Government and sustainability

One of my first posts here discussed Austrian macro and specifically Roger Garrison's Austrian model, in which government manipulations of the interest rate push the economy beyond its sustainable or economical production possibilities frontier, or as Arnold Kling might say, government policy deranges sustainable patterns of specialization and trade.

After my post last night on libertarian strategy, I had a long and fruitful discussion with my wife on the subject and realized that one way to describe the effect government policies can have when they externalize some costs (such as using force to maintain a supply of oil) and socialize others (such as building and maintaining toll-free roads) is just the same: these policies push our society beyond its otherwise sustainable PPF. These policies create more inefficiency by creating more externalities.

Libertarians are typically hostile towards environmentalists because environmentalists are typically hostile towards private property and free enterprise (that hostility ranging from a Gore-esque predilection for endless regulation all the way to an outright hostility towards human civilization). I think reframing the problem as I have, as one of the government permitting us to externalize the costs our actions have, reveals more common ground between the liberty and green movements. The issue isn't that markets are inherently destructive; the issue is that corporate interests have pushed for government policies that externalize the environmental costs that might otherwise make their industry uneconomical.

The typical libertarian answer to environmental concerns is some variation on the tragedy of the commons (TotC), and while I think that's a perfectly valid response to certain green concerns (deforestation, erosion), the larger green issue of environmental degradation caused by human action (to include climate change, air pollution, water pollution, etc.) is better addressed by my framework from both green and liberty perspectives.

From a green perspective, my framework includes efficiency and sustainability concerns more effectively than the typical TotC framing. Government allows us to behave wastefully because the true cost of acquiring more of what we are wasting is not factored into the price we are paying. The simplest example is energy. We use an incredible amount of oil, because we do not bear the true cost of that oil. Those costs are borne by those who groan under tyrants we prop up, those killed and maimed by military interventions to protect our oil supply, and those whose homes and livelihoods are destroyed by oil exploration and drilling conducted under laws that explicitly favor oil interests (BP disaster, anyone?). Eliminating these externalizations of cost would force these factors to be priced directly into the price of oil, driving that price up and thus, obviously, driving consumption down, all through market means without any government interference.

From a liberty perspective, the externalization framework covers far, far more government policies than the TotC framework. TotC covers government laws against owning certain types of property. The externalization framework includes foreign policy, war, infrastructure policy, the tax code, liability caps, and so on ad infinitum. Much more of what the government does is indicted in our ongoing environmental difficulties by the externalization framework, and a much broader swath of those difficulties is addressed by the same framework.

I'm not saying TotC is wrong, I am just saying it is incomplete. Let's look more broadly at all the ways the government interferes in market efficiency and think carefully on how they impact the environment.