21 Jul 2009

Endangered Species for Sale?

NW asks
With so many endangered species losing their natural habitats, would the usual prescription of allocating private property rights be suitable for dealing with this crisis?

On the one hand, centrally planned economies that had no or little private property are among the most environmentally damaged countries. On the other hand, I can't imagine private property rights being a good idea for saving natural habitats that are shrinking, especially if they're allocated in some form of a market to a developer, oil/gas company, or mining company that wants to destroy the ecosystem for the land's natural resources. Plus, once a natural habitat is damaged, I can't see the usual "market forces" working to punish these companies by reducing their profits for what they've done.

Thus, based on what we know from economics, how should we manage the natural habitats of endangered species?
NW makes a few standard observations here (government has screwed up; can't trust companies) but fails to consider the economics of conservation.

Why conserve? Because the "item" is more valuable alive (vs dead) or intact (vs desecrated).

Now notice how we take care of our houses, our cars, ourselves, our pets, etc.

Why? Because those items our OUR property, and we benefit from their wise use.

Endangered species, OTOH, are often in trouble because they have NO owners. As the Soviets found, "what belongs to all of us, belongs to none of us, so let's exploit it!"

That's why blue whales are endangered -- because nobody own them.

That's why the Brazilian rainforest is disappearing -- because government policy makes it easier to slash and burn and move on than to conserve the greenery.

The way to protect the rainforest, the whales, etc. is with stronger property rights, and individuals and companies (e.g., the Nature Conservancy) are set up to provide that protection. (To learn more about this kind of free market environmentalism, visit the Property and Environment Research Center.)

What about oil companies buying up land and then destroying the environment while they exploit the resource? That will happen if a clean environment has no value and/or there's no way of enforcing environmental quality. Thus, someone has to be willing to pay for the clean environment, and that payment needs to be linked to results. If the Nigerian government gave property rights for "clean environment" to the people in the Niger Delta and was NOT corrupt, then Shell Oil would have run cleaner operations and avoided the current conflict in the region.

Bottom Line: The difference between abundant chickens and endangered tigers is property rights. Chickens are owned by individuals who protect them from others; tigers are owned by "us" and protected by nobody. If you want to save the tigers, sell them.