Yesterday’s post explained how market incentives can address environmental issues, including the believed-to-be negatives of climate change. Prices of inputs and outputs, utilizing resources even if they are subject to the tragedy of the commons, incorporate dynamic environmental changes. Markets, in other words, offer the potential for dynamic responses.
If climate change reduces the productivity of land for wheat production, for example, the price of land will be high relative to its productivity. This generates an incentive for wheat farmers to seek new places for wheat production where land prices are lower. Hence, the 2012 Bloomberg news headline, “Corn Belt Shifts North With Climate as Kansas Crop Dies.” Therefore even if the atmosphere as a GHG sink and GHG emissions themselves are not priced, prices correlated with the effects of climate change will induce adaptation.
This is McKenzie Funk’s thesis in his book titled, Windfall: The Booming Business of Global Warming (2014). Changes in the arctic sea ice–“the Melt”—changes in water supplies—“the Drought”—and changes in coastal flooding—“the Deluge”—are the three central categories into which Funk pigeon holes entrepreneurial responses to climate opportunities. He asserts that his book is an answer to the increasingly urgent question: “What are we doing about climate change?” (Funk 2014, 11).
To be slightly more colorful, climate entrepreneurs aren’t just talking about the weather; they are doing something about it.
Consider the following examples:
None of this is to say that entrepreneurs will succeed is solving every resource conflict. But to the extent that the market believes that future conditions are based on solid science, entrepreneurs will take note.
Terry Anderson is the John and Jean De Nault Senior Fellow at the Hoover Institution and the executive director of the Property and Environment Research Center (PERC), a think tank in Bozeman, Montana, that studies free-market approaches to environmental challenges. Anderson’s research, epitomized in the new edition of his best-selling primer, Free-Market Environmentalism for a New Generation, helped launch the sub-discipline of environmental economics, free-market environmentalism.
Donald Leal, senior fellow emeritus at PERC , recently stepped down as research director at PERC after nearly 30 years. Dr. Leal is well known for his work on property rights in marine fisheries and has written and edited dozens of books, policy papers, and articles on fisheries, water, outdoor recreation, as well as timber and federal land use policy. A tribute to Dr. Leal from his friends in the free-market environmental movement describes his many contributions.
Anderson and Leal’s Free Market Environmentalism, first published in 1991, received the Outstanding Academic Book Award (1992) and the Sir Antony Fisher International Memorial Award (1992). A revised edition of the book was published in 2001 and, with the expanded title, in 2015.