8 Dec 2011

TANSTAAFL -- the review

It's generally true that writing gets better with each draft, but at some point a writer must stop, as his cost of re-drafting exceeds his benefit (the benefit to readers is a different story).

But sometimes we get the chance to re-write an earlier work, not just to finesse the original perspective but to add wisdom and highlight important points.

Edwin G. Dolan has taken this second path with his "Version 40.0" 2011 update of his 1971 book, TANSTAAFL (There Ain't No Such Thing As A Free Lunch) - A Libertarian Perspective on Environmental Policy.*

Now some readers may be tempted to stop reading this review, since they are not interested in a "libertarian" book on environmental policy. Don't libertarians, after all, think that money should determine who gets what, in some kind of Darwinist struggle to allocate rainforest to the richest?

Not really, and definitely not in this book.

That said, Dolan doesn't shy away from highlighting the dangers of government failure and command and control myopia. In fact, he does an excellent job of exploring the tradeoffs between individual liberty and government guidance when it comes to managing our environment -- saying things I've said in the past, but adding more discussion that I wish I had and explaining more clearly than I ever did.

In other words, I like this book. I like it in the same way as I like "Economics in One Lesson" [free download], which I assigned to my Environmental Economics and Policy class at UC Berkeley, and I'd definitely assign this book to ANY class with "environment" in the title. It's important to note that the book is written in clear prose, with no equations and only a few simple tables and figures. Fantastic.

And here's the coolest thing about this book: Each chapter has two parts -- the 1971 original and the 2011 update on "what's changed" and "what hasn't changed." I really liked this structure, as it revealed how much economists had to say so long ago (the first Earth Day was in 1970!) as well as bringing the reader up to speed on current events.

The book starts with its awkward title, i.e., every decision involves tradeoffs. I make this point to environmentalists when I talk about water. For example:
The only way to leave the environment intact is to take ZERO water; that action would result in a 90% population shrinkage as we returned to a life of hunter gatherers. If you want that, fine, but if you want a modern life, then you must agree that SOME water is going to be "taken" from Nature. The only question is "how much?"
Let's go over the chapters:
  1. A comparison of "throughput" and "closed loop" economies in which Dolan points out how the throughput basis of GDP distorts policies and decisions. In his 2011 addendum, Dolan points out the silly nature of policies designed around "willingness to pay" that do not actually involve payment. This paragraph alone should get about half the environmental economists in trouble (hear me guys?). He then goes on to demolish the "affordable energy" lobby (oil companies that like subsidies).
  2. A nice explanation of basic economics (in 9 pages!), i.e., how the law of decreasing marginal benefit and diminishing returns result, respectively, in the laws of demand and supply. His 2011 addendum demolishes crony capitalism ("Drill baby drill") and silly regulations, e.g., CAFE fuel standards dedicated to protecting America's dinosaur car companies.
  3. A move from market distortions to market failures and a discussion of pollution (negative externalities), property rights, tort laws and regulation. Dolan (like me in my book) points out that regulation can not only interfere with the discovery of "efficient" levels of pollution, but it can also fail to compensate those who are harmed by pollution AND result in far more pollution. In his update, he writes out the 20/80 rule (p. 77):
    Putting a price on pollution is by far the best way to affect the behavior of people who are neither environmental activists nor environmental skeptics, but are simply indifferent.
    That said, he also supports government and non-government involvement when it's too difficult to use price signals.
  4. Dolan covers "political economy" (oh boy!) and my favorite topic: who gets the costs and who gets the benefits from policies and how are we to organize collective action to make sure that the majority are not over-run by special interests (aka governments do not impose regulations ON industry; governments provide services TO industry via regulations). Wow. Every environmentalist should keep this chapter on the bedside table.
  5. Ehrlich, Malthus, The Limits to Growth [my review] and steady-state ideas. Dolan's discussion of anti-population (Ehrlich) vs. pro-population (the Pentagon) views is still timely, but he falls (surprise!) firmly on the side of individual choice AND an end to "pro-child" ideas like welfare payments for children, etc. In his update (7 billion people!), Dolan is neither optimistic (per Julian Simon) nor pessimistic (per Population Council); he ends with a plea for a woman's informed right to choose how many children she wants. (Read, via AW, Herman Daly's comment on how we've passed the limits to net-positive growth.)
  6. A discussion of economic development and the environment in which Dolan brings up one of my favorite taboos: if we find the way to feed the poor, then what do we do when they have children who are hungry? This awkward question should be debated every day in every aid agency that delivers superficial help (the fish) without deeper solutions (teaching the poor how to fish). He goes on to discuss the demographic transition and environmental Kuznets curve. In his 2011 update, he compares the good news (most people's lives are improving) to the bad news (massive corruption still harms many).
  7. A discussion of government intervention -- for better or for worse -- and the special interests (from oil to greens) who profess to speak for the People. Dolan wishes that government would get out of the business of destroying the environment (e.g., USACE and their silly cost-benefit) but also that environmentalists would support non-elitist outdoors (hear that Restore Hetch Hetchy?)
  8. A discussion of the steady state economy (don't) and plea for individual decisions instead of delegation to a "Central Environmental Administration" (the EPA was founded in 1970, so this is a funny term) in the move towards a sustainable macro-economy. In his 2011 update, Dolan reaffirms the power of prices over regulations (e.g., lightbulb prices vs bans).
That's where the 1971/2011 update ends, but Dolan adds a fascinating chapter on climate change and climate policy (reprinted from a 2006 CATO Journal article) in which he says that there's too much risk to wait for iron-clad proof of climate change AND that those who have committed the harm (more the US than China) need to pay the costs of mitigation and (Dolan also emphasizes) adaptation. These arguments are firmly grounded in libertarian economic theory (Coase, Hayek, Locke, et al.)

Bottom Line: I give this book a very firm FIVE STARS. Anyone interested in the environment (science, policy, economics, life) should read it -- and then go out and tell some emperors that they are naked!

* Searching Finance, the publisher, sent me a review copy and offered to pay me a commission on purchases from their website (paperback or PDF). You can also buy the paperback or Kindle version at Amazon. I don't care about the commissions (I wrote the review based on my real thoughts on the book), so click for convenience.

1 comment:

Read this first!

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