There is no such thing as "the environment" from an economics point of view. People use that word, but it's poorly defined. There is only property. Some property is land, some is air, and some is water. Some owners of property are careful to prevent others from damaging their property, some are not.
Economists study markets. Markets only trade in property. If you want to examine something from an economics point of view, you have to consider that thing to be property. The defining characteristic of property is that it has a single owner. The owner gets to decide who does what with the property. These are called property rights. Some owners are of course not individuals, e.g. partnerships, or corporations, or governments. Still, the owner of property acts with a single voice when it comes to trading that property.
If you listen to some people, you would hear them talk about "the environment". They want to protect "the environment." Specifically, what do they mean by that? It usually means that they are against pollution (it means other things as well, but let's ignore those other things). What is pollution, though? Pollution is anything that they think shouldn't be there; for example noxious gasses or liquids or solids. Pollution is illegal when it is trespass. Sometimes pollution is not trespass because the property owner has a reason to accept the pollution. The difficulty is that not every property owner chooses to prosecute the trespass.
Why should these people care about "the environment?" After all, it's not their property -- it's the property owner's problem. Sometimes they care because they are a part-owner of the property. It's owned by a government that's under their control (or vice-versa), and the government is failing to take good care of the property. Sometimes they care because they are subjected to externalities of the pollution. Every use of property has externalities; the existance of externalities is not sufficient reason to discontinue that use of the property. The most interesting reason is due to the way in which we have split up ownership of land.
Property rights may not be completely unique in the same volume of space. That is, you may have the right to do one thing with a piece of property, while I may have the right to do a different thing. For example, you may own the surface rights to land, and I may own the mineral rights. The US government owns the right to fly an airplane over that land. The same land has multiple owners of the property rights.
As every land-owner knows, one of the things you have to do with your land is pay taxes on it. You can reasonably view that right as "the right to collect property taxes". Some states are willing to sell you that right, e.g. Nevada. You can, when you purchase the set of rights we commonly call "ownership of land", you can pay extra (a lot extra) to purchase the right to collect property taxes.
The existance of this right to collect property taxes causes a problem. What if the property taxes are not paid? What happens then is that the property tax owner can get a lein on the rest of the owners. If the taxes become large enough, they can take possession of the land and sell it. Aye, here's the rub. What if the owner of the surface rights has extinguished the value of his right by allowing pollution? The owner of the property rights does not wish to see his value destroyed by another, and so he will take legal action to prevent the extinguishing.
This interferes in the market by preventing some worthwhile uses of land. What if someone could concentrate pollution on just one bit of land in exchange for money? That would be worthwhile because it would keep the pollution away from others. It would concentrate the pollution so that if the pollution becomes valuable it is available for easy recovery. After all, Pennsylvania farmers thought that oil springs were a nasty nuisance.
Except in western states where water is scarce, both the air and water have long been considered to be owned "by the public." Before governments were forced to take notice by their constituents, they were poor shepherds of their property. Air and water pollution by industrial processes are well-known problems. Note, though, that when water is privately owned, it is taken care of. This is the same effect you see when pollution of privately-owned land is not tolerated.
Still, calling air and water "the environment" confuses and conceals the issue. It's not an "environment", it's property, and the owner of that property is the only party that should be stopping pollution.
posted at: 16:06 | path: /economics | permanent link to this entry