Save the Environment, and Get Rich

David Henderson from the July 2000 issue

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The authors also think that "natural capitalism" is superior to "conventional capitalism" because the former treats nature as if it's valuable. But in conventional capitalism, much of nature is treated as valuable. If I own a farm, I care about how the addition of various pesticides and fertilizers affects the value of my land. I might not care about what the pesticides and fertilizers do to the surrounding rivers, but that's because no one has well-defined property rights in those rivers. If they had, they could hold me liable for the damage I do.

The book's authors are right that we often don't take account of the damage we do to nature, but that's because private property is not complete enough. No one "owns" nature, though as technologies of demarcation improve (the way that the invention of barbed-wire fences made it practicable to own and manage cows and land on the wide-open range), we can expect to find private property spread in areas in which it is currently absent, like water and air sheds.

If people owned nature, we wouldn't treat it nearly as badly as we sometimes do now. If I owned the water off Pacific Grove, California, to take a recent controversy in my town, I would never let the local government spill sewage into it the way they do now, or at least I would charge the government enough to compensate for the damage. Economists at the Political Economy Research Center in Bozeman, Montana, and other environmentally conscious "conventional capitalists" have written hundreds of articles and books extending these insights. The authors of Natural Capitalism, not well-versed in the body of thought known as "free market environmentalism," never mention this work of people who are truly their allies.

They are also mistaken about the level of government subsidy involved in transportation. They argue that transportation "is the most subsidized and centrally planned sector of the majority of the world's economies--at least for such favored modes as road transport and aviation." We do have a centrally planned (the old word was socialist) system of roads, airports, and air traffic control, as does virtually every other country. But it's certainly not one of the most subsidized. Drivers pay, in the form of gasoline taxes, for the roads they use, and not all the taxes go to build roads--a substantial fraction now goes to subsidize the buses and subways of municipal transit.

Interestingly, the authors admit that roads are not on net subsidized, writing, "In fairness, the federal subsidies to the U.S. oil industry, unlike other fossil-fuel industries, are approximately offset by federal excise taxes collected on its retail products." They confine this admission, which undercuts their whole case, to a note at the end of the book. That's too bad, because they could have made the point that even though there is no net subsidy to roads, roads are probably not built where they should be and are overcongested because government control means that the price system is not allowed to direct resources. Government rarely charges people for their specific choices as to what roads to drive on and when, and almost never prices them higher at peak times of the day.

The authors realize, though, that much urban sprawl is caused by government zoning regulations that prevent "clustering" of housing, jobs, and shopping, though they ignore Jane Jacobs' pioneering work on that issue in her modern classic, The Death and Life of Great American Cities. They also note that widespread building regulations requiring developers to provide parking for each new shop, office, and apartment effectively subsidize drivers.

Despite its flaws, Natural Capitalism does provide some good arguments for a good message, even if the authors might not fully agree with all the implications of their analysis. But Hawkens and the Lovinses are essentially saying: Get rid of government restrictions that prevent us from using resources efficiently, tear down socialism in our transportation sector, and, if you're a businessperson who wants to be environmentally conscious, pay close attention to all available profit opportunities, even if they seem new. Then go out and get rich.