Earth-Day'ers: Capitalism Is the Real Deal For the Environment
It is the only system under which it is even remotely possible to move the needle on climate change and other environmental concerns without violating individual rights.
Due to a family emergency, writing will take a backseat for a little while. Both Maria and I are ok, but demands on my time make it hard to focus on new material at the moment. However, with Earth Day just behind us—and the government continuing its anti human flourishing policies as I cross-posted about last week—I thought it timely to re-publish a chapter from the book about how to think morally Right or Wrong, not politically left or right, about the environment. Hopefully a good refresher for long-time subscribers, and food for thought for those who have recently joined. Enjoy!
Environmental issues, especially pertaining to climate change and global warming, are continually in the news. The degree of impact of human activity on global warming is not clear from the available science, nor is the answer to the question of whether global warming is on net beneficial or harmful. For example, an increase in global temperatures due to higher atmospheric CO2 levels will most likely increase agricultural productivity and diversity at less temperate latitudes, while potentially reducing productivity in arid areas.
Advocates of immediate action on climate change claim that we’re approaching an irreversible tipping point, but the facts are inconclusive. What is conclusive is that a century and a half of using economical, carbon-based energy from oil, gas, and coal—the main sources of human generated CO2 emissions—have brought mankind enormous benefits. If human flourishing is the standard, the benefits vastly outweigh the possible but factually inconclusive dangers of human induced global warming.
However, for the sake of argument, let’s assume that those concerned with climate change are right. Let’s assume that human activity does have a large impact due to increasing CO2 levels primarily from the burning of fossil fuels and that the impact is seriously harmful. How do we address the threat? What actions do we take to reverse the trend?
By now you know that for a solution to a problem to be morally Right, it must not violate our individual rights. Rights-violating domestic or international governmental action in the name of saving the planet is not an option, regardless of how important the cause. Government-imposed carbon taxes, vehicle emission standards, wind and solar subsidies, oil and gas regulations, bans on nuclear development, and other statist initiatives are off limits.
So what are we to do instead? We encourage the development of a social system that simultaneously respects and protects individual rights for everyone and unleashes the potential for human ingenuity and invention to deal with the situation. We embrace the system that lets loose the quest for the unimagined. You know by now that the only social system that checks all the boxes is capitalism, but let’s dig a little deeper.
As human beings, we generally apply our capacity for invention and ingenuity to do more with less. Some are better at it than others, but it is in everyone’s interest to always get more bang for our buck and to use our time more productively and enjoyably. This applies to all areas of our lives, including our use of fossil fuels. We are constantly on the lookout for ideas that will help us squeeze more value out of every resource at our disposal, be it time or money: a new car with better gas mileage saving money on our daily commute, new windows with higher energy efficiency keeping our house warm or cool while reducing our monthly energy bill, a more efficient washing machine saving on electricity and extending the life of our clothes (many of which use carbon-based materials). Generally, we seek to extract more value from the material things around us in every area of our lives. We have one life to live, and we want to get the most out of our possessions and our time.
Businesses in every industry pursue broadly the same goals. They try to increase profits by producing and selling more with less. They invent solutions that use fewer raw materials, that mechanize manual tasks, and that shorten time to market. And what they don’t specialize in producing they purchase from others.
Oil and natural gas companies improve extraction, refining, and transportation technologies; car manufacturers develop more efficient engines; window and appliance companies strive to make their products more attractive and energy-saving—all while using cost-effective raw materials and labor-reducing manufacturing methods.
The result is a perpetual virtuous cycle of increasing efficiency, leading to better products and services offering more value per resource spent in the form of money, time, and raw materials. Today’s poster child is the smartphone that packs a wealth of time saving, life-enhancing functionality into something that fits comfortably in your hand. Only 20 years ago, the same functionality required rooms full of equipment, to the extent it was available at all.
Nearly every industry is full of such examples. The first 150 years of industrialization saw a strong correlation between output and raw material use. As prosperity grew and humanity produced more stuff, raw materials use grew along with it in a linear fashion. But since the dawn of the information revolution some 50 years ago we’ve seen a decoupling of resource use and pollution from the output of products and services. The main resource needed for software development is the human mind, not raw materials in the ground. In fact, the use of raw materials is going down in many areas because information technology allows us to be more productive and do more with less than ever. Yes, the earth has still a few billion people who desperately want to get to the level of prosperity we have in America, but they will get there using relatively fewer resources as they leapfrog the resource-intensive stages of previous generations.
As individuals and businesses trading and cooperating with one another, we form a resource-optimizing society. We pool our capacity for invention and ingenuity, sharing an implied pursuit of doing more with less simply because it’s in our self-interest.
This brings us back to capitalism. For a resource-optimizing society to flourish, it needs a social system that protects the rights of individuals and corporations to pursue their desire for using resources efficiently. Capitalism is the answer. The decoupling of the use of raw materials from the output of products and services that we’re seeing is largely a result of the information technology industry developing in a semi-capitalist enclave of society relatively sheltered from welfare statist, rights-violating policies. Today, this benefits every other industry’s pursuit of doing more with less.
Statist, rights-violating government schemes throw a wrench in the intricate machinery of voluntary exchange. It limits our pursuit of getting the most out of our lives, of using our resources, our time, and our money optimally, whether individually or as part of an organization.
In contrast to the positive trends in economical resource use described above, the past century also provides glaring examples of how statist societies prevent voluntary resource optimization and interfere in ways that unnecessarily damages the environment. We can find horrific examples of environmental disasters under communism in the former Soviet Union and its Eastern Europe satellite states (Poland, East Germany, Czechoslovakia, etc.), ranging from dense smog to the Chernobyl nuclear disaster. China, a country that only sometimes respects individual rights, applies central planning to huge areas of its economy—housing, infrastructure, banking and finance, manufacturing, etc.—resulting in enormous misallocation of resources. And regulations and subsidies in the welfare states of Western Europe and here in the United States have crippling impacts on efficient resource use. For example, severe restrictions on nuclear energy development in most advanced economies have effectively killed promising, energy-efficient, CO2 reducing technologies such as liquid fluoride thorium reactors (LFTR) and the ultimate clean energy source, fusion reactors. And government tax-based funding of unreliable energy technologies such as wind and solar takes money from voluntary resource-optimizing, CO2-reducing, fossil fuel efficiency initiatives.
In fact, if nuclear technology development had continued on its pre-1970s trajectory, we would most likely not be discussing the potential harmful consequences of CO2 emissions today as most electricity generation would be nuclear powered, not only in the U.S. but also in advanced and emerging economies around the world. The U.S. nuclear share of electricity production has hovered between 19-20% since 1990. Compare this with France which generated 70.6% of its electricity from nuclear in 202014.
Capitalism unleashes human invention and ingenuity and gives free rein to our ambition to do more with less and to use our resources optimally. And over time, it also allows us to do more with more, as capitalism leads both to new sources of energy and to more efficient use of existing sources. The new sources allow us to continue increasing our use of energy exponentially which is critical for progress, while becoming more efficient means that we squeeze more use out of every produced kilowatt-hour with each passing year. If increasing CO2 levels are indeed harmful and need to be reduced, then capitalism is the solution.
The only role of government as it relates to the environment is to protect individual rights, primarily through the legal system. For example, if my pasture is downstream from an oil-drilling site, and runoff poisons my cattle feed, my rights have been violated and I may sue the drilling company for compensation. If my fish farm is damaged by an oil spill, and my expected harvest objectively reduced, I can take the polluter to court. And, if I can objectively prove that my individual rights are violated by increased total CO2 emissions, the same principle applies.
Another dynamic at work under capitalism is that watch groups concerned with pollution, hazardous materials, and other environmental problems can garner public support and apply pressure on polluters and manufacturers. The pressure of public opinion often is enough for the culprits to take corrective action, because a stain on your reputation is detrimental to your long-term success. Remember that you don’t last long in a capitalist social system with less than a 4-star rating. And if the pressure to take voluntary action is not enough, the tort system offers another avenue for watch groups to take action if the environmental damage can be objectively proved.
If you are troubled by the impact of human activity on the climate, capitalism is the answer. It is the only social system that allows human invention and ingenuity to flourish by respecting our right to manage our resources optimally while granting the same right to others. It is the only system under which it is even remotely possible to move the needle on climate change and other environmental concerns without violating individual rights. Capitalism is the real moral and practical environmental deal.