Increasing environmental concerns have started to be formulated taking into account the fact that the natural resources of the earth are depleting day by day. Due to the above-mentioned fact, states from throughout the world have designed and implemented different environmental policies aimed at preserving the environment. This paper's aim is to proove the ineffectivity of these policies and the importance of private property rights for achieving sustainable development. The scarcity of the natural resources and their closeness to depletion gave birth to a huge environmental movement in the entire world.
Environmental ruin in a world without property rights
The new tendencies intensively promote being "green" in order to achieve long-term sustainable development and environmental protection. As Walter Block explained "Environmentalism may be non-controversially defined as a philosophy which seeks great benefit in clean air and water and to a lower rate of species extinction"[1].
Due to the fact that environmental economics has become an important branch of economics as a whole, various interpretations have been given to it over time. The interpretation that is predominantly used today as an excuse for market interventionism is the neoclassical approach. Neoclassical economists propose an efficiency approach based on both the Pigouvian theory of social costs and on the Parettian equilibrium. The Pigouvian theory of social costs states that environmental ruin comes as a result of the fact that social costs are not included in the production costs of the products and services being bought, while the Parettian efficiency characterises a market where production and consumption are arranged such that supply exactly matches demand. Thus, neoclassical economists suggest that the current environmental chaos is due to the fact that pollution costs fail to be included in the prices of the final products. They advise for governmental intervention through "environmental taxes" in order to regulate this "market failure".
In fact, from a neoclassical perspective this "market failure" occurs as a result of the fact that people fail to consume until the point where the marginal personal benefit equals the marginal social costs and thus they involuntarily cause the depletion of the scarce resources. In theory, the neoclassical position seems logical. Even though, in practice, the costs and benefits are relative to individuals and cannot be mathematically quantified. Moreover, even a mathematical quantification of this equality would fail: in the lack of property rights for each individual the benefit will exceed the cost as long as that resource still exists. Why is this happening? First of all, the marginal benefit of an individual represents the satisfaction brought by one additional unit of a certain resource and this is definitely positive. Otherwise, that individual would no longer consume the resource. Secondly, the marginal social cost represents the cost that the consumption of that additional unit brings to the society and thus the individual will mathematically support only a fraction of that cost (equal to the marginal social cost divided by the number of citizens that belong to that society). Thus, no matter how small the marginal benefit of the individual will be, the marginal social cost will be much smaller due to the fact that it is supported by a larger number of people.
This is what it is usually called "the tragedy of the commons"[2]. In the lack of property rights, the public property cannot be appropriated in another manner than by depleting it. If the individual does not take the resource as long as it is available, another individual comes and takes it because that resource is "common" property. Thus, the neoclassical theory offers just a reason for the environmental ruin, not an excuse for interventionism as it is currently being used.
Another interpretation of the environmental economics has been given by Austrian economists. They believe and promote the economic freedom, consisting in the idea that people own themselves, their assets and the assets they acquire through voluntary exchange. Their also called libertarian philosophy considers that the only improper human action is that that threatens or violates the private property rights of other individual and thus the legal institutions should exist only in order to protect the infringement of this fundamental ground.
Looking through the Austrian eye from a praxeological perspective, the environmental problem is a problem of intra- and interpersonal conflicts that would have never been born in a world in which the institution of private property rights would have been clearly defined. "Pollution is therefore not about harming the environment but about human conflict over the use of physical resources"[3]. Environmental problems then reside when different individuals plan to use the same "common" resource for conflicting purposes. Thus the "market failure" becomes a governmental failure - the state authorities fail in solving the interpersonal conflicts in the absence of enforceable private property rights.
As Menger argued, "The only practical solution to conflicts that arise over the economic aspects of these otherwise non-economic resources [natural resources] is private property"[4]. Whenever private property is replaced by the public one, the externalities are supported by all the individuals while the benefits are incurred of only a few (those that arrive first and manage to appropriate more of that resource). In the absence of private property rights, no economic calculus for internalising the externalities can possibly be made.
Do conservation measures conserve? The case of the Common Fisheries Policy
As it was shown above, the protection of the environment is a very difficult goal to achieve as long as private property rights do not exist and thus there is no incentive for conserving the environment. Further on, the Common Fisheries Policy of the European Union will be analysed in order to underline its long-term effects in terms of achieving the sought end.
A first form of the Common Fisheries Policy came into existence in 1970 having as main aim to promote equal access to Member States Waters and to create a free trade area in fish within the European Economic Community. The first measure undertaken by the participants to this convention was to enlarge fishing waters from 12 to 200 miles (1976). In 1983 the Common Fisheries Policy was created as such and represented the European instrument for managing fisheries and aquaculture. In 2002 an important reform of the Common Fisheries Policy took place by establishing more complex goals - to ensure the sustainable development of fishing activities from an environmental, economic and social point of view.
Nowadays, the Common Fisheries Policy aims at progressively implementing an eco-system based approach to fisheries management and at providing a fair standard of living for those who depend on fishing activities, taking also into account consumer preferences. In order to achieve its goals in the best manner possible the Common Fisheries Policy has been structured on a four pillar basis: conservation of fish stocks, structural policy, relations with third countries and the common organisation of the markets in fisheries and aquaculture products.
The European Union has tried to improve the environmental conditions and to promote equality among member states by using conservation measures imposed through excessive governmental regulation. The environment was to be protected mainly through the implementation of strategies in order to prevent by catches, to eliminate discards and to remove destructive fishing practices.
Instead of introducing a clearly defined system of private property rights in order to protect both the environment and the interests of fishermen, the European Union used the neo-classical approach to environmentalism as an excuse for using interventionism in order to match supply and demand and to protect the interests of member states. Far from taking liberalisation steps, the EU matched the problems that have arisen with the need of more powerful regulations. The degree of interventionism in the market had an overall increasing trend, while the environmental problems in terms of fisheries and aquaculture were themselves increasing at an amazing pace.
The control and enforcement of the CFP was strictly supervised by both a fisheries control commission and the EU Inspectorate, in order to encourage compliance, to deter fraud and to ensure "sustainable" fishing. In 2007, The Community Fisheries Control Agency (CFCA) has become operational; it represents a permanent body of the European Union responsible for ensuring compliance and uniformity with the rules of the Common Fisheries Policy among member states.
The fishing industry is also highly subsidised in the European Union. The European Fisheries Fund, the financial instrument of the CFP, has a budget of 3.8 billion EUR and it is designed to support the fishing industry in the period 2007 - 2013.
Support is given to fish producers mainly through guaranteeing a minimum price on the market. This minimum price, also called withdrawal price, guarantees the producers that once this price is reached their merchandise is withdrawn from the markets at the expense of the European Union tax payers. The merchandise is afterwards destroyed or processed, stored and returned to the market when the prices rise again. Moreover, total allowable catches are defined at the beginning of the fishing year and fishermen have to comply with this maximum quantity to be extracted from the community's waters. Together, total allowable catches and the set up of a minimum price exercise a negative influence on the environment. Far from granting sustainable development, these measures offer an incentive to the producers to reach the total allowable catch without taking into consideration the ability of the market to absorb the supply. Due to the fact that the fishermen do not incur losses because the European Fisheries Fund buys the excess supply at the minimum price, they are practically determined to deplete the existent natural resources.
In the same time, the Common Fisheries Policy provides financial aid for diminishing the fishing capacity of the European fleet. This measure appeared to be a necessity after different policies were applied worldwide. For example, as an alternative to total allowable catches, the Alaskan authorities diminished the length of the fishing season. As a response Alaskan fishermen made innovations in their fleet fishing capacity and thus despite the considerable reduction in the length of the fishing season, no considerable differences were seen in the amount of fish caught. By supporting the decrease of the fishing capacity of the European fleet, the Common Fisheries Policy aims at reducing destructive fishing practices. Moreover, the long-term objective is to shift to less fuel-intensive methods for fishing in the community's waters.
Moreover, the Common Fisheries Policy promotes the existence of producer organisations. Only the members of the producer organisations can be subsidised through the European Fisheries Fund, while the other fishermen have to obey the regulations despite their non-membership status. Thus, special interests groups have been created at the European level and they will certainly make pressures in case steps will be ever taken towards liberalisation. In the absence of sole proprietorship for the community's waters, the fishermen will gain more today by catching more. Unlike the free market conditions, their gains are protected irrespective of the capacity of absorption of the market due to the fact that their excess supply is bought through the European Fisheries Fund and thus their inefficiency is financed by the European tax payers.
Overall, the interventionism on the European market managed only to put fish stocks under even greater pressure and to maintain an artificial price for the fish. Despite the fact that the quantity of fish destined for human consumption has more than tripled in the last century, the supply of fish has increased at an even higher pace. Nowadays, stocks of important commercial fish are severely depleted and they fail to recover even though the regulations imposed at European level have been intensified over the years. For example, tuna, the most fecund fish (1 female has 1 million eggs) is close to commercial extinction (that point where there is no longer economically viable to catch the existing fish). Moreover, total allowable catches failed to offer sustainability and the Common Fisheries Policy proves itself to be a total failure over time.
As Michael De Alessi Points out, "experience shows that when people are given the opportunity to conserve marine resources, they generally do so"[5]. The success of the South Pacific in protecting marine fisheries and aquaculture through instituting a strongly-defined system of private property rights should have been an example for the European institutions. At European level, the Common Fisheries Policy has to be essentially revised by decreasing the interventionism in the market to a minimum and by instituting an enforceable system of private property rights in order to attain the desired goals - environmental protection and sustainable development in aquaculture and fisheries.
Conclusions. Environmental preservation under a property rights based system
The overwhelming importance of private property rights for protecting the environment was once again demonstrated in the late 1980s, when the former socialist economies began to open up. Their environmental problems were crucial - tremendous waste energy, air pollution, depletion of resources. The absence of private property rights and free markets were thus enough in order to devastate the environment.
During socialism, due to the Marxist labour theory of value the land has been exploited and depleted and far more negative externalities were supported by citizens as compared with laissez-faire capitalism and the free market situation. Despite this clear evidence that the socialist doctrine fails to protect the environment due to the lack of the private property rights, contemporary "environmentalists" still suggest that government interventionism under a system of common property represents the solution to the environmental problems. In fact, the socialists that survived the transition periods to a free market capitalism disguised themselves into "environmentalists" - they advocate for the blatantly intrusion into private property rights and they believe wholeheartedly that the state should offer the "right to pollute" in exchange for an "environmental tax". These environmentalists are what Walter Block suggestively described as being "watermelons" - "green" at the exterior but still deeply red inside.
Under this "common property" environmental system, what is known as the "tragedy of the commons" uses two main principles for protecting the environment: "The polluter pays principle"[6] and the "First come first served principle"[7] The first principle is inefficient because the polluter has to pay an amount equal to the social costs that he brings about to the society in order to gain the "right to pollute". Moreover, this amount to be paid is subjective and cannot possibly be quantified. Thus, the impossibility of rational economic calculation does not exist only in the case of socialism, but also when we are talking about environmentalism. Under a system of property rights this principle would have been adequate due to the fact that if a person's activity causes by products that violate the private property rights of another individual than he can be made responsible for this through juridical procedures. In this kind of system the individual can either eliminate the emissions either confine them to his own property either pay a compensation regarding to the costs perceived by the person whose private property has been violated. For example let's take the case of a vessel that pollutes the waters by disposing traces of chemical substances. Under a system of common property rights the owner of the vessel cannot be made responsible for the damages caused, but under a private property system he can be sued and thus decide to continue to pay compensation or to internalise the negative externalities caused by his own private property.
"The first come first served principle" is applicable only through a system of common property and leads to conflicts between individuals and to a permanent competition for consuming the scarce resources, competition that on the long run leads to depletion. These kinds of conflicts exhaust the environment due to the fact that it cannot be legally decided who has the right to use the resource. For example, if water property would be passed to private individuals, the owner would no longer deplete the fish stocks as long as in the future they will bring him a higher benefit. Taking into account that the infringement of the property is punished through law, he will adopt a sustainable behaviour in order to maximise both his current and his future welfare without being threatened with the depletion of his stock due to over-fishing by other individuals. If others would violate his property right and would catch fish from his own private property he could action them into justice and demand a compensation that he considers sufficient in order to cover the costs that he supported.
The privatisation of natural resources by selling them through open public auctions to the highest bidder will not only solve the existing environmental conflicts but also bring about huge revenues. Thus, instead of spending on "unsustainable" interventionist measures, the transition to the system of property rights would also bring about government revenues. While government decisions regarding the allocation of natural resources are short-run based, influenced by agency problems and biased by the pressures exercised by special interest groups, the private owners would thoroughly allocate the resources they own to their most-valued use. Thus, previous experiments show the fact that there is no real conflict of ideas between economic and environmental goals.
Of course the shift to a property rights-based system is a long and painful transition process. The first that may oppose to that shift are in fact the governmental officials. In the case of a public property-based environmental system, the appointed managers receive their remuneration irrespective of the results they have. As long as tax revenues are collected regardless of the manner in which the management of resources is done, there will still be conflicts of interests. And politicians know better that renouncing at the common property system means to give up to special interests protection that offers plenty of room for bribery and corruption. These agency problems cannot be solved otherwise but through shifting the economy towards a point where the natural resources would be completely privately owned. Then the conflicts of interests between the appointed environmental managers and the citizens they represent will no longer exist.
The restoration or instauration of private property rights is a crucial matter for granting sustainable development. As Andrew Pack pointed out, "only property rights can instil the necessary desire to be respectful and resourceful with environmental assets".[8] A private property-rights based system would offer an incentive to the owners to appropriately use the resources they own and to maximise their value due to the fact they can be compensated in case some other individual infringes their private property.
There is a certainty that private property rights are more expensive to define and enforce, but they bring the biggest benefits to the environment, to the individuals and to the society as a whole. The private property rights system metamorphoses the game from a zero-sum game (individuals fighting to obtain a larger piece of the pie) to a positive sum-game (the entire pie is enlarged at the benefit of the society as a whole).
Selective bibliography
Andrew Pack, "Environmental Preservation: A Matter of Property", http://mises.org/story/2136
Walter Block, "Environmentalism and Economic Freedom: The Case for Private Property Rights", http://mises.org/etexts/environfreedom.pdf
Roy Cordato, "Toward an Austrian Theory of Environmental Economics", http://mises.org/journals/qjae/pdf/qjae7_1_1.pdf
Michael De Alessi, "Sustainable Development and Marine Fisheries", Chapter 13, "Sustainable Development: Promoting Progress or Perpetuating Poverty" edited by Julian Morris, Profile Books, London, 2002
David J. Theroux, "Property Rights vs. Environmental Ruin", August 1 1994, Cornerstone
Richard L. Stroup, Jane L. Shaw, "An Environment without Property Rights", February 1 1997, The Freeman
Sebastian Storfner, "Can Market Forces Solve Environmental Problems? Neoclassical versus Austrian Analytics", University of Central England, Birmingham
Elizabeth Brubaker, "Property Rights: Creating Incentives and Tools for Sustainable Fisheries Management", Tri-State Rock Lobster Industry Conference, Adelaide, Australia, September 8 1997, http://www.environmentprobe.org/enviroprobe/pubs/ev634.htm[1] Block, Walter; „Environmentalism and Economic Freedom: The Case for Private Property Rights", Journal of Business Ethics 1998, p. 1887
[2] Hardin, Garett; 1968
[3] Cordato, Roy; "Toward an Austrian Theory of Environmental Economics", The Quarterly Journal of Austrian Economics vol. 7, no.1 (spring 2004), p. 7
[4] Idem, p. 9
[5] De Alessi, Michael; "Sustainable Development and Marine Fisheries", Profile Books London 2002, p. 12
[6] Cordato, Roy; "Toward an Austrian Theory of Environmental Economics", The Quarterly Journal of Austrian Economics vol. 7, no.1 (spring 2004), p. 10
[7] Idem, p. 11
[8] Pack, Andrew; "Environmental Preservation: A Matter of Property", p. 3