The Global Climate Commons

With a new Climate Change conference starting in Canada, the United States government is announcing that it will resist any international agreements on CO2 emissions.

I find it interesting that, on the issue of climate change as well as other environmental matters, the people who describe themselves as "friends of capitalism" support the purest application of communist philosophy that exists in the United States today.

In 1968, Garrett Harden wrote an essay, "The Tragedy of the Commons" that has been a basic pillar of conservative (capitalist) thought since that time (though I see it as a very poor fit). The essay clearly describes why holding a finite resource in a commons (or according to communal or communist principles) results in the destruction of that resource, and why assigning property rights to (the use of) that resource solves the problem.

Harden described a hypothetical village that held all of its pasture land in common. Anybody who wanted to use it (for grazing) could do so without cost. All an individual has to do is buy a calf, set it loose on the commons, harvest it at the end of the year, and pocket the income.

Now, we look at the decision-making process for any given villager. We assume that he has enough money to buy a calf. The use of the commons is free, and he pockets the profits. He has little reason not to put another calf in the commons.

The alarm then gets raised that all of the cattle are overgrazing the commons. Yet, from the point of view of any individual villager, there is still little reason to keep cattle off of the commons. "If I hold back and not put cattle on the commons, somebody else will simply add a cow and he will take what profits there are to be had. Even if those profits are decreasing because we are destroying the land, the small profits I would get by adding a calf to the pasture is better than the nothing I will get if I restrain. The pasture that I save will get used by somebody else for his profits, leaving me nothing".

Even after the warning goes out, nobody has a reason to withdraw his calves from the commons. It will cost him money that will simply go into his neighbor's pocket.

A striking example of the tragedy of the commons in real life can be found in the fate of the American Bison. No individual hunter had much of a reason to leave any bison alive. The animal that he left alive today, some other hunter will harvest tomorrow. It would be better for him if he harvested the buffalo today. For this reason, buffalo hunters had a habit of wiping out entire herds, taking the most valuable parts, and leaving the rest to rot. This is what happens when a finite resource is held in commons.

Other areas today where we are facing the same tragedy of the commons include deep-sea fishing and groundwater. In both of these cases, a finite resource is held in commons and nobody has an incentive to leave anything behind -- because somebody else will come along and harvest what is left.

Our climate -- or, more precisely, the capacity to dump CO2 and other greenhouse gasses -- is another commons, and it is facing the same tragic fate. No person has much of an incentive to restrain from dumping CO2 into the atmosphere. Anybody who suffers the cost of reducing greenhouse gas emissions must compete on the open market with a company that treats the ability to dump as a "free resource." As with any free resource, no company has much of a reason to pay attention to how much of that resource they use up.

The Climate as a Commons

Capitalist economic principles predict that where a finite resource is held in commons, that the resource will be overused. If the use of the atmosphere as a dumping ground for greenhouse gasses is held in commons, it will be overused. That is to say, people will dump more greenhouse gasses into the atmosphere regardless of the costs imposed on others, because the costs to those doing the dumping are virtually non-existent.

The surprising thing is that people who claim that they are "friends of capitalism" argue loudly for protecting this status quo. There own capitalist principles predict that this policy will have tragic results. Yet, in this case, they abandon the policy and instead select the path that leads to the tragedy of the commons.

Why do they do this?

A reasonable first theory is that those who benefit most from the commons want to keep it that way. We may be heading for a tragedy down the road a ways. However, in the mean time, these people are using the commons free of charge and pocketing the profits this provides. This provides a powerful incentive to preserve the commons -- as long as it is profitable to do so. It remains profitable exactly as long as the person using the commons is able to force the costs onto others.

I have said before that I believe people are very good at recognizing useful courses of action and following them without fully recognizing what they are doing. While I do not believe in a “conspiracy” among corporations, I think that corporate leaders are naturally drawn to a course of action that has some morally questionable elements to it.

They recognize that the term "capitalism" has a great deal of market power among some voting blocks. Therefore, they seek to market the communal system that exists with regard to climate and other environmental concerns as “capitalism,” to get their capitalist friends to endorse it. This can also involve a fair amount of self-deception; they want to think that their policies are right so they convince even themselves that they are following capitalist principles.

The marketing gimmick that allows them to categorize the climate commons as a form of capitalism comes from categorizing capitalism as a type of regulation. Of course, on their doctrine, all “environmental regulation” is bad – it is un-American and anti-Capitalist. However, capitalism itself is a form of regulation. It seeks to regulate the allocation of scarce resources by assigning different blocks of it to individual owners, who then have the liberty to buy and sell ownership within the confines of a set of rules called “property rights”. A huge national bureaucracy is then set up for the purpose of defining and enforcing these “property rights.”

In this way, the corporate executives “package” capitalism as a form of environmental regulation to be opposed. The next step in this shell game is to “package” the system in which corporations may profit at the expense of others under the brand name “capitalism”. Then, the sales job is complete. We have capitalists going to great lengths to defend what is, in effect, corporate feudalism. At the same time, capitalism itself stands in as the decoy to draw the fire of those who stand opposed to the corporation.

At this point, I want to remark that I am not a capitalist “purist”. I am not one of those who claim that pure capitalism is without flaws and will solve all of our social ills. It would be nice if the world were that simple, but it is not. In this case, however, it would be useful to see what capitalism has to offer as a means of regulating corporate degradation of the environment and its effects on the climate.

Capitalist-Style Environmental Regulation

Free-market thinkers have been looking for ways to apply free-market efficiencies to environmental issues for years. Though we cannot divided the climate up into chunks and sell it to the highest bidder, we can find other ways of charging people for climate use.

Just as hunting licenses restrict the number of deer or other animals that one can harvest, emissions credits restrict the amount of pollution that one can put into the atmosphere. If somebody wants to put more of a particular contaminant into the air, he must purchase the emissions credits from somebody else. If the demand for a particular type of emission grows, the price goes up.

On this method, if somebody finds a way to produce the same product without producing any of these harmful emissions, the company no longer needs to hold onto these emissions credits. It can sell the ones it has, improving its bottom line.

If a company finds a way to take an equal amount of this contaminant out of the air, then it need not buy emissions credits. It will only need to pay for its net contribution to the overall problem.

In fact, a company can go into the business of pulling a particular contaminant out of the air (in this case, creating carbon-dioxide sinks that pull carbon dioxide out of the atmosphere) and use that to "manufacture" emissions credits that it can send elsewhere. Brazil and Indonesia, for example, can use a system like this to get paid for preserving and even enlarging their rain forests, because of the carbon-dioxide this would pull out of the atmosphere.

I do not have an opportunity to go into the details of such a system here. My actual aim for this blog entry is more modest. I merely wanted to point out how easily many of the “friends of capitalism” abandon capitalism when it is profitable for them to do so. While they portray themselves as people of principle and virtue, they show themselves to have no regard for principle when it gets in the way of profit.