[This post was originally written for my employer’s blog, Show-Me Daily.]
If you care about going green, you should care about internalizing the costs of pollution.
If you care about sustainability, you should care about property rights.
Why do I bring this up? According to an article over at the Post-Dispatch, Jefferson City has been chosen as one of five state capitals to receive extensive attention from the Environmental Protection Agency (EPA), in the form of plans intending to make the city greener and more sustainable. The project is called “Greening America’s Capitals,” and calls for “a team of designers to produce illustrations on how targeted neighborhoods in chosen capitals can be improved,” with funding provided by taxpayers nationwide the EPA. The Show-Me Institute’s book club is currently reading a lot about public choice economics, and I could write an entire post about the dispersed costs and concentrated benefits of this particular scheme. Instead, I’ll focus on how everything that is proposed by this federal agency would be better handled by a reduction in hands-on government management.
First, the obvious (at least to me): Strong property rights lead to good stewardship. When the costs of harming things falls on those doing the harm, they tend to try to reduce the harm as much as possible. Namely, when something belongs to you alone, you tend to treat it with more care than if it belongs to someone else. Moreover, when the benefits of improving something accrue to those doing the improvement, more improvements happen. Namely, you’re more likely to work to improve your own things than someone else’s things. There are plenty of historical examples, including the dramatic improvement in crop yield and work participation among the early European settlers in America after switching from a communal system to one based on private property.
When I hear “sustainable” and “going green” I think “good environmental stewardship.” There are two components to this, the first of which is taking care to maintain or improve your own property. The second part involves externalities. For the unfamiliar, externalities are any cost or benefit that falls on someone not directly or willingly involved in an exchange. Maintaining a classic car provides a positive externality to those who enjoy seeing one driven around town but who don’t pay for its upkeep. Pollution is the classic example of a negative externality: harming people who had no say in the pollution’s production. This is a problem with no obvious solution, but (as public choice has clearly shown) a lot of bad possible solutions from the government. Ronald Coase is a Nobel Prize–winning economist who demonstrated that the problem of externalities is really a problem of transaction costs (such as the cost of information). Show me a government solution to an externality problem that doesn’t involve internalizing costs and I’ll show you the law of unintended consequences in action.
Greening America’s Capitals will not help the state of Missouri. It’s a fundamental waste that distracts from the real problems of insufficiently robust property rights and, especially, transaction costs. But these difficult technical problems will never be as broadly appealing as a visible, heart-in-the-right-place EPA program. This is not a new problem in politics.