TT's Lost in Tokyo — by TokyoTom

1. I noted in November 2007 Gene Callahan’s interesting post, entitled “How a Free Society Could Solve Global Warming“, in the October 2007 issue of The Freeman: Ideas on Liberty, at the website of The Foundation for Economic Education (FEE). To reprise briefly, one of Callahan`s chief arguments is that public moral pressure is a perfectly appropriate way by which concerned citizens, acting in the market of public opinion, can influence behavior that generates externalities:

Even when economic transactions generate so-called negative externalities (activities that shower harms on third parties), I still contend that the free market is the best institution for identifying and reducing the problems.

One way negative externalities can be addressed without turning to state coercion is public censure of individuals or groups widely perceived to be flouting core moral principles or trampling the common good, even if their actions are not technically illegal. Large, private companies and prominent, wealthy individuals are generally quite sensitive to public pressure campaigns.

2. Sheldon Richman (editor of The Freeman and TheFreemanOnline.org, and author of Tethered Citizens) has now joined Callahan in offering to libertarians the argument that coordinated, mass moral suasion is a viable, efficacious alternative to the use of the state to address global warming. I excerpt below portions of Sheldon’s argument in “Fixing Global Warming for Fun If Not Profit; Free-rider problem overcome” (June 04, 2010)(emphasis added):

[Some] free-market advocates … in effect throw up their arms and say there is no way voluntary efforts could address catastrophic global warming. It’s the standard case regarding public goods: Free riders and prisoner’s dilemmas would thwart voluntary remedial efforts. Each individual would rationally calculate that he can let others make the sacrifices necessary to bringing about the improvement while continuing to do what he has been doing. That way he’ll get the benefits for free. The problem is that if everyone, or most everyone, follows this strategy the public good is never produced.

To be specific, if we stipulate that catastrophic (but reversible) global warming is happening, why would anyone voluntarily change his behavior to mitigate it? One person’s effort would make no difference anyway, so why be the chump? Let the others do it.

We’re doomed.

Unless there’s something wrong with the public-goods argument, as I and others think there is. (See, for example, Gene Callahan’s Freeman article “How a Free Society Could Solve Global Warming.”)

What About Government Failure?

It’s really odd to hear a free-market advocate resign himself to a government solution to the supposed global-warming “market failure.” In every other area where government is proffered as the fix for market failure, free-market advocates immediately fire back that government is itself riddled with free-rider problems. There’s a growing if belated literature on government failure. How can government be the answer to a public-goods problem when it suffers the same defect that allegedly plagues the thing to which it is supposed to be superior? How can government solve the public-goods problem when it itself is a public “good.” (I mean that strictly in the technical sense, of course.)

All the goods that government in theory is said to produce are public in nature; they would benefit most everyone. But that means the benefits would redound not only to those who contribute to their production but also to those who don’t, the free riders. Therefore, special interests should never fail to trump the general interest, since smaller groups are less affected by the free-rider problem than larger groups.

Income-tax rate cuts, for example, would benefit everyone, even people who did nothing to help achieve them, say, by contributing money to taxpayer organizations. In theory, then, income-tax cuts should be virtually impossible to achieve.

But income-tax cuts have been enacted in the past. In fact, far bigger things that should have been fatally plagued by the free-rider problem have happened, such as revolutions. They should have been impossible according to the theory. Everyone should have been hanging back waiting for everyone else to overthrow the oppressor. It’s a great way to gain freedom without taking any risks—except if everyone thought that way, no revolution would have occurred. But revolutions have occurred.

So in the political realm the free-rider problem can be overcome. We know it. It’s in the history books. But if it can be overcome in that realm, why not in others? It seems hasty to say it can’t happen. In fact, it has, for example in the effort to end the slave trade, which required a change in public sentiment. So global warming might be amenable to purely voluntary remedies, perhaps not via the traditional for-profit business plan but rather through a voluntary social movement that promoted an ethic encouraging and pressuring people and firms to cease their destructive activities.

The key is ideology, the set of explicit or implicit beliefs that motivates people to act one way or another in public matters even though individually they may reap minimal if any concrete benefits from their own marginal efforts. People are capable of acting to achieve things other than personal monetary profits. Homo economicus is an inadequate picture of the human race, a gross and misleading oversimplification.

“Ideology therefore becomes the wild card that accounts for public spirited mass movements that overcome the free-rider problem…, for ideology can motivate people to do more to effect social change than the material rewards to each individual would justify,” Jeffrey Rogers Hummel wrote (pdf) in another context.

Obviously there’s much more to say on the matter, but for now be aware that serious global warming would be no reason to abandon economic (or other) freedom. We can have our scientific objectivity and our liberty too.

3. In response, let me make the following observations:

3.1  Callahan and Richman want MORE moral outrage and arm-twisting from the enviros that Austrians and other lovers of so-called “free markets” seem to love to hate? Sure, I can see all the libertarians and right-wingers signing up in droves, to lead enviro-fascists in a holy war against fossil fuels!

But even if were libertarians WERE to wish to lead such a voluntary movement, how likely is it, given the long hostility that libertarians have expressed towards enviros, that enviros would put any credence in what such libertarians have to say?

3.2  Given what we know (from Elinor Ostrom’s research, etc.) regarding the conditions for voluntary coordinated action, even though it is very clear that we see attempts at moral suasion at play in local, state, federal and international climate-change-directed regulatory efforts, it seems very unlikely that moral suasion alone can be expected to prove efficacious at an international or global scale. Far too many communities, nations and economic interests are involved.

3.3  Moral pressure via an ideology is likely to be blunt.  As Silas Barta noted on a comment thread,

public boycott/suasion campaigns will only give a very noisy signal to corporations of how damaging their activities are to the environment, and it will be skewed toward more visible ones.

You’ve seen environmentalists (like the “Green Lantern” on Slate) try to calculate which activity is “truly” more damaging to the environment.  It manifests in, for example, the debates over whether shipping organic food a long distance is worse than shipping factory farm food over a short distance.

The fact is, even for very basic calculations, it gets complicated, and environmentalists will almost certainly have biased calculations and use them for non-climate purposes when wielding their power — that’s what they already do.

3.4  I think that Callahan and Richman are very right that societies can and do address public goods/commons without using formal legal mechanisms. In this, both echo Nobel-Prizewinner commons-expert Elinor Ostrom, This is a point that Bruce Yandle (a “free-market environmentalist” who is dean emeritus and Distinguished Professor of Economics Emeritus at Clemson University, Distinguished Adjunct Professor of Economics at the Mercatus Center, a faculty member with George Mason University’s Capitol Hill Campus, and a Senior Fellow at PERC – the Property and Environment Research Center) made earlier and that I noted:

People can build institutions that take the edge off frantic commons behavior. People have unwritten and written constitutions that help to establish social order. People can and do accumulate wealth. People communicate, invent lines of kinship, and develop customs, traditions, and rules of law that limit anti-social behavior. People define, enforce, and trade property rights. People can and do avoid the tragedy of the commons. Indeed, instead of living with tragedies, people triumph over the commons. But the triumphs are never perfect or complete. There is always another commons to manage.

I wish to put forward the notion that encounters with the commons form the fundamental stimulus that yields, instead of tragedy, what we today call civilization. The ascent of man from a primitive existence with no wealth accumulation to life as we know it is fundamentally a story about triumph over, not tragedy of, the commons. Let me explain.

Our very existence as human beings is defined by evolved institutions for avoiding tragedies. We have names, which serve the economic purpose of identifying us as parties to contracts and agreements. Those names, first and last, form webs of communication that reduce the social cost of assigning responsibilities and liabilities. They enhance truth-telling and promise-keeping; they raise the cost of engaging in anti-social behavior. They limit a tragedy of the commons.

We have abstract symbols of ownership—deeds, titles, and contracts—that define spheres of autonomous behavior. We speak of our homes, our cars, our clothes, our families, and our pasture. Even language has evolved to provide a possessive form that accommodates triumph over the commons.

We write and observe contracts, wills, and marriage agreements that define relationships, identify turf, and conserve wealth. We accept evolved bodies of law and law-enforcement activities to assure the integrity of our agreements. We carry papers that enable us to acquire property, extinguish debt, cross borders, drive vehicles, and communicate effectively with strangers. And we have locks, keys, walls, fences, brands, and encryption devices, all this in an effort to avoid a tragedy of the commons.

Property rights define who we are and what we have. Property rights guard others from our unwanted advances and prevent us from contributing to a tragedy of their commons.

Avoiding a tragedy of the commons is costly. The benefits must be large. …

The tragedy is found where for reasons having to do with power, intolerance, or cost, human beings have not yet defined private property rights. Or, as we shall see, where evolving property rights encouraged by man the institution builder have been destroyed. What was once a triumph can become a tragedy. …

[At] very low levels of income, what might be called stage one, human beings cannot afford to do much about property-rights enforcement and the commons. They live in a world where custom and tradition sustain them. As incomes rise and losses from the commons expand, stage two is entered. Fences go up, and rules are set for protecting the commons. Finally, in stage three, markets evolve along with rules of law that define spheres of private and public action. Private rights replace public control, and the triumph replaces the tragedy of the commons.

3.5  What about statist corporations? What Callahan, Richman and Yandle all miss is that the current status quo is very much NOT a libertarian one, but one in there are powerful vested interests that profit from using government to shift risks to the rest of society. This is very visible in our financial crisis, Wall Street profiteering and bailouts, the elites running public companies, fights over publicly-controlled natural resources (such as oil) and the messes mineral extraction activities leave behind, and in the damages and risks created by the use of fossil fuels.

Very noticeably, all of these commenters are silent as to how likely any of the people who profit from the use of government – and who are both relatively faceless and face incentives peculiar to corporate ownership, management or employment (and not simply the same incentives that face our personal and extended local, state, national or global communities) – are going to worry very much about public opinion, as opposed to continuing to work actively to mold and assuage it.