consumers “buy” environmentalism in one of two ways: by voting for candidates who support the legislation, agencies, rules and rulings that further the environmental agenda; and by donating money to environmental organizations that provide real income to environmentalists by employing them and lobbying for the environmental agenda.

Like the most successful consumer products, environmentalism has many varieties. Currently, the most popular and politically successful one is called “climate change,” which is a model change from the previous product, “global warming.” In order to appreciate the economic theory of environmentalism, it is instructive to trace the selling of this doctrine in recent years.

Why Was the Product Called “Climate Change” Developed?

The doctrine today known as “climate change” grew out of a long period of climate research on a phenomenon called “global warming.” This began in the 1970s. Just as businessmen spent years or even decades developing products, environmentalists use scientific (or quasi-scientific) research as their product-development laboratory, in which promising products are developed for future presentation on the market. Although global warming was “in development” throughout the 1970s and 80s, it did not receive its full “rollout” as a full-fledged environmental product until the early 1990s. We can regard the publication of Al Gore’s Earth in the Balance in 1992 as the completed rollout of global warming. In that book, Gore presented the full-bore apocalyptic prophesy that human-caused global warming threatened the destruction of the Earth within two centuries.

Why was global warming “in development” for so long? And after spending that long in development limbo, why did environmentalists bring it “to market” in the early 1990s? The answers to these questions further cement the economic theory of environmentalism.

Global warming joined a long line of environmental products that were brought to market beginning in the early 1960s. These included conservation, water pollution, air pollution, species preservation, forest preservation, overpopulation, garbage disposal, inadequate food production, cancer incidence and energy insufficiency.The most obvious, logical business rationale for a product to be brought to market is that its time has come, for one or more reasons. But global warming was brought to market by a process of elimination. All of the other environmental products were either not “selling” or had reached dangerously low levels of “sales.” Environmentalists desperately needed a flagship product and global warming was the only candidate in sight. Despite its manifest deficiencies, it was brought to market “before its time;” e.g., before its scientific merits had been demonstrated. In this regard, it differed from most (although not all) of the previous environmental products.

Those are the summary answers to the two key questions posed above. Global warming (later climate change) spent decades in development because its scientific merits were difficult if not impossible to demonstrate. It was brought to market in spite of that limitation because environmentalists had no other products with equivalent potential to provide real income and had to take the risks of introducing it prematurely in order to maintain the “business” of environmentalism as a going concern. Each of these contentions is fleshed out below.

The Product Maturation Suffered by Environmentalism

Businesses often find that their products lead limited lives. These limitations may be technological, competitive or psychological. New and better processes may doom a product to obsolescence. Competitors may imitate a product into senescence or even extinction. Fads may simply lose favor with consumers after a period of infatuation.

As of the early 1990s, the products offered by environmentalism were in various stages of maturity, decline or death.

Air pollution was a legitimate scientific concern when environmentalism adopted it in the early 1960s. It remains so today because the difficulty of enforcing private property rights in air make a free-market solution to the problem of air pollution elusive. But by the early 1990s, even the inefficient solutions enforced by the federal government had reduced the problem of air pollution to full manageability.

Between 1975 and 1991, the six air pollutants tracked by the Environmental Protection Agency (EPA) fell between 24% and 94%. Even if we go back to 1940 as a standard of comparison – forcing us to use emissions as a proxy for the pollution we really want to measure, since the latter wasn’t calculated prior to 1975 – we find that three of the six were lower in 1991 and total emissions were also lower in 1991. (Other developed countries showed similar progress during this time span.)

Water pollution was already decreasing when Rachel Carson wrote and continued to fall throughout the 1960s, 70s and 80s. The key was the introduction of wastewater treatment facilities to over three-quarters of the country. Previously polluted bodies of water like the CuyahogaRiver, the AndroscogginRiver, the northern Hudson River and several of the Great Lakes became pure enough to host sport-fishing and swimming. The Mississippi River became one of the industrialized world’s purest major rivers. Unsafe drinking water became a non-problem. Again, this was accomplished despite the inefficient efforts of local governments, the worst of these being the persistent refusal to price water at the margin to discourage overuse.

Forests were thriving in the early 1990s, despite the rhetoric of environmental organizations that inveighed against “clear-cutting” by timber companies. In reality, the number of wooded acres in the U.S. had grown by 20% over the previous two decades. The state of Vermont had been covered 35% by forest in the late nineteenth century. By the early 1990s, this coverage had risen to 76%.

This improvement was owed to private-sector timber companies, who practiced the principle of “sustainable yield” timber management. By the early 1990s, annual timber growth had exceeded harvest every year since 1952. By 1992, the actual timber harvest was a miniscule 384,000 acres, six-tenths of 1% of the land available for harvest. Average annual U.S. wood growth was three times greater than in 1920.

Environmentalists whined about the timberlands opened up for harvest by the federal government in the national parks and wildlife refuges, but less logging was occurring in the National Forests than at any time since the early 1950s. Clear-cut timber was being replaced with new, healthier stands that attracted more wildlife diversity than the harvested “old-growth” forest.

As always, this progress occurred in spite of government, not because of it. The mileage of roads hacked out of national-park land by the Forest Service is three times greater that of the federal Interstate highway system. The subsidized price at which the government sells logging rights on park land is a form of corporate welfare for timber companies. But the private sector bailed out the public in a manner that would have made John Muir proud.

Garbage disposal and solid-waste management may have been the most unheralded environmental victory won by the private sector. At the same time that Al Gore complained that “the volume of garbage is now so high that we are running out of places to put it,” modern technology had solved the problem of solid-waste disposal. The contemporary landfill had a plastic bottom and clay liner that together prevent leakage. It was topped with dirt to prevent odors and run-off. The entire U.S. estimated supply of solid waste for the next 500 years could be safely stored in one landfill 100-yards deep and 20 miles on a side. The only problem with landfills was a siting problem, owing to the NIMBY (“not in my back yard”) philosophy fomented by environmentalism. The only benefit to be derived from recycling could be had from private markets by recycling only those materials whose benefits (sales revenue) exceeded their reclamation costs (including a “normal” profit).

Overpopulation was once the sales leader of environmentalism. In 1968’s The Population Bomb, leading environmentalist Paul Ehrlich wrote that “the battle to feed all of humanity is over. In the 1970s, the world will undergo famines – hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now. At this late date, nothing can prevent a substantial increase in the world death rate….” Ehrlich also predicted food riots and plummeting life expectancy in the U.S. and biological death for a couple of the Great Lakes.

Ehrlich was a great success at selling environmentalism. His book, and its 1990 sequel The Population Explosion, sold millions of copies and recruited untold converts to the cause. Unfortunately, his product had a limited shelf life because his prophecies were spectacularly inaccurate. The only famines were politically, not biologically, triggered; deaths were in the hundreds of thousands, not millions. Death rates declined instead of rising. The Great Lakes did not die; they were completely rehabilitated. Even worse, Ehrlich made a highly publicized bet with economist Julian Simon that the prices of five metals handpicked by Ehrlich would rise in real terms over a ten-year period. (The loser would pay the algebraic sum of the price changes incurred.) The prices went down in nominal terms despite the rising general level of prices over the interval – another spectacular prophetic failure by Ehrlich.

It’s not surprising that Ehrlich, rather than the population, bombed. In the 1960s, the world’s annual population growth was about 2.0%. By the 1990s, it would fall to 1.6%. (Today, of course, our problem is falling birth rates – the diametric opposite of that predicted by environmentalism.)

Therefore, the phantom population growth predicted by environmentalism did not comprise one component of the inadequate food supply foreseen with uncanny inaccuracy by environmentalists. Ehrlich and others had foreseen a Malthusian scenario in which rising population growth overtook diminishing agricultural productivity. They were just as wrong about productivity as about population. The Green Revolution ushered in by Norman Borlaug et al drove one of the world’s leading agricultural economists to declare that “the scourge of famine due to natural causes has been almost conquered….”

The other leg of environmentalism’s collapsing doomsday scenario of inadequate food was based on cancer incidence. Not only would the food supply prove insufficient, according to environmentalists, it was also unsafe. Industrial chemicals and pesticides were entering the food supply through food residues and additives. They were causing cancer. How did we know this? Tests on animals – specifically, on mice and rats – proved it.

There was only one problem with this assertion. Scientifically speaking, it was complete hooey. The cancer risk of one glass of wine was about 10,000 -12,000 times greater than that posed by the additives and pesticide residues (cumulatively) in most food products. Most of our cancer risk comes from natural sources, such as sunlight and natural pesticides produced by plants. Some of these occur in common foods. Still, cancer rates had remained steady or fallen over the previous fifty years except for lung cancers attributable to smoking and melanomas attributable to ultraviolet light. Cancer rates among young adults had decreased rapidly. Age-adjusted death rates had mostly fallen.

Energy insufficiency had been brought to market by environmentalists in the 1970s, during the so-called Energy Crisis. It sold well when OPEC was allowed to peg oil prices at stratospheric levels. But when the Reagan administration decontrolled prices, domestic production rose and prices fell. As the 1990s rolled around, environmentalists were reduced to citing on “proven reserves” of oil (45 years) and natural gas (63 years) as “proof” that we would soon run out of fossil fuels and energy prices would then skyrocket. Of course, this was more hooey; proven reserves are the energy equivalent of inventory. Businesses hold inventory as the prospective benefits and costs dictate. Current inventories say nothing about the long-run prospect of shortages.

In 1978, for example, proven reserves of oil stood at 648 billion barrels, or 29.2 years’ worth at current levels of usage. Over the next 14 years, we used about 84 billion barrels, but – lo and behold – proven reserves rose to nearly a billion barrels by 1992. That happened because it was now profitable to explore for and produce oil in a newly free market of fluctuating oil prices, making it cost-efficient to hold larger inventories of proven reserves. (And in today’s energy market, it is innovative technologies that are driving discoveries and production of new shale oil and gas.) Really, it is an idle pastime to estimate the number of years of “known” resources remaining because nobody knows how much of a resource remains. It is not worth anybody’s time to make an accurate estimate; it is easier and more sensible to simply let the free market take its course. If the price rises, we will produce more and discover more reserves to hold as “inventory.” If we can’t find any more, the resultant high prices will give us the incentive to invent new technologies and find substitutes for the disappearing resource. That is exactly what has just happened with the process called “fracking.” We have long known that conventional methods of oil drilling left 30-70% of the oil in the ground because it was too expensive to extract. When oil prices rose high enough, fracking allowed us to get at those sequestered supplies. We knew this in the early 1990s, even if we didn’t know exactly what technological process we would ultimately end up using.

Conservation was the first product packaged and sold by environmentalism, long predating Rachel Carson. It dated back to the origin of the national-park system in Theodore Roosevelt’s day and the times of John Muir and John Jacob Audubon. By the early 1990s, conservation was a mature product. The federal government was already the biggest landowner in the U.S. We already had more national parks than the federal government could hope to manage effectively. Environmentalists could no longer make any additional sales using conservation as the product.

Just about the only remaining salable product the environmentalists had was species preservation. Environmentalism flogged it for all it was worth, but that wasn’t much. After the Endangered Species Act was passed and periodic additions made to its list, what was left to do? Not nearly enough to support the upper-middle-class lifestyles of a few million environmentalists. (It takes an upper-middle-class income to enjoy the amenities of nature in all their glory.)

Environmentalism Presents: Global Warming

In the late 1980s, the theory that industrial activity was heating up the atmosphere by increasing the amount of carbon dioxide in the air began to gain popular support. In 1989, Time Magazine modified its well-known “Man of the Year” award to “Planet of the Year,” which it gave to “Endangered Earth.” It described the potential effects of this warming process as “scary.” The International Panel on Climate Change, an organization of environmentalists dedicated to selling their product, estimated that warming could average as much as 0.5 degrees Fahrenheit per decade over the next century, resulting in a 5.4 degree increase in average temperature. This would cause polar ice caps to melt and sea levels to rise, swamping coastal settlements around the world – and that was just the beginning of the adverse consequences of global warming.

No sooner had rollout begun than the skepticism rolled in along with the new product. Scientists could prove that atmospheric carbon dioxide was increasing and that industrial activity was behind that, but it could not prove that carbon dioxide was causing the amount of warming actually measured. As a matter of fact, there wasn’t actually an unambiguous case to be made for warming. What warming could be found had mostly occurred at night, in the winter and in the Southern Hemisphere (not the locus of most industrial activity). And to top it all off, it is not clear whether or not we should ascribe warming to very long-run cyclical forces that have alternated the Earth between Ice Ages and tropical warming periods for many thousands of years. By 1994, Time Magazine (which needed a continuous supply of exciting new headlines just as much as environmentalists needed a new supply of products with which to scare the public) had given up on global warming and resuscitated a previous global-climate scare from the 1970s, the “Coming Ice Age.”

It is easy to see the potential benefits of the global-warming product for environmentalists. Heretofore, almost all environmentalist products had an objective basis. That is, they spotlighted real problems. Real problems have real solutions, and the hullabaloo caused by purchase of those products led to varying degrees of improvement in the problems. Note this distinction: the products themselves did not cause or lead to the improvement; it was the uproar created by the products that did the job. Most of the improvement was midwived by economic measures, and environmentalism rejects economics the way vampires reject the cross. This put environmentalists in an anomalous position. Their very (indirect) success had worked against them. Their real income was dependent on selling environmentalism in any of various ways. Environmentalists cannot continue to sell more books about (say) air pollution when existing laws, regulations and devices have brought air quality to an acceptable level. They cannot continue to pass more coercive laws and regulations when the legally designated quality has been reached. Indeed, they will be lucky to maintain sales of previously written books to any significant degree. They cannot continue to (credibly) solicit donations on the strength of a problem that has been solved, or at least effectively managed.

Unfortunately for environmentalists, the environmental product is not like an automobile that gives service until worn out and needs replacement, ad infinitum. It is more like a vaccine that, once taken, needn’t be retaken. Once the public has been radicalized and sensitized to the need for environmentalism, it becomes redundant to keep repeating the process.

Global warming was a new kind of product with special features. Its message could not be ignored or softened. Either we reform or we die. There was no monkeying around with tradeoffs.

Unlike the other environmental products, global warming was not a real problem with real solutions. But that was good. Real problems get solved – which, from the environmentalist standpoint, was bad. Global warming couldn’t even be proved, let alone solved. That meant that we were forced to act and there could be no end to the actions, since they would never solve the problem. After all, you can’t solve a problem that doesn’t exist in the first place! Global warming, then, was the environmentalist gift that would keep on giving, endlessly beckoning the faithful, recruiting ever more converts to the cause, ringing the cash register with donations and decorating the mast of environmentalism for at least a century. Its very scientific dubiety was an advantage, since that would keep it in the headlines and keep its critics fighting against it – allowing environmentalists the perfect excuse to keep pleading for donations to fend off the evil global-warming deniers. Of course, lack of scientific credibility is also a two-edged sword, since environmentalists cannot force the public to buy their products and can never be quite sure when the credibility gap will turn the tide against them.

When you’re selling the environmentalist product, the last thing you want is certainty, which eliminates controversy. Controversy sells. And selling is all that matters. Environmentalists certainly don’t want to solve the problem of global warming. If the problem is solved, they have nothing left to sell! And if they don’t sell, they don’t eat, or at least they don’t enjoy any real income from environmentalism. Environmentalism is also aimed at gaining psychological benefits for its adherents by giving their lives meaning and empowering them by coercing people with whom they disagree. If there is no controversy and no problem, there is nothing to give their lives meaning anymore and no basis for coercing others.

The Economic Theory of Environmentalism

Both environmentalists and their staunchest foes automatically treat the environmental movement as a romantic crusade, akin to a religion or a moral reform movement. This is wrong. Reformers or altruists act without thought of personal gain. In contrast, environmentalists are self-interested individuals in the standard tradition of economic theory. Some of their transactions lie within the normal commercial realm of economics and others do not, but all are governed by economic logic.

That being so, should we view environmentalism in the same benign light as we do any other industry operating in a free market? No, because environmentalists reject the free market in favor of coercion. If they were content to persuade others of the merits of their views, their actions would be unexceptional. Instead, they demand subservience to their viewpoint via legal codification and all forms of legislative, executive, administrative and judicial tyranny. Their adherents number a few would-be dictators and countless petty dictators. Their alliance with science is purely opportunistic; one minute they accuse their opponents of being anti-scientific deniers and the next they are praying to the idol of Gaia and Mother Earth.

The only thing anti-environmentalists have found to admire about the environmental movement is its moral fervor. That concession is a mistake.

DRI-306 for week of 3-23-14: Property Rights

An Access Advertising EconBrief:

Property Rights

This space endlessly bemoans the depredations of the economics profession, often laments the teaching of economics and occasionally points out shortcomings of economics textbooks. The biggest error of omission made by economists in and out of the classroom concerns property rights. Nothing is more important to the successful function of society. Judging by the attacks launched against them by enemies of free markets, we might expect lively discussions of property rights inside every economics text. Yet they are virtually ignored by mainstream economics.

The great exponent of property rights was the late Armen Alchian, who may have been the greatest economist ever spurned by the Nobel Prize selection committee. Alchian wrote comparatively little, but his few papers are still among the most cited of any economist. They have been fixtures on the reading lists of graduate students for decades – except for his great work on the economics of property rights, which has been pointedly ignored by academia.

Property Rights and Human Rights

As Alchian observed, social critics have long maintained that the system of property rights maintained in capitalist societies conflicts with “human rights.” Ostensibly, this conflict hurts the poor by allowing those with property to exploit those without it. Only a society without private ownership of property can stop this exploitation.

Alchian insisted that property rights – indeed, all rights – must be human rights. The call for abolition of private property is really a call for government ownership or control of property. This has certain unavoidable implications for people of all income levels.

Alchian stated that the very concept of property is best understood as a system of rights governing the care and use of property. That system operates under the logic of economics.

The Three Elements of Property Rights

Alchian’s key writings on property rights are summarized in entries in the Fortune Encyclopedia of Economics and its successor, the Concise Library of Economics. Here Alchian identified the three key elements of a system of property rights.

First among these is control. A right to property entails control over its care and use. This applies particularly, but not exclusively, to physical or tangible property. We are accustomed to this proposition in its positive form; i.e., in the right of people to enjoy and preserve things they own. Its negative form is less familiar. Children enjoy fewer rights than adults because they lack the capability to properly exercise them. Property rights are a good example of this; since tangible property usually demands care and maintenance, children are less able to exercise a right to its ownership.

Second is the right of exclusion. A property right gives the owner the right to exclude others from the possession and enjoyment of the property. Perhaps the most common example of this is the price charged by sellers, which excludes non-payers from the enjoyment of goods for sale. One of the key requisites for a public good – one that must be produced by government because private producers cannot produce it – is “non-exclusivity,” the inability to exclude non-payers. National defense is a public good because once it is provided for one, it is available to all.

Finally comes the right of salability. A true property right gives the owner the right to sell, rent, assign or delegate all or part of the ownership interest in the property at discretion. This is a key distinction between so-called government ownership and private ownership. Although government ownership is frequently referred to as “public ownership,” this is a misnomer. The government, not “the public,” controls the use of the property. In principle, according to the Rule of Law, the government should not exclude the public, but it often does. The public lacks the right to sell, rent or bequeath all or part of its property interest. Thus, no individual owns the property when “the government” owns it.

Both history and theory are replete with examples that sharpen each of these distinctions. We offer a few of these below.

Case Study in Property Rights: The American Indian and European Settlement

North America was settled by Europeans – Spanish, French, English, Germans and Dutch – beginning in the 16th century. Prior to European settlement, the continent was inhabited by aboriginal peoples who came to be called by the mistaken appellation of “Indians.” Over a period of roughly 300 years, the Indians were displaced – that is, removed from their original habitations and resettled.

The continent was populated by a mixture of Europeans, dominated by the English but also including large numbers of French to the north and Spanish to the south. Beginning in the 17th century, the English established numerous colonies in the central section that later gained their independence and became the United States of America. The English and French coexisted more or less peacefully in the English colony of Canada, which later became part of the British Commonwealth. The Spanish colony of Mexico to the south eventually rebelled and gained its independence from Spain.

In Canada and the United States, the displacement of Indians was accomplished through treaty, land purchase and resettlement. This was historically significant, since conquered peoples were generally treated much more harshly. Indeed, for thousands of years, the principal method for mass acquisition of wealth was conquest and plunder – that is, redistribution rather than economic growth. In the U.S., the process was still violent, though, as treaties and resettlement were accompanied by Indian wars lasting from the early 17th centuries until the end of the 19th century.

Much academic and popular history has condemned the acquisition of land from Indians by Europeans and, later, Americans. “We stole the land from the Indians” is a common phrase used to describe the process. This seems an odd way to characterize a process of negotiation and purchase, the historical successor to conquest, eradication or subjugation. More important is the implication that the proper course events would have been for Indians to have retained title to “their property.” This premise deserves careful study.

The social organization of American Indians was tribal. For most, though not all, their lifestyle was nomadic. In what later became the eastern U.S., the land was heavily forested in both the north and south. Most tribes subsisted by hunting deer. Historian Stanley Lebergott quoted one tribal chief: “[W]e must have a great deal of ground to live upon. A deer will serve us but a couple days, and a single deer must have a great deal of ground to put him in good condition. If we kill two or three hundred a year, ’tis the same as to eat all the wood and grass of the land they live on, and this is a great deal.”

This explains why Indians claimed such large quantities of land as “theirs.” They hunted deer. Deer were voracious consumers of forest grassland. (Today, deer thrive in urban American settings; a recent Wall Street Journal letter writer complained that deer are “urban locusts.”) Indians, in turn, consumed large numbers of deer. Deer would ravage a section of land, then migrate in search of fresh forage. Rather than build fixed settlements, Indians would follow the deer.

Prior to the Industrial Revolution, America – like the world – was overwhelmingly rural and agrarian. The overwhelming preoccupation was producing enough food to sustain life. Lebergott estimated that, by the early 1800s, the eastern Indian lifestyle demanded roughly two thousand acres, or three square miles, to produce enough calories to feed one Indian. This is consistent with contemporary accounts like the quoted passage above. In contrast, the American settlers who cleared land and build farms needed only two acres per person. In other words, the descendants of the European invaders had become one thousand times more economically productive than the Indians. The incentive for settlers to displace Indians on the land was enormous.

Even more to the point, the Indians’ claim to property rights was very weak. They could not control the use of the land they claimed as theirs, nor could they exclude non-users. Their only resort was sporadic violence against encroachments, which was by no means synonymous with enforcement of property rights since was violent, punished the innocent along with the guilty and affected only a small minority of the “violators.” Given their inability to command the first two elements of property rights, they could hardly execute the third. Thus, the basis for denying most Indian tribes a property-right claim to most of the North American continent rested on the same logic as that by which we deny most property rights to children. In both cases, the claimant lacks the competence and capability of exercising the claim.

Rather than grant Indians a dubious de jure property right they were sure to lose de facto anyway to white settlers, American governments in the early 1800s – particularly the administration of President Andrew Jackson – paid Indian tribes off and resettled them on federally owned land outside the boundaries of the United States. (Jackson maintained that it was unconstitutional to execute treaties with Indian tribes as if they were foreign nations, then force state governments to accept resettlement within their borders. He insisted that sovereign states were not bound by the terms of a treaty between the federal government and a foreign nation.)

There was much to regret about the execution of this approach, but the property-rights logic that underlay it was sound. It is quite clear now that salvation for Indians lay in assimilation with modern civilization rather than adherence to tribalism and outmoded economic organization. By treating Indians as wards of the state and preserving the reservation system and a separatist way of life for Indians, the federal government was guilty of the same false paternalism that has condemned much of the American underclass to inferiority today.

What about the western Indians, who occupied the plains and deserts of the Midwest and west? Once again, the predominant lifestyle was nomadic. In this case, subsistence derived from the buffalo or (more properly) bison, who roamed the plains in profusion during the 17th and 18th centuries. Once again, Indians followed the bison, which followed a seasonal pattern of migration throughout the plains. They hunted buffalo with bow and arrow – Plains Indians were amazingly proficient at driving arrows through the hides and deep into the muscular bodies of bison – and by stampeding the animals over cliffs. Although legend says that Indians were thrifty in their use of each part of the bison carcass, the truth is that carcasses were often left to rot.

As with the eastern Indians, the Plains Indians were highly unproductive compared with American settlers. Cattle fed upon grass proved to be vastly more profitable than bison – they dressed out better, their meat was in better demand, cattle could be domesticated whereas bison could not.  Despite the fact that the subjugation of warring Indians predated the near-extermination of the bison by about a decade, no serious attempt was made to establish the bison as a domestic meat animal on the western prairie.

The property-rights claims of Plains Indians were just as weak as those of eastern Indians, for similar reasons. The Plains Indians could not control use of the vast prairies, nor could they exclude interlopers. For many decades, a staple plot of Hollywood movies was the eviction of Plains Indians by greedy, unscrupulous whites hoping to profit thereby. Usually the motivation is gold, newly discovered by treaty violators in some place such as the Dakota Black Hills. In reality, gold discoveries were few and far between. The real motive behind the displacement of Plains Indians was cattle, not gold. White ranchers were vastly more productive on the plains than were Indians.

To be sure, the forest Indians of the east and the Plains Indians of the west do not encompass all Indians. Some Indians, like the Pueblo and Navaho in the west, did establish viable settlements and agricultural lifestyles. They did have valid property claims. Thus, their property rights should have been respected for the same reasons that the questionable claims of most Indians were rejected.

Pure Theory of Excludability: Alchian and Allen Offer a Proof By Negation

The most legendary of all economics textbooks may be University Economics (later reissued as Exchange and Production), by Armen Alchian and William Allen (AA). Blissfully sparse in its use of mathematics but lively and witty, it offers perhaps the most complete exposition of economic logic in any general textbook. Among its many famous applications is the authors’ imaginative defense of property rights, which takes the form of a “proof by negation.”

AA ask us to envision the following world: Automobiles exist, but are not privately owned. Instead, they exist as a common resource. Each is equipped with an auto-start that vitiates the need for an ignition key. Individuals are invited to make use of any car they find on the street, use it as long as required – purchasing their own gasoline – then leave it for someone else to use.

What would such a world be like?

A little thought suggests that the most salient automotive characteristic of that world would be that we would be driving a fleet of clunkers and junkers. Why? Because nobody would have an incentive to invest in either maintenance or repairs, at least beyond the point it took to get them to their immediate destination. From any one individual’s viewpoint, what would be the point of investing any substantial amount of money in an automobile that you would probably never see again once you reached your destination and left the car to go inside a building? Remember that everybody is not only entitled but expected to appropriate any unoccupied car for his own use. If you bought a new radiator for a car you picked up on the street, you might as well kiss that investment goodbye after leaving the repair shop and reaching your house.

With nobody wanting to repair cars to any significant degree or invest in preventive maintenance, their condition would deteriorate rapidly. People would carry their own motor oil, since they would likely have to add it to any vehicle to prevent the engine from blowing a gasket. Long trips would be a risky venture.

Another feature of this brave new world of socialized car ownership would be that everybody would drive off the bottom of their gas tank. Who would bother topping off the tank – unless undertaking a long trip – only to have somebody else drive off to enjoy most of the gas they purchased? For those who have not been subjected to this form of restraint, it can be a nerve-wracking experience calling for continual mental discipline.

AA suggest their example as an intellectual corrective for people who continue to regard property rights as a form of exploitation. Once absorbed, it can be applied to other forms of property to derive some idea what life without private property would be like. Alternatively, we can refer to the closest approximations provided by history. Visitors to socialist countries like Soviet Russia and Communist China often remarked upon the poor condition of the infrastructure and capital stock, usually without realizing that the lack of stock ownership and capital markets had killed off most of the incentive to maintain those capital goods.

Case Study in Salability: Property Rights and Species Preservation

The loss of species to extinction has been a chief selling point for the environmental movement ever since Rachel Carson published Silent Spring in 1962. Schoolchildren are taught the harrowing lesson of the passenger pigeon and the buffalo and told that only placing species on government’s “endangered species list” can save them. Typically, the grant of endangered status entails special protections and stern injunctions against harm.

A country whose wildlife has faced chronic preservation problems is Africa. Its exotic wildlife has always occupied a special place, if only because of its magnetic attraction for tourists. The elephant has been especially threatened because the unique properties of the ivory in its tusks have made it tremendously valuable. Poachers have reduced the elephant to the point of extinction in parts of its natural habitat.

The reflexive response throughout Africa has been twofold: ban elephant hunting and ban trade in elephant by-products like ivory. In Kenya, the government banned the hunting of elephants, but poachers decimated the elephant population from 140,000 to 16,000. In Tanzania, the government likewise banned hunting in 1970, but the elephant population was reduced from 250,000 to 61,000 in little more than a decade. In neighboring Uganda, the situation was even worse; its elephant population dropped from 20,000 to only 1,600.

To an economist well-versed in property rights, the reason for these failures was that the ban on hunting or harvesting elephants for commercial use was born of good intentions but was bound to produce bad results. In fact, it had the effect of killing thousands of elephants!

How could this possibly be true? How could people so sensitive to the welfare of these noble creatures do something so brutal, so insensitive, so utterly contrary to their intention? Alas, reason and emotion are completely different expressions of human thought. A surplus of the latter does nothing to promote the former; if anything, emotion tends to hinder the exercise of reason.

The laws against killing elephants had no effect on poachers because poachers are criminals by definition. They would have deterred ordinary people from killing elephants, but they actually encouraged poachers by killing off the legal market for elephants and elephant by-products, thereby making all things elephantine much more valuable in the black market. Being criminals, poachers were delighted to violate the law and sell their kill in the black market. In effect, the government was operating a price-support mechanism for the benefit of poachers.

One way to protect elephants as a species is by preventing the killing of existing elephants. The elephant-protection laws failed utterly in this respect. An even better means of species protection is by encouraging the breeding of more elephants. And the elephant-protection laws failed even more dreadfully here by destroying the legal incentive to breed elephants by destroying the legal market for them.

What a travesty of logic! Is it any wonder the results were so counterproductive? Well, it is one thing to sneer at failure, but another to actually succeed where good intentions alone have failed. Does ivory-tower economics have anything to show in the way of actual results?

In 1979, the African countries of Zimbabwe and Botswana created private property rights in elephants and allowed harvesting of elephants for commercial purposes. In a little less than 15 years, Zimbabwe’s elephant population rose from 30,000 to about 70,000. Botswana’s rose from 20,000 to 68,000.

The really amazing thing about this case study is that people are amazed by it. After all, we butcher many millions of cattle, chickens, hogs and sheep every year, but these species are not endangered because the legal market for them provides a continual incentive for their preservation and maintenance in good health and sufficient numbers to ensure viability. It seems as though people switch off their reasoning faculties when environmental subjects like species preservation arise.

Property Rights and Economic Development

In South America, economic development has been frustratingly elusive. A country such as Brazil possesses vast supplies of people and natural resources and seems on the verge of breaking through to developed-nation status. A country like Argentina was once among the world leaders in industrial production and economic growth, but now lags far behind. Venezuela has gone from being a continent leader in economic growth to Third-World status and near-chaos.

The insecurity of property rights throughout the continent has been identified as a leading culprit in this lack of enduring progress. It is difficult for investment to flourish in a climate where bribery is commonplace and cronyism runs rampant, where expropriation is a continual threat and financial-market transparency cannot be assumed.

Alchian’s Ghost

Today regulation looms larger in the lives of business and consumers than ever before. The ghost of Armen Alchian hovers over our shoulders. He does not haunt us. He is friendly, but admonitory and stern.