Conservation of Resources

As we have mentioned, the selfsame liberals who claim that we have entered the “postscarcity” age and are in no further need of economic growth, are in the forefront of the complaint that “capitalist greed” is destroying our scarce natural resources. The gloom-and-doom soothsayers of the Club of Rome, for example, by simply extrapolating current trends of resource use, confidently predict the exhaustion of vital raw materials within forty years. But confident — and completely faulty — predictions of exhaustion of raw materials have been made countless times in recent centuries.

What the soothsayers have overlooked is the vital role that the free-market economic mechanism plays in conserving, and adding to, natural resources. Let us consider, for example, a typical copper mine. Why has copper ore not been exhausted long before now by the inexorable demands of our industrial civilization? Why is it that copper miners, once they have found and opened a vein of ore, do not mine all the copper immediately; why, instead, do they conserve the copper mine, add to it, and extract the copper gradually, from year to year? Because the mine owners realize that, for example, if they triple this year’s production of copper they may indeed triple this year’s income, but they will also be depleting the mine, and therefore the future income they will be able to derive from it. On the market, this loss of future income is immediately reflected in the monetary value — the price — of the mine [p. 248] as a whole. This monetary value, reflected in the selling price of the mine, and then of individual shares of mining stock, is based on the expected future income to be earned from the production of the copper; any depletion of the mine, then, will lower the value of the mine and hence the price of the mining stock. Every mine owner, then, has to weigh the advantages of immediate income from copper production against the loss in the “capital value” of the mine as a whole, and hence against the loss in the value of his shares.

The mine owners’ decisions are determined by their expectations of future copper yields and demands, the existing and expected rates of interest, etc. Suppose, for example, that copper is expected to be rendered obsolete in a few years by a new synthetic metal. In that case, copper mine owners will rush to produce more copper now when it is more highly valued, and save less for the future when it will have little value — thereby benefitting the consumers and the economy as a whole by producing copper now when it is more intensely needed. But, on the other hand, if a copper shortage is expected in the future, mine owners will produce less now and wait to produce more later when copper prices are higher — thereby benefitting society by producing more in the future when it will be needed more intensely. Thus, we see that the market economy contains a marvellous built-in mechanism whereby the decisions of resource owners on present as against future production will benefit not only their own income and wealth, but the mass of consumers and the economy as a whole.

But there is much more to this free-market mechanism: Suppose that a growing shortage of copper is now expected in the future. The result is that more copper will be withheld now and saved for future production. The price of copper now will rise. The increase in copper prices will have several “conserving” effects. In the first place, the higher price of copper is a signal to the users of copper that it is scarcer and more expensive; the copper users will then conserve the use of this more expensive metal. They will use less copper, substituting cheaper metals or plastics; and copper will be conserved more fully and saved for those uses for which there is no satisfactory substitute. Moreover, the greater cost of copper will stimulate (a) a rush to find new copper ores; and (b) a search for less expensive substitutes, perhaps by new technological discoveries. Higher prices for copper will also stimulate campaigns for saving and recycling the metal.This price mechanism of the free market is precisely the reason that copper, and other natural resources, have not disappeared long ago. As Passell, Roberts, and Ross say in their critique of the Club of Rome: [p. 249]

Natural resource reserves and needs in the model are calculated [in] . . . the absence of prices as a variable in the “Limits” projection of how resources will be used. In the real world, rising prices act as an economic signal to conserve scarce resources, providing incentives to use cheaper materials in their place, stimulating research efforts on new ways to save on resource inputs, and making renewed exploration attempts more profitable.6

In fact, in contrast to the gloom-and-doomers, raw material and natural resource prices have remained low, and have generally declined relative to other prices. To liberal and Marxist intellectuals, this is usually a sign of capitalist “exploitation” of the underdeveloped countries which are often the producers of the raw materials. But it is a sign of something completely different, of the fact that natural resources have not been growing scarcer but more abundant; hence their relatively lower cost. The development of cheap substitutes, e.g., plastics, synthetic fibres, has kept natural resources cheap and abundant. And in a few decades we can expect that modern technology will develop a remarkably cheap source of energy — nuclear fusion — a development which will automatically yield a great abundance of raw materials for the work that will be needed.

The development of synthetic materials and of cheaper energy highlights a vital aspect of modern technology the doom-sayers overlook: that technology and industrial production create resources which had never existed as effective resources. For example, before the development of the kerosene lamp and especially the automobile, petroleum was not a resource but an unwanted waste, a giant liquid black “weed.” It was only the development of modern industry that converted petroleum into a useful resource. Furthermore, modern technology, through improved geological techniques and through the incentives of the market, has been finding new petroleum reserves at a rapid rate.

Predictions of imminent exhaustion of resources, as we have noted, are nothing new. In 1908, President Theodore Roosevelt, calling a Governors’ Conference on natural resources, warned of their “imminent exhaustion.” At the same conference, steel industrialist Andrew Carnegie predicted the exhaustion of the Lake Superior iron range by 1940, while railroad magnate James J. Hill forecast the exhaustion of much of our timber resources in ten years. Not only that: Hill even predicted an imminent shortage of wheat production in the United States, in a country where we are still grappling with the wheat surpluses generated by [p. 250] our farm subsidy program. Current forecasts of doom are made on the same basis: a grievous underweighting of the prospects of modern technology and an ignorance of the workings of the market economy.7

It is true that several particular natural resources have suffered, in the past and now, from depletion. But in each case the reason has not been “capitalist greed”; on the contrary, the reason has been the failure of government to allow private property in the resource — in short, a failure to pursue the logic of private property rights far enough.

One example has been timber resources. In the American West and in Canada, most of the forests are owned, not by private owners but by the federal (or provincial) government. The government then leases their use to private timber companies. In short, private property is permitted only in the annual use of the resource, but not in the forest, the resource, itself. In this situation, the private timber company does not own the capital value, and therefore does not have to worry about depletion of the resource itself. The timber company has no economic incentive to conserve the resource, replant trees, etc. Its only incentive is to cut as many trees as quickly as possible, since there is no economic value to the timber company in maintaining the capital value of the forest. In Europe, where private ownership of forests is far more common, there is little complaint of destruction of timber resources. For wherever private property is allowed in the forest itself, it is to the benefit of the owner to preserve and restore tree growth while he is cutting timber, so as to avoid depletion of the forest’s capital value.8

Thus, in the United States, a major culprit has been the Forest Service of the U.S. Department of Agriculture, which owns forests and leases annual rights to cut timber, with resulting devastation of the trees. In contrast, private forests such as those owned by large lumber firms like Georgia-Pacific and U.S. Plywood scientifically cut and reforest their trees in order to maintain their future supply.9

Another unhappy consequence of the American government’s failure [p. 251] to allow private property in a resource was the destruction of the Western grasslands in the late nineteenth century. Every viewer of “Western” movies is familiar with the mystique of the “open range” and the often violent “wars” among cattlemen, sheepmen, and farmers over parcels of ranch land. The “open range” was the failure of the federal government to apply the policy of homesteading to the changed conditions of the drier climate west of the Mississippi. In the East, the 160 acres granted free to homesteading farmers on government land constituted a viable technological unit for farming in a wetter climate. But in the dry climate of the West, no successful cattle or sheep ranch could be organized on a mere 160 acres. But the federal government refused to expand the 160-acre unit to allow the “homesteading” of larger cattle ranches. Hence, the “open range,” on which private cattle and sheep owners were able to roam unchecked on government-owned pasture land. But this meant that no one owned the pasture, the land itself; it was therefore to the economic advantage of every cattle or sheep owner to graze the land and use up the grass as quickly as possible, otherwise the grass would be grazed by some other sheep or cattle owner. The result of this tragically shortsighted refusal to allow private property in grazing land itself was an overgrazing of the land, the ruining of the grassland by grazing too early in the season, and the failure of anyone to restore or replant the grass — anyone who bothered to restore the grass would have had to look on helplessly while someone else grazed his cattle or sheep. Hence the overgrazing of the West, and the onset of the “dust bowl.” Hence also the illegal attempts by numerous cattlemen, farmers, and sheepmen to take the law into their own hands and fence off the land into private property — and the range wars that often followed.

Professor Samuel P. Hays, in his authoritative account of the conservation movement in America, writes of the range problem:

Much of the Western livestock industry depended for its forage upon the “open” range, owned by the federal government, but free for anyone to use . . . . Congress had never provided legislation regulating grazing or permitting stockmen to acquire range lands. Cattle and sheepmen roamed the public domain . . . . Cattlemen fenced range for their exclusive use, but competitors cut the wire. Resorting to force and violence, sheepherders and cowboys “solved” their disputes over grazing lands by slaughtering rival livestock and murdering rival stockmen . . . . Absence of the most elementary institutions of property law created confusion, bitterness, and destruction.

Amid this turmoil the public range rapidly deteriorated. Originally plentiful and lush, the forage supply was subjected to intense pressure by increasing [p. 252] use . . . . The public domain became stocked with more animals than the range could support. Since each stockman feared that others would beat him to the available forage, he grazed early in the year and did not permit the young grass to mature and reseed. Under such conditions the quality and quantity of available forage rapidly decreased; vigorous perennials gave way to annuals and annuals to weeds.10

Hays concludes that public-domain range lands may have been depleted by over two-thirds by this process, as compared to their virgin condition.

There is a vitally important area in which the absence of private property in the resource has been and is causing, not only depletion of resources, but also a complete failure to develop vast potential resources. This is the potentially enormously productive ocean resource. The oceans are in the international public domain, i.e., no person, company, or even national government is allowed property rights in parts of the ocean. As a result, the oceans have remained in the same primitive state as was the land in the precivilized days before the development of agriculture. The way of production for primitive man was “hunting-and-gathering”: the hunting of wild animals and the gathering of fruits, berries, nuts, and wild seeds and vegetables. Primitive man worked passively within his environment instead of acting to transform it; hence he just lived off the land without attempting to remould it. As a result, the land was unproductive, and only a relatively few tribesmen could exist at a bare subsistence level. It was only with the development of agriculture, the farming of the soil, and the transformation of the land through farming that productivity and living standards could take giant leaps forward. And it was only with agriculture that civilization could begin. But to permit the development of agriculture there had to be private property rights, first in the fields and crops, and then in the land itself.

With respect to the ocean, however, we are still in the primitive, unproductive hunting and gathering stage. Anyone can capture fish in the ocean, or extract its resources, but only on the run, only as hunters and gatherers. No one can farm the ocean, no one can engage in aquaculture. In this way we are deprived of the use of the immense fish and mineral resources of the seas. For example, if anyone tried to farm the sea and to increase the productivity of the fisheries by fertilizers, he would immediately be deprived of the fruits of his efforts because he could not keep other fishermen from rushing in and seizing the fish. [p. 253]

And so no one tries to fertilize the oceans as the land is fertilized Furthermore, there is no economic incentive — in fact, there is every disincentive — for anyone to engage in technological research in the ways and means of improving the productivity of the fisheries, or in extracting the mineral resources of the oceans There will only be such incentive when property rights in parts of the ocean are as fully allowed as property rights in the land Even now there is a simple but effective technique that could be used for increasing fish productivity parts of the ocean could be fenced off electronically, and through this readily available electronic fencing, fish could be segregated by size By preventing big fish from eating smaller fish, the production of fish could be increased enormously And if private property in parts of the ocean were permitted, a vast flowering of aquaculture would create and multiply ocean resources in numerous ways we cannot now even foresee.

National governments have tried vainly to cope with the problem of fish depletion by placing irrational and uneconomic restrictions on the total size of the catch, or on the length of the allowable season In the cases of salmon, tuna, and halibut, technological methods of fishing have thereby been kept primitive and unproductive by unduly shortening the season and injuring the quality of the catch and by stimulating overproduction — and underuse during the year — of the fishing fleets And of course such governmental restrictions do nothing at all to stimulate the growth of aquaculture As Professors North and Miller write:

Fishermen are poor because they are forced to use inefficient equipment and to fish only a small fraction of the time [by the governmental regulations] and of course there are far too many of them The consumer pays a much higher price for red salmon than would be necessary if efficient methods were used Despite the ever-growing intertwining bonds of regulations, the preservation of the salmon run is still not assured.

The root of the problem lies in the current non-ownership arrangement It is not in the interests of any individual fisherman to concern himself with perpetuation of the salmon run Quite the contrary It is rather in his interests to catch as many fish as he can during the season.11

In contrast, North and Miller point out that private property rights in the ocean, under which the owner would use the least costly and most efficient technology and preserve and make productive the resource itself, is now more feasible than ever “The invention of modern electronic [p. 254] sensing equipment has now made the policing of large bodies of water relatively cheap and easy.”12

The growing international conflicts over parts of the ocean only further highlight the importance of private property rights in this vital area. For as the United States and other nations assert their sovereignty 200 miles from their shores, and as private companies and governments squabble over areas of the ocean; and as trawlers, fishing nets, oil drillers, and mineral diggers war over the same areas of the ocean — property rights become increasingly and patently more important. As Francis Christy writes:

. . . coal is mined in shafts below the sea floor, oil is drilled from platforms fixed to the bottom rising above the water, minerals can be dredged from the surface of the ocean bed . . . sedentary animals are scraped from the bed on which telephone cables may lie, bottom feeding animals are caught in traps or trawls, mid-water species may be taken by hook and line or by trawls which occasionally interfere with submarines, surface species are taken by net and harpoon, and the surface itself is used for shipping as well as the vessels engaged in extracting resources.13

This growing conflict leads Christy to predict that “the seas are in a stage of transition. They are moving from a condition in which property rights are almost nonexistent to a condition in which property rights of some form will become appropriated or made available.” Eventually, concludes Christy, “as the sea’s resources become more valuable, exclusive rights will be acquired.”14

• 6Passell, Roberts, and Ross, op. cit., p. 12.
• 7On these mistaken forecasts, see Thomas B. Nolan, “The Inexhaustible Resource of Technology,” in H. Jarrett, ed., Perspectives on Conservation (Baltimore: Johns Hopkins Press, 1958), pp. 49-66.
• 8 On timber, and on conservation generally, see Anthony Scott, Natural Resources: The Economics of Conservation (Toronto: University of Toronto Press, 1955), pp. 121-25 and passim.

   

  On ways in which the federal government itself has been destroying rather than conserving timber resources, from highway building to the indiscriminate dams and other projects of the Army Corps of Engineers, see Edwin G. Dolan, TANSTAAFL (New York: Holt, Rinehart & Winston, 1971), p. 96.

• 9See Robert Poole, Jr., “Reason and Ecology,” in D. James, ed., Outside, Looking In (New York: Harper & Row, 1972), pp. 250-51.
• 10Samuel P. Hays, Conservation and the Gospel of Efficiency (Cambridge: Harvard University Press, 1959), pp. 50-51. See also E. Louise Peffer, The Closing of the Public Domain (Stanford: Stanford University Press, 1951), pp. 22-31, and passim.
• 11Douglass C North and Roger LeRoy Miller, The Economics of Public Issues (New York Harper & Row, 1971), p 107
• 12Ibid., p. 108. Also see James A. Crutchfield and Giulio Pontecorvo, The Pacific Salmon Fisheries: A Study of Irrational Conservation (Baltimore: Johns Hopkins Press, 1969). On a similar situation in the tuna industry, see Francis T. Christy, Jr., “New Dimensions for Transnational Marine Resources,” American Economic Review, Papers and Proceedings (May 1970), p. 112; and on the Pacific halibut industry, see James A. Crutchfield and Arnold Zellner, Economic Aspects of the Pacific Halibut Industry (Washington, D.C.: U.S. Dept. of the Interior, 1961). For an imaginative proposal for private property in parts of the ocean even before the advent of electronic fencing, see Gordon Tullock, The Fisheries — Some Radical Proposals (Columbia, S.C.: University of South Carolina Bureau of Business and Economic Research, 1962).
• 13Christy, loc. cit., p. 112.
• 14Ibid., pp. 112-113. For a definitive discussion, economic, technological, and legal, of the entire problem of the ocean and ocean fisheries, see Francis T Christy, Jr , and Anthony Scott, The Common Wealth in Ocean Fisheries (Baltimore Johns Hopkins Press, 1965)