Property and Environment: Thoughts on an Evolving Relationship

TLDR: In this article, the authors argue that private property is a necessary but insufficient tool for environmental regulation, and that private ownership can be used for environmental protection in a market economy, which is not the case in many countries.

Abstract: Private property is a necessary but insufficient tool for environmental regulation. Why is it necessary? There are several reasons. First, it settles who controls a resource, making rational management possible. While this may sound trivial, countries with weak or fragmented systems of ownership--or where enforcement of law is tainted by corruption--find it impossible even to begin to preserve resources or prevent pollution. (1) This is especially the case when different individuals make conflicting claims to the same plot of land. Second, private property owners have the incentive to preserve the capital value of their land. They can reap where they (or nature) have sown. They postpone harvesting their property (by cutting a forest, for example) until a propitious time. This choice is a cousin to environmental protection. Private ownership involves control of appetite and rational planning. It similarly solves the problem of open access to a resource, which leads to destruction, because all may have an incentive to reap but none have any incentive to sow--or even to defer use. (2) Private property owners can also be effectively regulated. Regulators can easily locate owners of land and many other natural resources. To the extent that the resource is valuable or the owner competes in a market, regulators have a generally effective lever for enforcement of laws. This obvious point is not unimportant; clear expectations of effective enforcement are an aspect of the rule of law. Reducing enforcement costs enhances the efficiency of regulations in reaching public goals. Private property generally encourages innovation by simplifying decision-making and safeguarding the fruits of success. In some instances, it can similarly encourage innovation in achieving environmental goals by allowing an owner to capture the economic benefit of the innovation. Regulatory systems that create such benefits harness private initiative for public ends, but are themselves complex public creations that require enormous sophistication in regulatory agencies. (3) I will discuss this further below. Consequently, private property may be necessary for environmental protection in a market economy. (4) Nearly everyone, however, recognizes that property rights alone are insufficient. While an owner may manage her land to protect the value of some economic service or product it provides her, she may not take steps to protect its ecological health, at least in spheres unrelated to economic return. A farmer may assiduously cultivate a field for corn, but remain indifferent to the consequences of destroying wildlife habitat. Moreover, the fertilizer spread on the fields and the drainage system for rainwater may weaken the natural health of nearby bodies of water. (5) Owners might also rationally conclude that exhausting the entire value of a resource immediately is more valuable to them than preserving it, even if this eliminates options for future users. (6) They make choices that impose costs on others without taking those costs into account, which is the fundamental economic problem of externalities. Environmental law starts from the recognition that: 1) environmental benefits are public goods, so individual owners do not have a strong incentive to produce them, and 2) legal institutions are needed to make owners take account of the costs that they might impose on others. A near consensus on these points seems to exist, both in the legal academy and on this panel, although with a great deal of pulling at the margins. Professor Ely distinguishes between pollution control regulations, which address harms to the public, and other regulations (such as those preventing the destruction of privately-owned wetlands or woodlands) that seemingly try to gain some public environmental benefit. He argues that the former is unobjectionable because no one has the right to use his property to harm another, a familiar principle drawn from the common law of nuisance. …