Pope Underestimates Power of the Market

Pope Francis’ new encyclical, “Laudato Si,” advocates a new “ecological spirituality.” Unfortunately, this challenging call is diminished by the document’s tendency to devolve into leftish policy positions. The encyclical seriously underestimates the power of market forces to promote environmental ends.

Drawing environmental lines requires balancing such interests as ecology, liberty and prosperity. One cannot merely assume that the correct outcome in every case is more of the first.

Indeed, the pontiff’s own goals conflict. He speaks movingly of the dignity of work and its importance for the poor. But the more expensive and extensive the government controls, the fewer and less remunerative the jobs.

Perhaps most disappointing is how the pope seemingly views capitalism, and especially property rights, as the enemy of a better, cleaner world. Yet most environmental problems reflect the absence of markets and property rights.

The encyclical rightly insists on “the obligation of those who cause pollution to assume its costs.” The best way to achieve this end is to either create or mimic markets and property rights.

For instance, public control rarely ends well. Garrett Hardin famously wrote about the “tragedy of the commons,” in which land open to everyone typically is misused by everyone. Federal range and forest land is badly managed, not because government officials are malign, but because the incentives they face are perverse.

In contrast, a private owner bears both costs and benefits, and suffers when he misuses a resource. The owner may make a mistake, but his power to do harm is sharply limited.

Pollution taxes and tradeable permits attempt to apply market forces to the great common areas, such as air and water. Yet “Laudato Si” launches a perplexing attack on the use of emission credits to limit use of hydro-carbons. Properly designed, they create an incentive for those who can control emissions at the least cost to control them the most. This serves the common good far more than imposing greater expense on everyone.

Although the Pope acknowledges “that honest debate must be encouraged among experts, while respecting divergent views,” “Laudato Si” ignores the most sophisticated critiques of climate alarmists. For instance, many critics dispute the likelihood of catastrophic change, and the best means to deal with the likely impact of any temperature increases.

For years, models failed to match climatic behavior. Peer-reviewed research increasingly suggests that warming will be modest. Moreover, any prediction today as to conditions decades in the future is a wild guess.

These argue in favor of addressing specific problems rather than imposing arbitrary, draconian, and costly cuts in energy consumption. Economic analysis confirms that adaptation can achieve similar environmental ends at less expense.

The encyclical offers no evidence for its sharp attack on consumption in developed countries, which of course produce more goods than they use. In fact, unowned resources are vulnerable to abuse in any society. Resources priced too cheaply — usually for political reasons — are squandered wherever they are located.

Where markets operate, resource depletion is largely a myth. There now is more recoverable oil than ever. Increasing prices tell consumers to use less, producers to operate more efficiently, suppliers to find new sources, and everyone to seek substitutes.

Markets typically are better than governments in protecting “future generations.” An individual landowner who misuses his property and squanders the resources loses value of his land. By contrast, the typical political time horizon is until the next election.

Economic progress eases the impact of environmental problems on the poor. It also provides resources to enhance the environment, efficiencies to produce more using less, and technologies to better preserve ecological values. New technologies and processes may reduce or counter greenhouse gas emissions.

Of course, markets are not perfect or enough. Government must create a legal and policy framework. Even more important is the moral infrastructure, about which the church should engage the rest of us. “Laudato Si” is part of that dialogue.

Doug Bandow is a senior fellow at the Cato Institute and former special assistant to President Ronald Reagan. He is the author of “Beyond Good Intentions: A Biblical View of Politics.”