Propertizing

Peter Barnes: Capitalism 3.0 — Chapter 4: The Limits of Privatization (pages 49-63)

Free Market Environmentalism
One other version of privatism is worth considering. Its premise is that nature can be preserved, and pollution reduced, by expanding private property rights. This line of thought is called free market environmentalism, and it’s favored by libertarian think tanks such as the Cato Institute.

The origins of free market environmentalism go back to an influential paper by University of Chicago economist Ronald Coase. Writing in 1960, Coase challenged the then-prevailing orthodoxy that government regulation is the only way to protect nature. In fact, he argued, nature can be protected through property rights, provided they’re clearly defined and the cost of enforcing them is low.

In Coase’s model, pollution is a two-sided problem involving a polluter and a pollutee. If one side has clear property rights (for instance, if the polluter has a right to emit, or the pollutee has a right not to be emitted upon), and transaction costs are low, the two sides will come to a deal that reduces pollution.

How will this happen? Let’s say the pollutee has a right to clean air. He could, under common law, sue the polluter for damages. To avoid such potential losses, the polluter is willing to pay the pollutee a sum of money up front. The pollutee is willing to accept compensation for the inconvenience and discomfort caused by the pollution. They agree on a level of pollution and a payment that’s satisfactory to both.

It works the other way, too. If the polluter has the right to pollute, the pollutee offers him money to pollute less, and the same deal is reached. This pollution level — which is greater than zero but less than the polluter would emit if pollution were free — is, in the language of economists, optimal. (Whether it’s best for nature is another matter.) It’s arrived at because the polluter’s externalities have been internalized.

For fans of privatism, Coase’s theorem was an intellectual breakthrough. It gave theoretical credence to the idea that the marketplace, not government, is the place to tackle pollution. Instead of burdening business with page after page of regulations, all government has to do is assign property rights and let markets handle the rest.

There’s much that’s attractive in free market environmentalism. Anything that makes the lives of business managers simpler is, to my mind, a good thing — not just for business, but for nature and society as a whole. It’s good because things that are simple for managers to do will get done, and often quickly, while things that are complicated may never get done. Right now, we need to get our economic activity in harmony with nature. We need to do that quickly, and at the lowest possible cost. If it’s easiest for managers to act when they have prices, then let’s give them prices, not regulations and exhortations.

At the same time, there are critical pieces missing in free market environmentalism. First and foremost, it lacks a solid rationale for how property rights to nature should be assigned. Coase argued that pollution levels will be the same no matter how those rights are apportioned. Although this may be true in the world of theory, it makes a big difference to people’s pocketbooks whether pollutees pay polluters, or vice versa.

Most free marketers seem to think pollution rights should be given free to polluters. In their view, the citizen’s right to be free of pollution is trumped by the polluter’s right to pollute. Taking the opposite tack, Robert F. Kennedy Jr., an attorney for the Natural Resources Defense Council, argues that polluters have long been trespassing on common property and that this trespass is a form of subsidy that ought to end.

The question for me is, what’s the best way to assign property rights when our goal is to protect a birthright shared by everyone? It turns out this is a complicated matter, but one we need to explore. There’s no textbook way to “propertize” nature. (When I say to propertize, I mean to treat an aspect of nature as property, thus making it ownable. Privatization goes further and assigns that property to corporate owners.) In fact, there are different ways to propertize nature, with dramatically different consequences. And since we’ll be living with these new property rights — and paying rent to their owners — for a long time, it behooves us to get them right. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 5: Reinventing the Commons (pages 65-78)

There’s nothing about property rights, however, that requires them to be concentrated in profit-maximizing hands. You could, for example, set up a trust to own a forest, or certain forest rights, on behalf of future generations. These property rights would talk as loudly as shares of Pacific Lumber stock, but their purpose would be very different: to preserve the forest rather than to exploit it. If the Lorax had owned some of these rights, Dr. Seuss’s tale (and Pacific Lumber’s) would have ended more happily.

Imagine a whole set of property rights like this. Let’s call them, generically, common property rights. If such property rights didn’t exist, there’d be a strong case for inventing them. Fortunately, they do exist in a variety of forms — for example, land or easements held in perpetual trust, as by the Nature Conservancy, and corporate assets managed on behalf of a broad community, as by the Alaska Permanent Fund.

Some forms of common property include individual shares — again, the Alaska Permanent Fund is an example. These individual shares, however, differ from shares in private corporations. They’re not securities you can trade in a market; rather, they depend on your membership in the community. If you emigrate or die, you lose your share. Conversely, when you’re born into the community, your share is a birthright.

I recognize that, for some, turning common wealth into any kind of property is a sacrilege. As Chief Seattle of the Suquamish tribe put it, “How can you buy or sell the sky, the warmth of the land?” I empathize deeply with this sentiment. However, I’ve come to believe that it’s more disrespectful of the sky to pollute it without limit or payment than to turn it into common property held in trust for future generations. Hence, I favor propertization, but not privatization. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 7: Universal Birthrights (pages 101-116)

The standard argument against third wave universal birthrights is that, while they might be nice in theory, in practice they are too expensive. They impose an unbearable burden on “the economy” — that is, on the winners in unfettered markets. Much better, therefore, to let everyone — including poor children and the sick — fend for themselves. In fact, the opposite is often true: universal birthrights, as we’ll see, can be cheaper and more efficient than individual acquisition. Moreover, they are always fairer.

How far we might go down the path of extending universal birthrights is anyone’s guess, but we’re now at the point where, economically speaking, we can afford to go farther. Without great difficulty, we could add three birthrights to our economic operating system: one would pay everyone a regular dividend, the second would give every child a start-up stake, and the third would reduce and share medical costs. Whether we add these birthrights or not isn’t a matter of economic ability, but of attitude and politics.

Why attitude? Americans suffer from a number of confusions. We think it’s “wrong” to give people “something for nothing,” despite the fact that corporations take common wealth for nothing all the time. We believe the poor are poor and the rich are rich because they deserve to be, but don’t consider that millions of Americans work two or three jobs and still can’t make ends meet. Plus, we think tinkering with the “natural” distribution of income is “socialism,” or “big government,” or some other manifestation of evil, despite the fact that our current distribution of income isn’t “natural” at all, but rigged from the get-go by maldistributed property.

The late John Rawls, one of America’s leading philosophers, distinguished between pre distribution of property and re distribution of income. Under income re distribution, money is taken from “winners” and transferred to “losers.” Understandably, this isn’t popular with winners, who tend to control government and the media. Under property pre distribution, by contrast, the playing field is leveled by spreading property ownership before income is generated. After that, there’s no need for income redistribution; property itself distributes income to all. According to Rawls, while income re distribution creates dependency, property predistribution empowers.

But how can we spread property ownership without taking property from some and giving it to others? The answer lies in the commons — wealth that already belongs to everyone. By propertizing (without privatizing) some of that wealth, we can make everyone a property owner.

What’s interesting is that, for purely ecological reasons, we need to propertize (without privatizing) some natural wealth now. This twenty-first century necessity means we have a chance to save the planet, and as a bonus, add a universal birthright. ... read the whole chapter

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