In the UK edition of Wired magazine is an article on the use of environmental markets in which, for instance, property developers or industrial users of water pay others, such as owners of wetlands or somesuch, if they want to make a development. The way the article is written gives the impression – at least in my eyes – of this being a great example of how capitalism and the Greens can work together. I am not so sure.
For instance, take the idea of “banks” of wetlands. Typically, what happens is that a government, such as the US one acting under legislation, will decree that there can be no net loss of wetland in given geographical area A, so if any area of wetland is destroyed, then the destroyers must offset this by paying to create another area of wetland somewhere. I immediately see a problem here: someone in authority has decreed that whatever happens to be the area of wetland at the time the new system is introduced is the area that must be maintained ad infinitum; but why not say that the area should be twice as big, or three times, or four times, or half as big? Also, the supposed “market” for such development permit trading depends on the existence of government regulations of certain areas, like wetlands, which might clearly go against the property rights of the folk who have owned those wetlands in the past and might have wanted to turn them into golf courses or whatever.
To be fair, though, the article does address the fact that property rights or markets of some sort represent a smarter way of addressing issues such as conservation, pollution and so on than traditional “lets just ban it” approaches used in the past. The article contains a great example of how the French mineral water industry did a deal with farmers over the latters’ use of fertilizer and pesticides in order to protect the water and keep the farmers happy. That is the kind of market transaction that works, and probably could have worked without government getting involved. My worry, though, is that a lot of such artificial markets in things such as environmental resources can become prey to corruption and mission creep of all kinds. Nigel Lawson, for instance, wrote dammingly about carbon trading in his recent book on the global warming controversy.
It sounds like another artificial government created “market” similar to carbon trading.
Perhaps wetland credits will become big business in the property business.
It would seem to be a trade in legal requirements. There is no production or any tangible good involved.
Just keeping on the right side of the guy with the big stick.
Money for nothing and chicks for free?
Slightly OT, but in the good old days when wetlands were known as swamps or marshes they were considered health hazards. When the swamps around London were drained, the incidence of ‘ague’, (malaria), dropped of smartly.
Of course if malaria comes back it will be ‘global warming’ to blame, rather than all the pretty wetlands which provide such excellent breeding grounds for anopheles.
I wonder if the possibility of creating new health hazards will form part of the cost of these contracts.
Hey, if the Central Authority (government, church, whatever) is going into the business of selling indulgences, at least it’s nice that there is a functioning secondary market for them.
Oh, pseudomarkets are much smarter than older techniques like direct regulation and banning things. It forces actors in the productive economy to subsidise their enemies. It is a kind of protection racket. You can run a business so long as you pay the agreed sum to Big Luigi to prevent nasty things happening to you.
We are so very, very far from Kansas, Toto.
Good post – and good comments.
Yes – government action does not protect the environment. The environment is best protected by private property and agreements between human beings (which government, and those politically connected private interests that governments favour, mess up).
As for “Carbon Trading” and other such Economist magazine style government created “markets”.
They are indeed, as Brother Glenn calls them, “Crime Inc ” – an alliance of corrupt business interests (calling Enron [it started the thing off], Goldman Sachs, General Electric…..) and far left political activists.
The politicians also play their part – especially if they “used to be” far left political activists who helped set up the Chicago Climate Exchange (via their control of charitable Foundations set up by well meaning, but now dead, people). And now have the ear (and the thoat) of the very banking and other business interests that helped them gain power.
Calling Comrade Barack……