Archive for the ‘catallaxy’ Category

Cordato summarizes Austrian environmentalism

October 11th, 2007 No comments

Roy Cordato has cogently summarized his views and the work of his Austrian colleagues here:  Thoughts on what this framework implies for modern issues are welcome.

Below are some favorite excerpts, with emphasis added:

“Austrian economics lacks a formalized, self-conscious theory of environmental economics. But in fact all of the major elements of such a theory already exist and in that sense what is needed is to piece together the relevant aspects of Austrian economics in order to draw out and focus a theory that is already there. … In developing an Austrian theory of environmental economics, very little new theoretical ground will be plowed. But by bringing together Austrian concepts of costs and the praxeological foundations of economics we discover a unique perspective on pollution and the role of property rights in solving environmental problems. Furthermore by placing environmental problems within the context of personal and interpersonal plan formulation, we discover that they are not about the environment per se but about the resolution of human conflict.

The concept of social costs, as typically invoked, completely disembodies and impersonalizes costs.  … The “social cost” approach to environmental economics has led to the “dehumanization” of issues related to the environment [where] [p]ollution or “tragedy of the commons” problems are not problems because of the damage that some people may or may not be inflicting on others, but because they create what amounts to disembodied harms. A problem occurs because some goods are “overproduced” while other goods are “underproduced.” In its more extreme form this has led to a separation of the concepts of costs and harm from human beings completely, substituting notions such as “costs to the environment,” and damage to the ecosystem.”

Economic analysis of the environment that starts from a praxeological perspective shifts the focus from maximizing the social value of output or equating price to marginal social cost, to efficient intra- and inter-personal plan formulation and execution, i.e., the internal consistency between the means that people use and the ends that they desire to achieve. Within this context, pollution problems that are indeed problems create an interpersonal conflict over the use of means and therefore obstruct efficient plan formulation and execution. Pollution is therefore not about harming the environment but about human conflict over the use of physical resources.”

“Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.”

“The focus of the Austrian approach to environmental economics is conflict resolution. The purpose of focusing on issues related to property rights is to describe the source of the conflict and to identify possible ways of resolving it.”

“If a pollution problem exists then its solution must be found in either a clearer definition of property rights to the relevant resources or in the stricter enforcement of rights that already exist. This has been the approach taken to environmental problems by nearly all Austrians who have addressed these kinds of issues (see Mises 1998; Rothbard 1982; Lewin 1982; Cordato 1997). This shifts the perspective on pollution from one of “market failure” where the free market is seen as failing to generate an efficient outcome, to legal failure where the market process is prevented from proceeding efficiently because the necessary institutional framework, clearly defined and enforced property rights, is not in place.

“The starting point for all Austrian welfare economics is the goal seeking individual and the ability of actors to formulate and execute plans within the context of their goals. Furthermore, in all three approaches, social welfare or efficiency problems arise because of interpersonal conflict.  [C]onflict, that similarly cannot be resolved by the market process, gives rise to catallactic inefficiency by preventing useful information from being captured by prices. … A theory of environmental economics and pollution that evolves from problems associated with human conflict then would be a natural implication of each of these welfare standards.”

[I]rresolvable inefficiencies, i.e., inefficiencies that cannot find a solution in the entrepreneurial workings of the market process, arise because of institutional defects associated with the lack of clearly defined or well enforced property rights. In a setting where rights are clearly defined and strictly enforced, plans may conflict but the resolution to that conflict is embedded in the exchange process. … In the absence of clearly defined and strictly enforced property rights this process breaks down and the conflict becomes irresolvable through the market process. Under … Austrian approaches to welfare economics, therefore, the solution to pollution problems, defined as a conflict over the use of resources, is to be found in either clearly defining or more diligently enforcing property rights.”

“[W]e have integrated the Austrian focus on the actor’s means-ends framework, including its emphasis on the subjective nature of value and therefore costs, with the definition of what constitutes an environmental problem. By defining such problems in these terms, both the nature of pollution and the definition of a polluter take on new meaning. Environmental problems are brought to light as striking at the heart of the efficiency problem as typically seen by Austrians, that is, they generate human conflict and disrupt inter- and intra-personal plan formulation and execution.”

“[T]he Austrian approach to solving pollution problems may face implementation problems at the margin, i.e., with certain “tough cases,” defining and enforcing property rights already stands as the fundamental way in which interpersonal conflicts of all kinds are avoided or dealt with. …This is not to suggest that the clear definition of property rights is an easily achievable goal in all situations. It is not. But, while the Austrian approach to solving pollution problems may face implementation problems at the margin, i.e., with certain “tough cases,” defining and enforcing property rights already stands as the fundamental way in which interpersonal conflicts of all kinds are avoided or dealt with. This approach is clearly operational as it has been in operation, to one extent or another, throughout human history. The challenge for Austrians is to explain how we apply the theory in certain tough cases, not to explain, in reality, how it can be applied at all.”

— Okay – this sounds like a productive framework for approaching environmental issues. 

But on tough cases, let’s start off by hating the enviro-nazi watermelons (green on the outside, red on the inside) and by letting them know exactly what we think about them.  Not because that is productive, but because it satisfies other visceral needs.  Besides, we can always rationalize that the best form of progress is stalemate, while various parts of the global environment are trashed.