The Synergy of Economic Freedom and Sustainability
Politicians, bureaucrats and scientists from around the world met in Brazil this summer for the United Nations Conference on Sustainable Development. Many attendees called for greater government control over our economic lives in order to preserve more of earth’s resources for future generations.
Sadly, their efforts are sorely misdirected. A better way to promote sustainable economic growth is to maintain a free marketplace where individuals with private property rights and knowledge of their local markets are encouraged to invest in, and protect their valuable resources.
Indeed, real world data reveals that, for a given level of goods and services produced in an economy (GDP), nations with free markets have far less impact on their environments. By comparing data from the Economic Freedom of the World Report, which ranks nations by their levels of economic freedom, with ecological measures from the World Bank database, the synergy between high levels of economic freedom and sustainable development is striking:
- Greenhouse Gases: Those nations with the freest economies emit only one-third the level of carbon dioxide and just five percent the level of methane per dollar of GDP when compared to the least free nations.
- Air and Water Pollution: The freest economies also emit one-sixth the level of sulfur dioxide, 7 percent the level of nitrous oxides and only 11 percent the level of organic water pollution per dollar of GDP compared to the least free economies.
- Energy Consumption: With nearly all nations heavily dependent on fossil fuels to produce the energy needed to operate their economies, the world’s freest economies consume just 20 percent the energy per dollar of GDP produced in the least free.
How is this possible?
First, private property rights encourage owners of a resource to prudently manage it because of the potential profit they can gain from preserving its value—both in the short and long terms. Consider an example that I use in my economics course: Imagine you inherit a farm that you didn’t want from a deceased relative. What would motivate you to expend the time and resources necessary to properly maintain this farm?
Through the free marketplace, others who value this farm more highly can compete to pay for ownership. Knowing that you would keep all proceeds from this sale would encourage you to bear the cost of preserving its value until it is sold. Awareness that you would be throwing away significant profits would prevent you from letting the farm deteriorate through neglect or become spoiled by pollution. In this way, private ownership provides direct and powerful incentives that no government resource manager faces.
A second, and often overlooked, aspect of the free market is that it taps into the local intelligence and talents of the people in that economy. Each person has some unique knowledge of the diverse, local opportunities for profitable production and trade. This wisdom allows people to make better choices when weighing various ways to manage their resources. Kellogg’s® exemplified the power of local knowledge when it tapped rice farmers in Louisiana and Louisiana State University (LSU) scientists to help the company adopt more sustainable production methods.
Specifically, these farmers and scientists were asked to develop a more efficient way—using less natural resources including water, land, fuel and fertilizer—to produce the rice to make Rice Krispies® and other breakfast cereals. Using their knowledge of rice growing and Louisiana’s ecosystem, this team was able to identify more sustainable methods to grow and process rice using less ground water, land and energy while taking care to avoid subsequent, unintended impacts on the larger environment.
For example, developing a more efficient electric motor for the milling process reduced the energy needed for production. Farmers using fewer inputs to generate the same amount of rice cut costs while reducing the impact on the environment. It is hard to imagine that a bureaucrat in Washington would have been as able or motivated to discover cost saving innovations that successfully improve environmental impacts.
To move closer to the goal of sustainable growth, we must involve the individuals and empower them as stewards of their valuable resources through private ownership. If we want to leave a better world economy for future generations, we should call for greater freedom from government involvement in our nation’s economies, rather than demanding more government control over our individual economic independence.
Image Credit: Andresr/Shutterstock
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