Free markets are our secret weapon against environmental challenges.
This is not something we hear very often. We are more likely to hear the opposite, as when Greta Thunberg lectures us about “fairy tales of eternal economic growth” and David Attenborough remarks, “Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist.”
That sort of reasoning has a long pedigree, stretching from Thomas Malthus in 1798 to Paul Ehrlich’s The Population Bomb, which, in 1968, predicted that humanity would imminently run out of resources and “hundreds of millions” would starve in the 1970s.
That tradition of reasoning has, fortunately, been completely proven wrong. The good news is that humanity’s environmental impact is declining while we continue to grow economically, achieving longer and more prosperous and fulfilled lives.
The United States reached “peak stuff” in the 1990s. Like other developed countries, we are now consuming less in raw goods, both per capita and in absolute terms, while achieving economic growth. There is declining use of plastics, paper, timber, lead, steel, aluminum, and much more. “Peak oil” has been replaced by concerns about oil prices being too low, as usage declines and we discover more oil fields.
In the case of agriculture, farmers are using less nitrogen, potash, phosphate, water, and land to produce more food than ever before. We now produce enough food to feed 10 billion people, and the United Nations’s Food and Agriculture Organization forecasts that crop yields will increase by 30% in the next 30 years. Millions of acres of land previously used for farming and animal production have been returned to nature.
These days, food waste and obesity are bigger challenges than starvation — a situation totally unimaginable to our forefathers.
That’s not all: The hole in the ozone layer is shrinking, per capita greenhouse emissions are falling, and many endangered species are being replenished. Environmental progress is most striking in richer, more developed countries, which have reduced air pollution, cleaned formerly putrid rivers, and opened green spaces for public enjoyment.
We have become wealthier over the last few hundred years not because we used more, but rather thanks to our ability to find innovative ways to do more with less. The truly unlimited resource is the human mind. Innovators are constantly looking for ways to make cans with less aluminum, to make cars that are more fuel efficient, to make computers that use less energy. We can only address our very real environmental challenges if we acknowledge, understand, and replicate the progress over recent decades.
The confusion about our environmental improvement perhaps stems from its source. We are overcoming environmental challenges, not because of the benevolence of a grand planner, and not because of Greta, but rather because of the dispersed actions and choices of billions of people, each seeking out little improvements, largely motivated by their interest in making a little more profit.
Despite the claims of many modern-day environmentalists, grand plans in the socialist style were rotten for the environment. Countries with the most economic freedom perform 50% better on Yale and Columbia University’s Environmental Performance Index compared to countries that are repressed or mostly unfree. This is because centrally controlled economies do not ensure our limited resources are put to the best possible use. Furthermore, affluence provides the necessary resources and public concern to address environmental challenges.
Economist Thomas Sowell quotes Soviet economists discussing how without prices, enterprises request more raw materials, equipment, and other resources than they require because there is no incentive (provided by prices and profits) to economize. The Soviet economy used an astonishing 1.5 times more materials, 2.1 times more energy, and 2.4 times more metal per unit of national income compared to the U.S. in the same era. The Soviets also broke international agreements by hunting for whales, despite their limited economic use, to keep up with “quotas.” There was also substantial evidence of brown haze and chemical fumes after the fall of the Iron Curtain.
In short, free markets are good for the environment. Anything that hampers the process of innovation, such as unfriendly taxation and red tape that prevents new entrants, is damaging. We can help the environment by removing barriers to technologies such as genetically modified crops, fracking, lab-grown meat, carbon capture and storage, and much more.
This is not to say that there is no role for the state in ensuring positive environmental outcomes, but the goal should be to ensure the market operates effectively to allocate scarce resources — for example, by protecting property rights. Government should avoid disastrous plans to direct businesses.
Matthew Lesh is the head of research at the Adam Smith Institute and a chapter author in the new book Green Market Revolution: How Market Environmentalism Can Protect Nature and Save the World.
