Private Property and Pollution

Everyone who is sensitive, cultured and very anxious to do good knows that the free-market economists have sold out to Big Business, and that Big Business, in turn, delights in pillaging and raping the landscape, the seascape, and the atmosphere in its frenetic search for an extra buck. But Professor Dwight Lee provides quite a differentand vastly more sophisticatedpicture.

The problem of environmental pollution, Professor Lee explains, is fundamentally an economic problem, that is, a problem of scarcity. Pollution is a cost of living and producing; reduced production is a cost of cleaner and more attractive environment. There is an unavoidable trade-off between man-made goods and environmental purity. How much of the one are we to sacrifice at the margin to obtain more of the other? What is the optimal combination of production and pollution?

The role of conveying accurate information and efficiently coordinating activities of self-interested individuals is performed splendidly by open markets to the extent that private property prevails. For well-defined and enforced ownership rights in resources make possible mutually beneficial exchange: you can sell only what you own and buy only what is owned by someone else. And uncoerced exchange will be conducted at market-clearing prices, which reflect the worth of goods not only to their owners, but also to others in the market.

Automobiles are private property, as are the gasoline and maintenance services which keep them rolling. People rationally buy and sell such assets. But operating a car creates pollutants which are emptied into the airand air is not privately owned. Small wonder that we accept the gains of automobile transportation but ignore the pollution costs. We weigh the costs of the car, the gas and the maintenance against their benefit, but we do not have to buy the air, so we treat pollution as being free.

In the absence of saleable property rights, there are no markets and no prices to induce and guide efficient use of resources. The costs of pollution aren't fully weighed, and individually rational activity in a defective institutional arrangement results in excessive pollution.

1. Would it be possible to have zero pollution by any means?

2. Why is the optimal amount of pollution likely to vary across societies? Would real per capita income differences have a predictable effect?