Markets, manure and the future of mankind: the case against environmental regulation

“In 50 years, every street in London will be buried under nine feet of manure.” So predicted the London Times newspaper in 1894. An army of more than 50,0000 horses pulled cabs, carts and busses around the city and literally drowned the streets in floods of manure and urine. New York faced a similar predicament and the problem was debated in the city in 1898 at the inaugural International Urban Planning Conference – but the planners could come up with no practical solutions. Luckily the nine feet manure caking prediction turned out to be false alarm, but the reason was not government intervention to regulate use of horses, nor was it a tax on manure. It was of course the invention of the automobile and the improvement in manufacturing techniques enabling mass production of affordable cars. Henry Ford solved the manure crisis, the government didn’t. And he solved it without London or New York coming to a halt as would have been the case had authorities clamped down on horse powered traction. There was no cost to the economy, no trade-off between environment and economic growth.

The parallels are obvious to today’s climate change debate, where predictions are for dire results if the use of fossil fuels continues on its current path (we question the validity of the man-made climate change consensus, but that is another discussion). Unsurprisingly, the political answer to the predicament is in the form of carbon taxes, emission quotas and alternative energy subsidies. Whoever, it is clear that the long term solutions to environmental sustainability lies within innovation and not intervention. And the next Model T moment will not come from government.

The shale gas revolution is such a moment. In the US, energy related CO2 emissions have dropped 12% in the last decade, largely due to shale gas exploitation which has reduced the use of coal for power production. It is of course ironic that the main obstacle to shale gas exploitation is politics, as we are witnessing first hand in the UK. Government proves to be the problem once again, not the solution.

Source: US Energy Information Administration

As luck would have it, China, the usual bogeyman in environmental doomsday predictions, happens to sit on the world’s largest shale gas reserves.

Source: US Energy Information Administration

Nuclear power is another environmentally friendly energy source which is being held back by government intervention. Demonized by the left, all nuclear plants have been decommissioned in both Japan and Germany and many other countries never adopted the technology in the first place.

Other technologies are queuing up. Form Elon Musk’s SolarCity to Coca Cola’s fully recyclable plant bottle and batteries that run on butane, private sector innovators are solving environmental challenges as we speak.

The case against government intervention is of course also supported by crony capitalist scandals like the Solyndra fiasco. Subsidies and legislation opens the door for waste and corruption.

But the main case against environmental legislation is the economic cost. Restraining the forces of capitalism which have lifted billions out of abject poverty reduces living standards for all and condemns those at the bottom to remain in desperate wanting.

Besides growth is not, as often argued, detrimental to the environment, quite the contrary. For example, while the developing world continues with deforestation, the developed world has reversed the trend and is rapidly expanding their forests. Public property presents another major issue which warrants separate scrutiny: lack of ownership socialises the cost of pollution and removes incentives to protect the environment.

All in all, the case for government intervention on behalf of the planet is not strong, in fact it largely ignores that the only sustainable solution to pollution is private sector innovation. And government is poorly places to direct innovation with subsidies and incentives. Most environmental regulation is based on a cost-benefit analysis which ignores the costs, often borne by the poorest. The English reverend Malthus famously predicted the end of mankind, as food production would not be able to keep up with population growth. Advances in agricultural production technology proved him wrong. It proved that, if left to their own devices, the forces of capitalism contain within themselves the solution to man’s problems, whether self-inflicted or not. They always have, they always will.

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