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Friday, April 14, 2006

Beyond the Propaganda of Privatization

[A]s academics and policymakers clamor to distance themselves from the now dowdy and stilted fashions of 1970s-style “command-and-control regulation” and to embrace the virtues of the free market, privatization has replaced government intervention as the preferred solution to the tragedy of the commons. Right wing ideologues pump out books, articles, and monographs touting the virtues of “free-market environmentalism” and claiming that all environmental problems can eventually be solved by simply defining and enforcing private property rights and allowing the free market to function.7 But even more moderate voices, who point out the obvious impracticality of privatizing many natural resources, still hurry to agree that privatization is superior to government regulation and should therefore be pursued where ever practicable.8 Thus, extremists and moderates alike tout any environmental policy that looks or smells anything like private property or a market as either an example of a practical implementation of the privatization alternative, or as an “intermediate” or “hybrid” scheme that is moving us in the right direction — that is, closer to the privatization solution and away from government regulation.9 In this vein, water markets, emissions trading schemes, transferable fishing quotas, and private land ownership are all touted as examples of the triumph of privatization over the flawed, second-best alternative of government regulation.

[I] argue that all of this talk about private property and market regimes generating an alternative to government regulation of environmental problems is in fact nothing more than a mirage. It has generated a lot of misperceptions about the extent to which government regulation can be dispensed with, and a lot of muddled thinking about exactly what privatization is and under what circumstances it can actually “solve” the tragedy of the commons. In fact, on close inspection, it becomes apparent that simply defining and enforcing private property rights does not necessarily “solve” the tragedy of the commons. It is only under a very limited and idealized set of circumstances that the delineation of property rights and/or the creation of markets actually solves the tragedy by aligning private incentives so as to prevent the overexploitation of resources and the over-production of pollution.