September 18, 2014

Fighting Fires Without Socialism

July 28, 2014

Walter Block

| Dr. Block is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is author of Ron Paul for President in 2012 Yes to Ron Paul and Liberty and Privatization Of Roads And Highways: Human And Economic Factors... and others.

Opinions from Liberty Crier contributors and members are their own and do not necessarily reflect those of The Liberty Crier.

According to Terry L. Anderson and Daniel Botkin, “Fighting Western Fires with Economics” is a good idea.

Were I writing an essay with this title, I would emphasize the role of private property rights. If all forests were owned by individuals and private corporations, those that did well in protecting their trees from conflagrations would prosper, those who failed to do so would lose money and eventually be forced into bankruptcy. Whereupon the ones who were more efficient protectors of the woodlands would  take over the holdings of the failures, and more and more acreage would fall under the control of  those who were effective not only at fighting fires, but at all aspects of protecting and promoting this valuable resource.

Would this be a perfect system? No, of course not. Nothing in this vale of tears rises to that level. Entrepreneurs in charge of making these decisions are imperfect human beings, who always make mistakes. But this “weeding out of the unfit” process tends to ensure that more effective fire fighters would tend to control more and more stands of wood, and the particularly inept less and less. Does anyone else have a better idea? No? I thought not.

Is this the tack that was taken by Anderson and Botkin? No. Of course not. Had they done so, there would have been no reason for me to have written this sharpish critique of their essay. Instead, I might have just blogged this on, alerting readers to a good, modern, application of the Bastiat – Hazlitt insights.

Which analytic technique did these authors offer to combat forest fires? What advice did they offer to this end? Property rights, profit and loss? No. Perhaps a different version of these insights? No, again. We search in vain for even any mention of these concepts. And this is more than passing curious, in that these authors are well known as being advocates of free market environmentalism.

Instead, horrors, they took on the role of efficiency experts for the state. Murray N. Rothbard had this to say about Milton Friedman in this regard: “Milton Friedman has once again been guided by his overwhelming desire not to remove the State from our lives, but to make the State more efficient.” Why do I mention this? I am not sure of Botkin, but Anderson is certainly a disciple of Friedman (full disclosure, as if any were needed: as I am of Rothbard). The point is, both Anderson and I are heavily guided by our respective mentors: Anderson (and Botkin) try to promote more efficient state control of forests, and I now upbraid him (them) for so doing, from the free enterprise perspective.  Neither the word “privatization” nor the phrase “private property” appears even once in this essay, and this is incomprehensible for an analyst who claims any adherence at all to the philosophy of laissez faire capitalism.

What do they say, instead? They call for a reallocation of government resources: “With homes, watersheds and vistas threatened, city, county, state and federal agencies have little choice but to throw everything they have into suppression, once again neglecting the basic forest management needed to clear the tinder buildup that fuels infernos.” Is this advice clearly wrong? No. It might well be the case that diverting expenditures from suppression to clearing timber buildup will reduce the harm generated by conflagrations. But without a competitive market, where some owners try plan A and others B, C or D, and then see who earns the most profit, we will never know for sure.  Unless competition is allowed, we are flying blind. We are in a position similar to that of the Soviet central planners, who also had to operate in the absence of the profit and loss system.

Our authors also reject “balance of nature ecology” in favor of “modern ‘dynamic ecology.”” The latter “understands nature as a motion picture, so to speak, not a still life” as in the former case.  The “balance of nature” suggest(s) there is some optimal global temperature whereas dynamism sees a “never-ending movie, (where) the environment has always changed and is always changing, and humans have always played a role.” I confess that as an economist and a libertarian, a supporter of private property rights, I really have no dog in this fight. Full disclosure: I scarcely understand the full differences between these two. All I know for sure is that the best way to determine which policy is more economical is to allow both management techniques to compete with each other.  This is an empirical issue, not a matter of praxeology, or economic law. Time preferences would appear to play a role here and thus, perhaps, there is no one “correct” way to which all entrepreneurs should conform.

I confronted a similar challenge in my work on road privatization. I speculated that perhaps, just perhaps, a single system emanating from our friends in Washington DC regarding highway speed limits (40 miles per hour minimum, 70mph maximum) was not the most conducive one to saving lives. Instead of a one size fits all system, I opined that different thoroughfare owners might implement dissimilar rules, in order to reduce traffic fatalities. But, should it be 50mph in the right lane, 65mph in the middle lane and 80mph is the left lane?  Or perhaps 55mph in the right lane, 70mph in the middle one and 80mph is the left? Maybe 50, 60 and70 would work better in terms of minimizing deaths and maximizing distance travelled per hour? Should owners west of the Mississippi adopt faster speeds than east of this river, given fewer motorists per mile? Not being a road engineer, merely a free market economist, I simply did not know. (I am also ignorant as to whether red, blue, green or white tablecloths most satisfy restaurant patrons.) So I recommended a competitive system in which different highway corporations would try some of these options, and/or any others of their own devising, or even continue the status quo. Then  we would live and learn; then, we would have a hope of improving highway safety.

It is precisely the analogous public policy recommendation I would make in the present case regarding forest fires. Do not subscribe to policy A (as do Anderson and Botkin) or B or C or D either. Rather, call for privatization, free enterprise, competition, and allow the market process to determine the best management technique, or, possibly, several of them.

Anderson’s organization, PERC, used to be called the Political Economy Resource Center. It subsequently changed its name to the Property and Environment Resource Center. All the more reason, then, to be true to the first word in its new title, “property,” as in private property.

In the view of these authors, “science should guide forest managers.” No, no, no. Science should not guide present governmental bureaucratic managers in their decision making. In that direction lies becoming an efficiency expert for the state, something to be avoided like the plague. Nor, or course, should anti science guide them. Instead, libertarianism should do so. That is, libertarianism should be the guiding light.  These Soviet style central planners should be turfed out of their cushy high paying jobs in which they are never automatically penalized for their mistakes. According to Thomas Sowell, “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting these decisions in the hands of people who pay no price for being wrong.”  Science schmience. These civil “servants” should be supplanted by forest entrepreneurs who will indeed pay a price for errors. That is the best, indeed only rational way to bring about rational management of these resources.

In the view of Anderson and Botkin, in sharp contrast, “Dynamic economics requires finding the appropriate institutions for connecting human action with environmental change. Government can help by providing realistic signals about the environment and encouraging people to act on them.” Were this support of socialism emanating from the left wing of the Democratic Party, or from the watermelons (green on the outside, but red on the inside), it would pass without critical comment from me. There is more anti market verbiage emanating from that side of the aisle than you can shake a stick at. But, when it is published in an ostensibly free market newspaper such as the Wall Street Journal, and written by authors with impeccable free enterprise credentials such as Anderson, it deserves critical comment. The “appropriate institutions for connecting human action with environmental change” are economic freedom, private property rights and laissez faire capitalism. The government is also known far and wide as the provider not of “realistic signals” but of the very opposite. Its Fed interest rate policies provide “signals” that misallocate the inter-temporal capital and resource markets. Its minimum wage laws provide misbegotten “signals” in the labor market, creating unemployment for the unskilled. Its drug war provides “signals” that encourages the rise of gangsterism and fill our jails to overcapacity. Its tariffs provide “signals” that undermine international trade and with it the international division of labor. Its agricultural policies provide “signals” that misallocate resources from that sector of the economy, and these examples are the tip of the veritable ice berg. Why oh why, pray tell, should we expect, let alone ask for, “realistic signals” from the statists in forestry, or fire-fighting?

Anderson and Botkin even admit that FEMA subsidies “distorted incentives … to rebuild in the same locations” in the aftermath of Sandy and Katrina. They bewail that “low-interest loans are available to homeowners and business that suffered property damage in the San Diego wildfires. Such policies fool people into thinking that they can live anywhere without accepting the environmental risks…” Why, then, do they rely on this malevolent and inefficient institution, government, to play a positive role in fighting western fires?

These authors go so far as to assert that “markets can also play a constructive role.” They properly point to the movement of the grain belt. But markets, or at least free markets, simply cannot properly function in the absence of private property rights. Free markets and private property rights are joined at the hip. You can’t have one without ‘tother. Hopefully when next Anderson and Botkin address such issues they will approach them in a manner more compatible with economic freedom.

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