30 Aug 2010, 1:14pm
Economics Philosophy Policy
by admin

The Market Illiteracy Embodied in the Politically Correct Version of Sustainability

Travis Cork III. 2010. The Market Illiteracy Embodied in the Politically Correct Version of Sustainability. W.I.S.E. White Paper No. 2010-4

Full text [here]

Selected excerpts:

The forest products industry has been practicing sustainable forestry for much of the Twentieth Century. During this time we have seen substantial gains in the management and utilization of forests, particularly on forest industry lands. “Although the forest industry occupies only about one-seventh of total U. S. timberland, its land produces a full fifth of national timber growth, a quarter of the growth of softwoods, and about a third of the annual timber harvest.” 1/

The forest industry has signed on to the sustainable forestry initiative, no doubt for public relations, but it does not need market illiterate bureaucrats and GAGs (green advocacy groups-The Nature Conservancy, Sierra Club, et al.) telling it how to practice sustainable forestry. …

Depletion is not caused by lack of resources, but by a lack of institutions, specifically private property rights and free-markets, that allow for a rational and sustained use of resources. In America, it is a manufactured crisis. If depletion of forest resources were a real problem, the responsible solution would be to find ways to increase productivity. Locking up more of the American land base (50 percent or more with Reed Noss’ Wildlands Project) and restricting utilization on remaining lands is neither a serious nor an ethical approach to depletion. But then the crisis-mongers are not concerned about the depletion of resources but the control of resources.

A statist perspective of sustainability

Sustainability is defined as

meeting the needs of the present without compromising the ability of future generations to meet their own needs.

The American Forest & Paper Association expands this to include forestry.

Sustainable forestry means managing our forests to meet the needs of the present without compromising the ability of future generations to meet their own needs by practicing a land stewardship ethic which integrates the growing, nurturing, and harvesting of trees for useful products with the conservation of soil, air and water quality, and wildlife and fish habitat.

What bureaucrat or academic can make an accurate measurement of my “sustainable” allotment of forest resources (or any other resource) in quantifiable terms; e.g., cords, tons, board feet, cubic meters, kilograms, etc.?

Who is the soothsayer, seer, or mystic that can divine what future generations will want from the forest or any resource?

Who can determine the annual removal of wood products or any resource compared to the volume estimated to be sustainable?

The answer is no one.

History tells us “no exhaustible resource is essential or irreplaceable… The relevant resource base is defined by knowledge, rather than by physical deposits of existing resources.” 7/ Unless suppressed by government force, human intelligence and ingenuity break the bonds that carrying capacity imposes on other species. …

Sustainability, as defined, is vague and inoperable highfalutin rhetoric. It is evidence that the natural resource community, at least in the public sector, academia, and some corporate boardrooms, is ignorant of market economics and responsible social behavior. This ignorance puts the productive future of the forest resources sector very much at risk.

Who in government or academia is qualified to make this allocation? Not the U. S. Forest Service (USFS). In A Gradual Unfolding of a National Purpose: A Natural Resource Agenda for the 21st Century, USFS admits it has “approximately 40 million acres of national forests that are exposed to abnormally high risk of fire, disease, and insect outbreaks… the vulnerability of these forests is unacceptably high.” 9/ If a private sector forester had 40 million acres of mismanaged forest, he would not be rewarded with more resources to mismanage or misallocate.

Allocations by government are not based on market signals but on political signals. Unable to use rational price signals as a guide, the USFS is so flummoxed by competing demands for resources from public forests that it is moving more and more to a policy of no-allocation (preservation not conservation).

Inability to make a rational allocation does not deter market illiterate bureaucrats from trying. …

Change is anathema to government. It seeks refuge in the fairyland of static analysis and equilibrium. It has little or no ability to innovate. Forcing a result is not innovative. No central-planning bureaucrats can keep up with millions of individuals expressing their preferences through millions of daily choices. To have control, bureaucrats must ignore market information and use the power of government to limit market choices. It must prevent change.

An ecosystem is not an objective reality in nature. It is an artifice to justify regulating across property boundaries. It has nothing to do with sustainability. It has everything to do with control.

Limiting choices, especially the entrepreneurial spirit of discovery, forecloses options to future generations. …

When government is the arena where citizens fight for privileges they cannot get through the free-market mechanisms of cooperation and voluntary exchange, hostility and chaos are the norm. There are no common grounds, only battlegrounds — exactly where we are with public land disputes.

Costs and benefits cannot be shared by all under the social organization of free-markets and private property rights. For forced sharing, allocations must be controlled by government. Under government control, resources are not allocated to their highest and best use by well-informed political or bureaucratic decision-makers. The allocation occurs in response to political pressures brought by organized special interests, each with a narrow focus on a specific outcome, regardless of long-term or unintended consequences.

Self-interested bureaucrats are often happy to cooperate as they are empowered. Bureaucracies are corrupted. Data are distorted. Logic and reason are discarded. …

A rational measure of sustainable resource use

Government has never found a way to live with limits. If there is a rational way to allocate resources, it must be found outside of bureaucratic planners.

The solution can be found in a free-market economy with its price signals and its attendant regulatory force—private property rights.

In a free-market, competition weeds out the inefficient, wasteful use of labor and resources. Depending on the division of labor to supply a wide diversity of goods and services, a free market fosters a spirit of cooperation. It is regulated by respect for property boundaries and the individual responsibility demanded by private property rights. “Only the self-regulation of the market—where individuals directly bear the costs of their bad judgment—can discipline greed.” 22/ Bureaucracy does not have this self-regulation. …

In a free market where property has alternative uses, “[i]t is always in the interest of entrepreneurs to maximize the present value of their land and capital assets. Excessive depletion of resources would lower their capital value…” 29/ On the other hand, if, in a command economy where property use is dictated by government, the cost of retaining its current productivity exceeds the value of its services, the quasi-owner has an incentive to deplete the property if the costs of doing so are low enough. …

Resources will be allocated by the market or by government. Government allocation
would require an expansion of government. The only way government can expand is by taking resources from creative, productive individuals.

Government central planners do not know what the resource base is. They cannot see the future. They do not and cannot know the correct allocation of any resource.

What are the dire consequences of the inevitable wrong guesses by bureaucratic planners?

* Waste of resources
* Misallocation of resources
* Economic stagnation
* Discouragement of innovation
* Violence
* Bigger and more intrusive government.

That a free market and its price signals do not guarantee a perfect allocation of resources does not mean government is better. Clearly, it is not. In a free market, failure is a signal that resources are being wasted or misallocated. It is a signal that individuals cannot ignore. Only government can ignore failure. We have a cornucopia of information documenting this government failure. Rewarding government failure with more power is not just folly, it is downright destructive.

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