Author Archive

Environmentalists for School Choice

Last year I met Dr. Bart Danielsen, the Founder of Environmentalists for Education Reform. What a brilliant concept! As a long-time environmental economist, and urban economist, I should have recognized the vital importance of the connection between at least the “school choice” part of the urgently needed transformational education reform and environmental impact, not to mention the very fiscal and economic sustainability of central cities. Family flight to the suburbs has been a disaster; tax base loss, loss of business/jobs, and environmentally. The latter disaster arises from the blight of property abandonment and infrastructure decay, loss of open space to suburban sprawl, and increased driving which means more pollution.

Once the connection fully sank in, I recalled that my The School Choice Wars discusses a 1990’s Denis Doyle paper that describes survey results that said “school choice” would have kept a lot of middle/upper income families from moving to the Baltimore suburbs. Nathan Gray and I discovered a similar phenomenon in Edgewood, west of downtown San Antonio, TX. School choice attracted families and business, and drove public school improvement.

Well, thankfully, Dr. Danielsen recognized the vital importance of the connection.  He’s working hard to give it prominence through publication, networking, and the documentation of additional examples. Hopefully, this will significantly broaden the pro-transformation, pro-choice coalition.

Does it Matter if Alleged Climate Change is Alleged to be Human-Caused?

Three things happened recently to prompt this plea for clearer thinking on the issue of alleged climate change.

  1. A fund-raising letter from the Environmental Defense Fund, a once fine environmental policy think tank that has lost its way on “Global Warming”, which was the subject of the letter.
  2. Paul Jacobs Common Sense column, which focused on disagreement on natural vs. human basis for alleged climate change.
  3. Several of the comments on Bjorn Lomborg’s Wall Street Journal Op-Ed on Climate Change Alarmism focused on human vs. natural causation.

By the way, as an economist, I don’t have a noteworthy opinion on the physical science of climate change. As an environmental economist (before I jumped into school system reform studies), I can see that there is a lot less agreement among climate scientists on this issue than the mainstream media outlets argue. For example, climatologist Dr. Roy Spencer laments: “Two scientists can examine the same data and come to exactly opposite conclusions about causation.” And the unscientific basis for widely-assumed human causation depresses Dr. Spencer.

What depresses me is the continued failure to focus on the central issue, which is the ability to cost effectively address the issue. Instead, there is a lot of focus on the nearly irrelevant causation issue. Suppose scientists detect a huge meteor on a collision course with earth. Can you imagine someone saying ignore it because it is not human-caused? Suppose another ice age is imminent? We wouldn’t worry about cause. We’d be doing benefit-cost analysis on ways to warm things up. If/when catastrophic warming becomes imminent, we’d better stop the finger-pointing and focus on cooling strategies, or lacking cost-effective cooling strategies, we’d better invest in go-it-alone, no-regrets strategies and adaptation to a warmer planet. In this period of uncertainty and controversy about the scope of the threat and cost-effectiveness of feasible strategies, serious people will give special attention to the many available policies that reduce methane and fossil fuel emissions as a side benefit to already attractive policies from other perspectives (= no regrets). One of those is the challenge to eliminate costly shortages of highway space. The popular term for such “shortages” is traffic jam, which are very costly just for the delay they cause, not to mention vehicle wear and tear, increased air pollution, and over-building of roads to meet the demand at a direct price of zero. The ECO 101 cause of all shortages is setting price too low. At rush hour, “free”-way is too cheap.  Economic illiteracy is often very costly.

A Way Out of The Endangered Species Mess

Too many environmental issues are seen as crime and punishment problems.  The bureaucratic process that implements the Endangered Species Act (ESA) is one of the results. That process produces too few environmental benefits, too many economic losses, and an unnecessary infringement on individual liberties. Far more species go extinct waiting to be listed as endangered or threatened, and after being listed, than are upgraded to a less threatened status or delisted (true success).

The current process is unsuited to the real issue, which is how to efficiently accommodate competing users (people, plants, and animals) of land. That is being increasingly recognized, even by mainstream environmental activists. With the implementation details of each case now in the hands of government employees, the science of species listing and recovery is tainted by politics. Since the ESA’s official goal of preserving our biodiversity enjoys strong public support, we must develop news, more productive ways of pursuing it.

With appropriate property rights, market mechanisms will protect threatened plants and animals much more efficiently than the current bureaucratic process. Private property rights can be strengthened to make listed plants and animals more valuable to individual landowners (50% of endangered and threatened species occur only on private land) as they become more scarce. It will cause landowners (including public landowners) to ‘set aside’ enough land to recover and sustain each listed species. The key details are the definition of habitat, how much is enough, and how much actual and restorable habitat exists; facts that are already required by the existing process.

‘Set aside’ should not mean outright purchase in most cases. Most species can co-exist with human activity. Indeed, they must. There is not enough money or land to provide every threatened species with its own exclusive refuge. The viable terms of that co-existence determine the type of easement that landowners that eliminate habitat must purchase (perhaps subsidized?) from landowners that maintain habitat. The market price of such easement arrangements will depend upon development pressures (demand), the scarcity of existing and potential habitat, and the biological requirements of the species (supply).

In the well-known, expensive Edwards Aquifer-Endangered Species situation of South Central Texas, pumpers could be habitat eliminators during severe droughts. An approach analogous to land easements would be to levy a small pumping fee and use the revenue to maintain aquatic habitat. Depending on cost comparisons and conditions, a number of measures could be funded. They include springflow purchase, springflow augmentation, and artificial habitat maintenance for the inevitable times of severe drought. Past attempts (the 1995 Texas Legislature’s revision of 1993’s SB 1477) to address the problem are very expensive, they limit pumping too much, they do not ensure that the springs the endangered species depend on will not go dry, and therefore do not ultimately fully address the possibility of federal sanctions that supposedly justify the costly measures.

All landowners would be better off under the proposed easement purchase process than under the expensive, open-ended, indeterminate process that exists now. Landowners contemplating land uses that would eliminate some habitat would enjoy lower known costs and no species habitat-related delays. The existing process is fraught with uncertain high costs and long delays, and often ultimate denial of permission. It is especially hard on small landowners, for whom the existing process can easily cost much more than their land is worth.

Under the easement purchase proposal outlined above, land developers would have an incentive to minimize their destruction of habitat, and other landowners would have an incentive to protect and restore habitat, and advertise its existence. Habitat owners would profit from the chance to sell the easements. Habitat owners would be better off under the proposed market approach than if there was no public interest in maintaining a sufficient level of species habitat. Contrast that with the existing incentives. Now most landowners fear (and take steps to prevent) the discovery of habitat of potentially threatened species on their property, because it could cause property values to fall, and land use restrictions could lead to forfeiture. Species also suffer from the existing process because it creates incentives to destroy habitat, and no incentive to maintain it.

In closing, it is important to summarize the role of government in the proposed market approach to species protection. The government would no longer engage in case-by-case ‘consultations’ (the root of the problem). Biological data would be used to define the terms of easements, and how much protected habitat is enough. The government would enforce compliance with the terms of the easements just like it enforces other contracts. If the requirement that habitat eliminators acquire easements constitutes a ‘taking’, public funds could be used to subsidize easement purchases.

Diminishing Returns to Dam Building and Other Supply Solutions

Megadam Projects not Successful” highlights what many in Texas and elsewhere will see as an inconvenient, but critical, truth: there are diminishing returns to structural solutions to water scarcity problems. One reason that it is inconvenient is that there is a lot of money in dam building, and another is that water planners and municipal purveyors are not used to the demand-side approaches to make sure that demand will not exceed supply even in a worst-case-scenario drought.

Sole reliance on supply-side solutions to meet that mandate means the environmentally and fiscally costly construction of some projects that will sit idle most of the time. There are two alternatives that become more and more economically efficient as additional water supply projects come on line:

  • Provision for permanent and temporary market-based re-allocations of existing water rights, which means true private ownership of water consumption rights. Water price differences, or lacking those, water use value differences, will signal which way true markets would move water. It would not be a mass-movement because the prices are changed by the re-allocations, sometimes significantly by small reductions in sellers’ water use. For example, a relatively small re-allocation of irrigation water can slightly increase the value of agricultural water while massively decreasing the cost of municipal water.
  • For water supplies like municipal utilities and irrigation companies, provision of some discounted interruptible service. The option to buy a mix of non-interruptible and discounted interruptible service has been long-time standard fare in industries like natural gas that are much less vulnerable to the double whammy of simultaneous increase in demand and decrease in supply that comes with drought.

But gas providers and users are spending their own money, whereas government-run water purveyors spend someone else’s money. So, as water projects come online it eventually becomes cheaper to provide discounts for service that is interrupted in specified drought conditions than to have a nearly-always idle water project on standby for a rare situation.

Real Water Markets: Another Leadership Imperative

Political and economic freedom plus the rule of law and free enterprise yields the prosperity that we enjoy, and its absence explains why most of the world lags so far behind us. Its absence also explains why some sectors of our economy lag so far behind the rest. We use our resources more wisely than most of the rest of the world because market-determined prices guide most of our resource use decisions.

Changing market prices are a powerful information and incentive system. That system has an impressive track record because every price is the result of a serious, continuous, money-where-your-mouth-is indirect conversation about priorities and costs. It involves the entire population, so it harnesses much more information than the central planning alternative, which is just guesswork by a handful of over-extended public officials spending someone else’s money. Central planning has an awful track record, not just for economic inefficiency and poverty, but for creeping tyranny.

Market-determined prices will address Texas’ water management challenges more effectively than our current system of limited markets and central planning. Willing buyer — willing seller exchange of privately-owned water rights will tell us what each basin’s lowest value water uses are worth. Until we know what price existing users would sell water for, we cannot tell which potential water projects are wise investments. Price differences between water basins tell us if inter-basin transfers make economic sense, and tell us what restrictions on inter-basin transfers cost. The same price information is an essential element of water conservation planning.

Texas surface water law allows water rights’ exchanges, but transfers are over- regulated. For example, water rights holders cannot change water uses without state permission. Water rights are just revocable permission to use state water; a factor that undermines exchange, investment in water-related infrastructure, and promotes wasteful use-it-or-lose-it usage. Let’s hope for the wisdom and leadership to fix that before our drought and recent referendum push us to waste billions of dollars and the environmental disaster of unnecessarily flooding thousands of acres under new reservoirs.

Texas groundwater law has not even come that far. Many groundwater basins have long since reached the point where recharge can no longer keep up with unlimited pumping, which means that efficient use requires quantified pumping rights and a price system. Only the Edwards Aquifer area of South Central Texas has quantified pumping rights, but even there, water users cannot trade directly. Much of the Edwards Aquifer permitted pumping is locked into historic and mostly low water uses. Those are very expensive restrictions. How expensive? Only a system of market-determined prices can reveal the true amount.

The legal infrastructure needed to foster market-determined surface- and ground- water prices will have to incorporate numerous geologic, hydrologic, and historic use details that are beyond the scope of this commentary. But nothing about issues like third-party claims, drought management, and environmental values preclude the government from severely curtailing its costly micro-management of water use. Getting there is just a matter of leadership; selling the correct, limited government policies to a general public interested in freedom-based new ideas.

Using Benefit-Cost Analysis to Protect the Environment

Increased use of Benefit-Cost Analysis (BCA) could either improve or harm the environment. As usual, the devil is in the details. Since the beneficial (=correct) use of BCA is readily achievable, the political momentum behind increased use of BCA should be seen as an opportunity to improve environmental decision-making. Lobbying efforts and political capital should be directed at appropriately defining BCA practices, and seeing to it that it is used in ways that are consistent with its capabilities. For environmentalists, the alternative is bleak. Opposition would consume more of their precious political capital, and it would give anti-environmentalists another sound-bite to use to attack productive, market mechanism-oriented environmental initiatives. Furthermore, since resisting the political momentum may be futile, incorrect, destructive uses of BCA might then predominate.

The Global Warming Fiasco

Leadership to focus debate on the critical questions has never been more important.  Devastating consequences lurk for those asking the wrong questions. A lot of research money and newsprint has been allocated to whether the planet is warming or cooling (the concern in the 1970s), and whether humans are responsible. But those questions are relatively trivial, and border on irrelevant.

Once we have probable cause to believe that climate change, from what it would otherwise be (regardless of the reason), would be worthwhile, the key issue becomes which, if any, human actions are capable of cost effectively producing desirable climate changes. If the answer is there are no such policies, it doesn’t matter if the planet is warming or cooling, or whether humans have had a significant hand in it or not. Living with the risk would then be less costly than attempts to address it. If the answer is there are some potentially cost effective policies, we should consider only such policies, and consider them whether humans are responsible for warming or cooling, and whether we can prove change one way or the other. For example, there may be no evidence of climate change, but if we are capable of cost-effectively improving the climate, then we should pursue such policies, which would include researching the distribution of costs and benefits, and other potential efficiency trade-offs. If we can figure out a way to cost effectively reduce hurricane frequency or intensity, it doesn’t matter if humans have done something in the past that has increased hurricane damage, or if hurricanes are more intense or numerous now than at some other time.

Given that the likely necessary conditions (for example, an enforceable international agreement that includes all major emitters; Kyoto doesn’t) for a cost effective climate change policy may be improbable, the only sane unilateral actions against potential adverse climate change are policies that would help there, but make sense without climate change benefits. There are many such policies; for example congestion pricing to reduce traffic jams and revenue-neutral tax burden shifts to fossil fuels.

Environmentalism: Achievements and Mistakes

Nearly forty-four years ago, the first Earth Day energized the environmental movement. The event gave form and substance to long-simmering concerns about the environmental side effects of free enterprise. It empowered the leaders of the environmental movement to pursue safeguards through the political process.

Unfortunately, environmental leaders made a very costly, fundamental error at the outset. They misdiagnosed the problem. They attributed environmental problems to uncontrolled pursuit of profit, while the true source of the problems was poorly defined and un-enforced property rights. Consequently, they sought (with the best intentions) controls on behavior, rather property rights corrections.