Enviros Embrace “Free Market Environmentalism”!

We don’t need no stinkin’ environmental regulations to save the earth – all we need are well functioning property rights for environmental resources and common law courts to protect that property against trespass. Pollution is simply a neighbor’s garbage dumped in your backyard without permission. If we simply recognize and enforce property rights for nature, the need for most environmental regulation goes away.

That’s the libertarian pitch anyway, and it goes by the moniker “Free Market Environmentalism,” or “FME” to its acolytes.  FME was given a firm theoretical foundation by Ronald Coase, embellished and blessed by libertarian economist Murray Rothbard, given academic life by the Political Economy Research Center and the Foundation for Research on Economics and the Environment, popularized in Washington by the Competitive Enterprise Institute, and even pitched by yours truly to the Board of Trustees of the Natural Resources Defense Council about nine years ago.

Alas, there has never been much evidence to suggest that libertarians were making much headway with these arguments and I have come to believe that they have less promise than I had once imagined. But what do you know? FME is now all the rage amongst environmentalists who have discovered that suing polluters for tresspass is easier than passing satisfactory laws against the same.

Think I’m pulling your leg? Read this from Darren Samuelsohn in today’s issue of Greenwire (subscription required):

Efforts to force a stronger U.S. global warming policy through the courtroom came under sharp scrutiny yesterday as eight states, New York City and conservation groups pressed for reduced greenhouse gas emissions from the nation’s five largest electric utilities.

A three-judge panel of the 2nd U.S. Circuit Court of Appeals pressed plaintiffs over why their case was necessary when other avenues exist for addressing global warming – from Capitol Hill to state courts. “My basic question is should we be invoking this doctrine in this very unusual case when there are many other remedies available?” asked Judge Sonia Sotomayor, the lone Democratic appointee on the 2nd Circuit’s panel.

Connecticut Attorney General Richard Blumenthal (D) replied that the utilities’ emissions violate federal common law by harming residents in multiple states. The utilities’ emissions are creating a public nuisance and must be reduced to counteract a variety of global warming effects, including California’s diminished snow pack and more intense heat waves.

Addressing Sotomayor’s question, Blumenthal said his case is not unusual compared with other seminal common law challenges upheld by the Supreme Court, including suits over Illinois sewer water running into Lake Michigan and air pollution from two Tennessee smelters.

“We’re dealing with a developing area of science where federal common law provides a remedy under the doctrines that exist,” Blumenthal said.

Plaintiffs singled out the five companies and their subsidiaries for litigation almost two years ago because they are the largest emitters of carbon dioxide from the power sector in the United States.

… The electric utilities’ defense covered some of the same ground offered successfully last summer before a federal district court, which dismissed the case on the grounds it raised political questions better left to the other two government branches. Both current and former sessions of Congress and presidents have not adopted such an aggressive climate change policy, argued Washington-based industry attorney Joseph Guerra.

Guerra also insisted federal common law has not been applied to an issue of such sweeping scale. Of the Supreme Court precedents Blumenthal cited, Guerra replied, “None of those cases could have possibly affected the entire U.S. economy.”

Pushing another line of the industry’s defense, Guerra cautioned the litigation would be a precursor to more global-warming nuisance claims – with no end in sight as plaintiffs tick through other sources of greenhouse gas emissions.

But Sotomayor, who asked the bulk of the questions during the hearing, took issue with the line of industry defense. “That’s the nature of every tort action,” she told the utility attorney.

Sotomayor also said she had a problem with dismissing the case just because potential remedies were so large.

OK, I’ll grant that enviros are going the common law route less out of conviction than out of necessity.  But so what?  What was once a fringe argument has now migrated into the political and legal mainstream with a vengeance.  Good news for libertarians, right?

Well, if libertarians and fellow-travelling conservatives are popping champagne bottles, it has escaped my attention.  FME blogs are dead silent. Conservatives are taking the corporate line that common law is an inappropriate venue for all of this with no dissenters that I can tell.  In short, FME’ers either aren’t paying attention or aren’t willing to back their doctrines when they are employed by the Left.

Sure, one can argue that the plaintiffs don’t have proper standing, that there is really no nuisance here to begin with, that the tort system is so messed up that employing it in such cases is problematic, etc.  But nonetheless, this is a growing trend and libertarians seem surprisingly ambivalent about it.

A Case for a Different Libertarian Party

All of this blogtalk about which major party is likely to be more receptive to libertarian policy positions, I suggest, is a waste of time unless the winning candidate of either party is dependent on the votes of libertarians.

Increased outrage about the state of American politics and the prospect for a larger number of close elections increases the potential effectiveness of a different libertarian party – one that sometimes endorses one or the other major party candidate but does not run a party candidate for that position.

The Libertarian Party’s efforts to promote their policy positions by running Libertarian candidates is counter-productive when they reduce the vote for their favored major party candidates. A disciplined group that is prepared to endorse one or the other major party candidate in a close election, however, can have a substantial effect on the issue positions of both major party candidates. The following conditions must be met to achieve this effectiveness:

  1. The party cannot run a separate candidate.
  2. The size of the party must be larger than the expected vote difference between the major party candidates.
  3. After the major party candidates are selected, the party leadership must have the opportunity to bargain with both major party candidates on the issue positions of highest priority for the party.
  4. The party, as much as possible, must act in concert to support the major party candidate who is chosen by the members of the party in that district.

There is no reason for this libertarian party to be active in any district for which the party does not meet all four of the above conditions. (For most libertarians, the most difficult of these conditions to meet, I suspect, is condition 4.) In addition, the party should not emphasize the same issues in every district, because the choice of these issues should depend on those for which the major party candidates are willing to bargain.

This is a strategy to increase the approval of libertarian policy positions rather than the usually counter-productive effort to increase the number of votes for Libertarian candidates. Maybe it is better to term the organization that I have described as a libertarian political action group, not a libertarian party.

Marriage Amendment Failure

Supporters of the Marriage Protection Amendment say that even though it failed in the Senate on Wednesday, they are pleased that it did better than two years earlier. But let’s do the math. In 2004 supporters lost a cloture vote 48-50, with two opponents not voting. So their strength on moving the amendment to a floor vote was 48-52. This year the vote was 49-48, far short of the 60 needed to invoke cloture or the 67 for a constitutional amendment. If all senators had voted, the vote would likely have been 50-50. So maybe that’s a pickup of two votes for amendment supporters.

But the Republicans picked up four Senate seats in the 2004 election. So relative to the number of Republicans in the Senate, support for the amendment actually slipped by two votes. Supporters picked up no Democrats, and they lost two Republicans. Judiciary Committee chairman Arlen Specter voted for cloture in 2004, though he would have voted against the amendment itself; this year he voted against cloture and quoted two Cato publications in his Senate speech. Judd Gregg joined his New Hampshire colleague John Sununu in voting for federalism over centralism after realizing that the 2003 Massachusetts court ruling for marriage equality in that state is not being replicated nationwide. Given that younger voters are much more supportive of same-sex marriage than older voters, it seems unlikely that support for an amendment will grow in future years.

Reagan in Leipzig

On a trip to East Germany last week I talked to a politician who had been involved in the 1989 Leipzig protests that led to the opening of the Berlin Wall. I asked him, “When Reagan said ‘Mr. Gorbachev, tear down this wall!’ in 1987, did you know that?” He said, yes, not from East German TV but from West German TV, which they could watch. And what did you think, I asked. “We thought it was good, but we thought it was impossible.” And yet just two years later, “peace prayers” in Leipzig’s Nikolaikirche turned into protests for liberalization and open borders. The Leipzig politician told me, “As it says in the Bible, we walked seven times around the inner city, and the wall came down.”

Then I went to a museum exhibit in Leipzig on the history of the German Democratic Republic. It was very impressive, with a large collection of posters, letters, newspapers, video, and more. Alas, it was all in German, so I had only a dim understanding of what it all said. I did get the impression that it wasn’t a balanced presentation of communism such as might be found in a Western museum; these curators knew that communism had been a nightmare, and they were glad to be out of it. As it happened, the only English words in the entire exhibit came in the collection of audio excerpts that greeted visitors in the entry foyer. And they were a familiar voice proclaiming “Mr. Gorbachev, open this gate!”

In Higher Education, Status Quo Is Status Quo

Yesterday, a House subcommittee working on the higher education portion of the 2007 federal budget approved a bill that would add $100 to the maximum Pell grant, bringing the ceiling to $4,150, and save numerous programs President Bush had slated for elimination. According to Inside Higher Ed, committee Democrats were on the warpath from the start, demanding more support for the nation’s college students:

After a few minutes of civility, House Democrats went on the attack, questioning their Republican counterparts’ commitment to helping working-class Americans afford college education.

“Here’s the story as I see it: Families spend more to send their children to college; their costs are not frozen,” said Rep. David Obey (D-Wis.)… “We’re not going to effectively deal with this by keeping the status quo. And this bill is worse than that. People who are supposed to be the focus wind up getting squeezed.”

Obey was right—keeping the status quo is not going to ground higher education’s skyrocketing price. But the problem is that the federal government is putting too much money into student aid, not too little! The political cycle that drives tuition is actually easy to understand: Some people complain that tuition is too high and demand that politicians make college “affordable.” Politicians, to get votes, provide student aid. Then schools, suddenly able to get more money, raise tuition. But wait, that makes college “unaffordable” again! And so it goes…

The data bear out that increases in student aid have driven tuition up. Indeed, aid has actually been increasing faster than tuition over the last ten years. According to College Board figures, between the 1995-96 and 2005-06 academic years, the average, inflation-adjusted, enrollment-weighted, cost of tuition, fees, room, and board rose 31 percent at private, four-year institutions, and 41 percent at public, four-year schools. Meanwhile, inflation-adjusted aid per full-time equivalent student – most of which came from the federal government—rose 61 percent, from $6,261 to $10,119! Tuition ballooned because politicians made sure it could… and then some!

To truly change the status quo, Congress will have to do the exact opposite of what Rep. Obey wants. It will have to cut student aid, not increase it. Unfortunately, that’s not what gets votes.

Jury Nullification and Perjury

Here’s an interesting personal account on the perils of jury nullification:

Julian Sanchez was called to jury duty in a drug case.

He was forced to decide whether to answer honestly when asked if he could convict a nonviolent drug offender (in which case he’d promptly be tossed from the jury), or to risk perjurying himself so he could nullify an immoral law once in deliberation.

Jury nullification is a right – perhaps even an obligation. Unfortunately, we’ve let prosecutors and courts effectively make it a crime.

We need a test case to move this issue before the Supreme Court. Prosecutors shouldn’t be allowed to hold the threat of perjury over potential nullifiers during voir dire.

Topics:

Holt & HSAs: Perhaps Fruitful after All

Matthew Holt writes:

The argument I want to have is a theoretical one about what would happen if we had essentially a completely personalized account-based system, as he advocates in his Large HSA proposal.

Holt raises important questions about what would happen under a system of large HSAs, where workers would get a large but limited tax break for cash that they (and/or their employer) deposit in an HSA – tax-free cash that workers could use for health savings, spending, or insurance as they wish.

Holt’s first concern is that “a significant number of people would take the money and buy no or minimal insurance coverage.” That some would choose to drop health insurance is certainly a possibility. I have two responses. First, that is already an option. People can and do choose to “go bare” and use their money for savings or other spending. The large HSA approach could marginally increase the number of people who do that, but only if the newly “bare” actually put money aside for future medical expenses. (Actually, large HSAs could even encourage today’s non-saving uninsured to start saving for their health expenses.) That brings me to my second response. If large HSAs do increase the number of people who “go bare,” the only people they would add to the ranks of the uninsured would be savers. As those “health savers” build up large balances in their large HSAs, it will occur to them, “Gee, one serious illness could wipe out all the money I’ve got stashed in my HSA.” How do people typically protect their assets from such unforseen losses? Insurance. So there’s a built-in incentive for health savers to purchase insurance.

Holt’s second concern goes like this: Were we to allow people to take all of their health benefits in the form of a cash contribution into a large HSA, and let them choose how to allocate those funds (among savings, spending, and insurance), that would begin a process known as “risk segmentation.” As I describe in my paper, some people would “go bare,” many would purchase less comprehensive health coverage, and many would migrate to the individual insurance market, where their premiums (typically) would be based on their individual health risk. What concerns Holt is that sicker people would have to pay more for health insurance, to the point where many sick people could not afford it.

My response is not that sick people should not be subsidized.  (I would prefer that they not be subsidized by government, but let’s assume that all options are open.) It is that sick people should not be subsidized through the vehicle of “insurance.” Attempting to deliver such subsidies through “insurance” destroys much of the good that insurance markets accomplish. Insurance premiums cease to deliver price signals about the costs of bad behaviors (e.g., smoking, obesity, waiting until you’re sick before you buy insurance). Many consumers drop insurance rather than pay the higher-than-necessary premiums, which increases the number of uninsured and tempts government to force people to buy insurance. Most importantly, when patients are spending someone else’s money, we lose a very important ally in the fight to curb wasteful medical expenditures: the patient. Instead of nagging providers about delivering value for the dollar, patients – especially the high-cost ones – line up with providers on the side of more spending. 

My preference is to let insurance markets do all they can do to improve efficiency, particularly by encouraging patients to pay directly more often. Some people will still require assistance, though with a more efficient health care sector their numbers should be smaller. We should subsidize those who remain directly, with cash.

I’m not sure how much of this Holt will find persuasive. Given that we agree that providers are riding the gravy train, I would think that having millions of patients nagging providers about value would hold some appeal.

He and I agree on something else. HSA supporters too often ignore these issues.