The Economics of Ecology: Angry Planet or Beautiful World?

by MARK  SKOUSEN via the Foundation for Economic Education“The bright promise of a new millennium is now clouded by unprecedented  threats to humanity’s future.” -WORLDWATCH INSTITUTE, 20001

“We know that the environment is not in good shape. . . . My claim is that  things are improving.” -BJØRN LOMBORG2Cover of "The Skeptical Environmentalist:...

Bjørn Lomborg is a Danish professor of statistics who was an environmental  activist and member of Greenpeace for years. He accepted at face value the  Malthusian views, expressed by Paul Ehrlich, Lester Brown, and groups such as  the Worldwatch Institute, Greenpeace, and the Sierra Club, that the world was  running out of renewable resources, clean water, and forestland, and that the  earth was becoming more polluted and that population growth was exploding.

Along came Julian Simon, an American economist from the University of  Maryland, who challenged Lomborg’s thinking. Simon had published several books  and papers filled with data supporting his view that life was actually getting  better, that air in the developed world was becoming less polluted, that fewer  people were starving, and that the population growth was slowing.

Simon made two devastating arguments against the pessimists: First, natural  resources are virtually unlimited in the long run because higher prices,  reflecting scarcity, encourage the discovery of additional reserves and the use  of substitutes. In addition, entrepreneurs and inventors are developing new  technologies and cost-cutting techniques allowing more resources to be  discovered and developed. Second, a large and growing population leads to a  higher standard of living because it increases the stock of useful knowledge and  trained workers.

Lomborg decided to test Simon’s statistics. In the fall of 1997, he and a  group of students examined Simon’s data. Their conclusion: Simon was right!  Lomborg reversed course and, in publishing his findings in The Skeptical  Environmentalist, has created a furor within the environmentalist  community.

Lomborg joins Simon in refuting most of the claims of the perma-bear  environmentalists: global forests have increased since World War II; the world’s  population growth rate peaked in 1964 and has since declined; only 0.7 percent  of species have disappeared in the past 50 years; fewer people in the world are  denied access to water; incidence of infectious disease is still on the decline  worldwide; the number of extremely poor/starving people is also declining; air  pollution is falling in many parts of the world.

But what about global warming, the overriding concern that our capitalistic  lifestyle is changing the climate and could do permanent damage to our  ecosystem? The evidence is clear that temperatures have been rising in the past  century, but the questions remain: how much of the temperature increase is due  to global carbon-dioxide emissions and what is the best course of action?  Economic analysis shows it will be far more expensive to cut CO2 emissions  radically than to pay the costs of adapting to global warming.3

Economists have also debunked the popular myth that economic development is  responsible for environmental degradation. The truth is largely the opposite. As  Lomborg states, “environmental development often stems from economic  development–only when we get sufficiently rich can we afford the relative luxury  of caring about the environment.”4

The Polluted Stat

Economists have also publicized “government failure” in the debate about the  environment. Recent studies have revealed how less-developed countries,  including the former Soviet Union, have more pollution, lower health standards,  and more environmental hazards than industrialized nations. Economists Terry  Anderson and Donald Leal point to several examples of government mismanagement:  National parks such as Yellowstone are in major disrepair, the U.S. Park Service  is notoriously wasteful (it built a $330,000 outhouse), the Canadian government  destroyed the cod industry, and Brazil and Indonesia forced migrants to burn  once-pristine rain forests to plant crops.5

Economics has provided real solutions to pollution and environmental  degradation. One problem is what is known as the “tragedy of the commons.” In a  1968 issue of Science, Garrett Hardin, emeritus professor of biological  sciences at the University of California at Santa Barbara, wrote a seminal  article arguing that a resource tends to be overexploited when owned by the  public and not private individuals. If no one owns a piece of grazing land, each  herdsman has an incentive to add another animal to the herd until the land is  overgrazed. As a result, “Freedom in a common brings ruin to all.”6

Hence, the lack of property rights and market prices creates a “tragedy of  the commons”–unnecessary pollution, extinction of animals, destruction of  forests, strip mining, and more. At first government favored regulation as a  solution, but economists have encouraged the establishment of clearly specified  property rights and accompanying price signals in water, fishing, and  forestland, so that owners can preserve these resources in a balanced way.

In sum, free-market environmentalism has come a long way in showing how to  replace the regulatory fist of command with a greener invisible hand. Many  free-market think tanks, such as PERC and the Competitive Enterprise Institute,  have challenged the supremacy of the Sierra Club and Greenpeace.7

Earth Day will never be the same.


  1. . Worldwatch Institute, The State of the World 2002 (New  York: Norton, 2002), p. xvii.
  2. . Bjørn Lomborg, The Skeptical Environmentalist: Measuring  the Real State of the World (Cambridge: Cambridge University Press, 2001), pp.  30, 32.
  3. . Ibid., p. 318.
  4. . Ibid., p. 33.
  5. . Terry L. Anderson and Donald R. Leal, Free-Market  Environmentalism, revised ed. (New York: Palgrave, 2001), pp. 47-58.
  6. . Garrett Hardin, “The Tragedy of the Commons,” reprinted  in Garrett Hardin and John Baden, ed., Managing the Commons (San Francisco: W.H.  Freeman, 1977), p. 20.
  7. . Two additional sources written from a free-market  perspective are Michael Sanera and Jane S. Shaw, Facts, Not Fear: A Parent’s  Guide to Teaching Children About the Environment (Washington, D.C.: Regnery,  1996) and Ronald Bailey, ed., Earth Report 2000 (New York: McGraw Hill,  2000).


About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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2 Responses to The Economics of Ecology: Angry Planet or Beautiful World?

  1. Pingback: Teaching Kids about the Environment, Government Style | Land & Livestock International, Inc.

  2. Pingback: The Skeptical Environmentalist: Measuring the Real State of the World | Land & Livestock International, Inc.

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