Monday, July 15, 2013

The Moral Case for "Wealth Destroying" Limitations on Property Rights - From Slavery to Leopold

Last Thursday, at the Economics Institute for Law Professors (which I earlier discussed here), Terry Anderson of the Property and Environment Research Center gave a fantastic presentation on "free market environmentalism." Anderson admitted that this was somewhat of an unfortunate phrase as it signals an open-ended, silver bullet market-driven approach to environmental protection. But the basic premise of this type of environmentalism is that markets harnessing property rights can provide protections for the environment above and beyond what government would be able to accomplish through regulation. And indeed, Anderson highlighted numerous compelling examples where regulatory intervention led to environmentally destructive unintended consequences, whereas environmental gains would have been achieved if markets had been allowed to work freely.

But another point of Anderson's talk, at least in my interpretation, is that under many (if not most) circumstances, rather than "destroying wealth" of property owners through regulation that prohibits them from using their environmental resources (through, say, creating pollution or engaging in potentially unsustainable extractive activities), we should just pay them not to pollute or not to unsustainably extract. And, of course, there are many examples of successful policies based on paying landowners to preserve positive externalities.

During the talk, however, an interesting point was raised. A professor made the point that she was having a hard time reconciling the view of property rights whereby markets can efficiently resolve all conflicts with the history of slavery in the U.S. In other words, pure markets likely would have perpetuated slavery since in the absence of "wealth destroying" regulations on slave-owner property rights we would have had to rely on the federal government or others opposed to slavery to make it more profitable for slave-owners to sell slaves (who would then be freed by the purchaser) than to retain slaves. First, of course, the pure economics of this potential "transaction" (which Anderson admitted was a cold and calculating way to engage in this discussion, and he handled the whole difficult conversation with great sensitivity) would weigh heavily in favor of perpetuating slavery because the abolitionists would have had an incredibly difficult time raising the capital required to free all of the slaves. Second, and far more importantly, the pure economic, market analysis says nothing of the injustice or the lack of morality of slavery. Slave abolition, or "wealth destroying" regulation (or the fact that we went to war over the issue), on the other hand, made a definitive normative statement about the morality of slavery. Abolition said that we as a society - as a collective - believe slavery is wrong and notwithstanding very real (but ultimately artificially created) property interests and technical "wealth destruction" aimed at slave owners we will no longer accept the practice.

By way of example, and looking again through the cold and calculating lens of property rights (though unjust), consider the technical values citizens in 1863 gave to slaves in my home county in Alabama, as depicted in the following image:

Clarke County Slavery

Compare the estimated value of land, at roughly $1.9 million, with the estimated value of slaves, at roughly $3.5 million. Thus, when looked at through a pure property perspective, Anderson described that regulatory abolition of slavery technically destroyed a great amount of wealth for some property owners, the slave owners, and redistributed it to other, new "property" owners, the slaves (where the property in question was freedom from slavery). Of course, Anderson highlighted that the moral case against slavery justified for American citizens the destruction of wealth for some and its redistribution to others. The moral case demanded this approach, whereas a pure economic, market-driven approach may have supported another approach in the form of purchasing slaves and freeing them.

The difficulty this posed to me in assessing Anderson's presentation is that it is difficult to see how the logic of environmental regulation is different. Let me be clear, human rights and slavery should be a far higher priority than clean air or water - because without basic human dignity and civil rights the environment we live in cannot be protected or at least cannot be protected through credible government action (how can a government protect the environment without first protecting the rights of its citizens?). Nonetheless, why should we under all circumstances pay others not to pollute or unsustainably extract? Is there a moral case that in some circumstances landowners should be prevented from doing so, and should not be paid as a result? While I am actually quite in favor of environmental markets, promotion of ecosystem service markets, and the internalization of environmental externalities that have long been excluded from the market (and am also a rural forestland property owner), I also believe that there are some circumstances where regulatory limits are the most effective means, and the normative, morally correct approach, to balancing private rights with the public interest. I have discussed this in a historical, descriptive context here. Take, for example, an urban growth boundary aimed at preventing urban sprawl, even though a landowner on the outside of the boundary now maintains property worth $1,000 an acre while a property owner just inside the boundary maintains property worth $10,000 an acre. Perhaps some short-term economic wealth is destroyed for the property owner outside the boundary, but long-term wealth is gained by society at large and future generations (in the form of access to natural capital like forests, wetlands, open space, and biodiversity and also in the form of reduced air and water pollution and a variety of other environmental harms).

This was largely the point of Leopold's "land ethic," that the rights and ethics that have been extended to minorities, women, laboring children and others over time should eventually be extended to the land and environment - that there is a moral case for environmental protection. In this view, regulation may very well "destroy wealth" of property owners who might otherwise pollute or unsustainably extract and redistribute it not only to the current public to enjoy but also to future generations who later have access to those resources and an unpolluted environment. But it is also a moral mandate, rather than something that can or should always be left to market transactions compensating polluters and unsustainable extractors from undertaking those activities (of course, one of Anderson's very compelling points is that politicians creating regulations often sacrifice the environmental wealth of future generations in order to make short-term economic and other gains. In other words, governments may, and often do, wield regulatory tools irresponsibly with regards to the environment - and this is where the market can come in and do far better).

Ultimately, once we admit that there is one moral case for regulatory limits on property rights (such as in the case of slavery), then there must be other cases that warrant deeper analysis than we have historically undertaken. We may argue over the morals that drive those choices, of course, as people have many different perspectives on moral justifications for limiting the rights of others (including property owners). But when I consider my children and the climate-changed, highly populated, increasingly paved, and resource stressed world they will live in, it is difficult for me not to view environmental conservation as a moral imperative. An imperative upon which "liberals," who stereotypically prefer regulation, and "libertarians" and "conservatives," who stereotypically prefer markets, can agree. And perhaps this is the hope - that regulation and markets can work together to make a better world and a better future.

- Blake Hudson

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