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I was recently in the audience of a young ideologue.  The child said that one of the things that had troubled him about his ideology (anarcho-capitalism) was the lack of environmental protection.  He feared that without some interference in the market, the environment would be damaged significantly.

Then, he learned about a few things that made him think that the free market could protect the environment.  One was the tragedy of the commons.  Here's a summary of the tragedy of the commons for those of you who've not heard of the notion:

The Tragedy Of The Commons
Daniel McFadden, 09.10.01

A Nobel laureate's warning on the Net's shared resources
Immigrants to New England in the 17th century formed villages in which they had privately owned homesteads and gardens, but they also set aside community-owned pastures, called commons, where all of the villagers' livestock could graze. Settlers had an incentive to avoid overuse of their private lands, so they would remain productive in the future. However, this self-interested stewardship of private lands did not extend to the commons. As a result, the commons were overgrazed and degenerated to the point that they were no longer able to support the villagers' cattle. This failure of private incentives to provide adequate maintenance of public resources is known to economists as "the tragedy of the commons."

Contemporary society has a number of current examples of the tragedy of the commons: the depletion of fish stocks in international waters, congestion on urban highways, and the rise of resistant diseases due to careless use of antibiotics.

So, common ownership, or lack of clearly defined private ownership, can cause serious problems.  The solution is private ownership. According to theory, people who own their own land are going to protect the resources on that land for their use.  They're going to protect others from polluting their land or using their resources in order to protect their property value or their future use of those resources for themselves.

The argument is one that I've heard often.  I didn't have a strong reaction to  it yet, not until it got into an example I know a little bit more about than the others: logging.  
You see, I'm from Oregon, world capital of logging (or at least some like to pretend that).  Ever seen or read Sometimes a Great Notion?  Yeah, Oregon.  Every generation of my family that's been here has been involved in forestry or wood products industries.  My great grandfather was a longshoreman who supervised the loading of lumber onto ships in Coos Bay.  My grandfather, uncle, father, and sister all at times worked in the mills.  You can't say something stupid about forestry to me.

The argument was that if forests were privately owned, the owners would log sustainably, or at least replant the lands for future harvest.  After all, historically, like overgrazing on publicly owned ranges, most logging has taken place on federal and state lands (which constitute over half of the land area of Oregon).  However, because of increasing environmental regulations among other things, most logging in the state in recent years has taken place on privately owned lands.  It hasn't resulted in greater environmental protection.

You can see how this would work in theory.  And benevolent sustainable loggers who cared for the land and the trees would do it.  But even in theory it doesn't quite work, and in reality it certainly doesn't, because for one, logging companies aren't even logging companies anymore.  Once the trees are gone, they have no incentive to replant.  They can find another way to make money.  Logging companies are now real estate companies, and they are generally owned by finance firms.

Timber investment management organizations and real estate investment trusts, which have expanded like wildfire, have been hit by the recession along with others in the forest products industry. They wield a fundamental advantage: They don't pay corporate taxes, which range up to 35 percent. Instead, their shareholders or investors pay capital gains taxes of 15 percent based on dividends.

This month, Weyerhaeuser's board of directors approved the company's transition to a real estate investment trust for those reasons, says Bruce Amundson, spokesman for the Federal Way, Wash.-based company.

Real estate companies and investment firms have little incentive to log sustainably or replant forests once cut.  They are not forestry firms, after all.  Rather, often as not they sell the land, once the trees are cut, for development.  Developing the land is much more profitable.

In the past, traditional companies owned land to supply timber to their mills. They invested in research to find more efficient ways to grow trees, their primary business.

Investment managers have an objective to maximize returns for their investors. And as the timber industry grows tougher, selling land for development has become an opportunity for all forest owners. In industry talk, it's called "higher and better use."

A growing gap in the economics of timber versus housing development ramps up the pressure. The going price for property at timber value in Oregon is $2,000 to $4,000 an acre. If it's sold as a home site, it's worth $30,000 an acre.

"There's a greater pressure to maximize returns and to find alternative revenue," says Ray Wilkinson, executive director of Oregon Forest Industries Council, a trade group that represents the state's largest private landowners. "The new ownership structure has investor expectations that are different from traditional forest products companies."

What's more, the article I've quoted cites that forestry land parcels in recent years have changed hands an average of every two years, but it takes at least 30-50 years to regrow a forest.  Where's the incentive?

Theory simply doesn't hold up to the facts in the real world.  Private ownership does not protect forest lands better than public ownership.  Investors are not by nature loggers, they don't have much incentive to stay in the logging business, and so to log sustainably or to replant forests.  They will find a different way to make money once the trees are gone.

Now, there could be regulatory solutions to fixing the use of public and private forest lands in order to protect them for sustainable logging, but that is not a free market solution.  At best, leaving it to the free market would leave us with an amount of forests and trees which would fit the market's demand, an amount apparently far smaller than we started with, and probably smaller than we have now by a lot as well.  But the environmental demand for forests is not the same as the market's, and to concede even that the free market would shift the amount of trees and forest land to meet the sustainable market demand is a concession that private ownership doesn't protect the environment, it simply meets market demand.

*My quotes in the body I haven't yet provided links for, but they're from one great article from the Oregonian When the land's worth more than the trees

Originally posted to James Allen on Thu Feb 17, 2011 at 12:48 PM PST.

Also republished by Anti-Capitalist Chat and Community Spotlight.

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