Going Against the Grain, Environmentally Speaking

When economist Harold Demsetz looked into the history of the fur trade in the Labrador Peninsula in 1967, he was not studying environmental protection. He was exploring the origins of property rights. Yet his findings contributed to a major rethinking of environmental issues. Here’s what he found.

Before 1700, Indians hunted beaver in forests around Quebec, using them for food and fur. Because the demand for beaver was limited, says Demsetz, “hunting could be practiced freely.”[1]

But around 1700, Europeans came to the peninsula, eager to purchase beaver skins from the Indians.

Beaver became so valuable that Indians began to set aside forest territories in which small groups could hunt exclusively, marking these areas by blazing trees. Families often owned these territories, and they further divided them among their members, leaving one section untouched unless absolutely necessary—a prescient conservation measure. “The fur trade made it economic to encourage the husbanding of fur-bearing animals,” said Demsetz.[2]

In other words, the gradual process of establishing property rights avoided a “tragedy of the commons” in which too many people would have overhunted the beaver and destroyed the resource that provided so much reward.

The role of property rights in preventing the tragedy of the commons became a staple for a group that coalesced in the 1970s and 1980s, mostly in Bozeman, Montana. Political scientist John Baden and economists Richard Stroup, Terry Anderson, and P. J. Hill began an academic approach that was at first called the New Resource Economics and subsequently “free market environmentalism.” (I consider the latter term ambiguous because the process can operate even when markets are not fully free.)

You can read more about free market environmentalists  here.

Early on, they were alert to examples of environmental protection through markets and, concomitantly, environmental failure through government. Thus they went against the grain of how the media, historians, and even other economists had been looking at environmental issue—and often still do.

While Demsetz’s article was clearly in line with the free market environmentalists, often they drew new lessons from articles written for other purposes.

Who Owned Property along the Wisconsin River?

For example, in 1971 Peter N. Davis wrote a lengthy law review article about water pollution in Wisconsin. [3] Along the way, he observed that, historically, paper mills bordering the Wisconsin River had been able to avoid many lawsuits—even though they were dumping tons of pulp residue in the river, and lawsuits against nuisances are part of the national legal arsenal.

Why this absence of lawsuits? Davis didn’t really know, but he observed that the mills had bought up enormous amounts of land. That was, in fact, the answer. From a free market environmentalist perspective, extending property ownership well beyond the mills was a way for the mills to protect others from severe pollution and themselves from being sued.

The Secret Past of Recycling

Another big discovery was the enormous amount of recycling that industry did long before Earth Day. “The practice of turning byproducts into the valuable inputs of another industry is as ancient as economic development,” wrote economic geographer Pierre Desrochers.[4]

Desrochers cited a writer from the Warehousemen and Drapers’ Trade Journal in 1876 who argued that instead of letting fatty acids pollute streams, the wool textile industry had a better idea. The acids:

“have been precipitated from the factory liquor by a simple chemical process, and are thus not only prevented from becoming a direct and all but unbearable nuisance—which is the most important result for society at large—but are actually changed into a source of profit for the manufacturer.”[5]

In one paper, Desrochers cited 24 such articles from the nineteenth century or early twentieth century about “closing the loop” (that is, reusing waste). His article in the Journal of Industrial Ecology is a tour-de-force showing (especially) how animal products were recycled—as early as fashioning a flute from a bone 32,000 years ago. In 1875, bones were being used to make “knife handles, spoons, nail brushes, combs,” etc., says Desrochers. Animal intestines were used for musical instruments (“catgut,” although cat was not a source). Other products were glue, soap, and fertilizer, to name a few.[6]

Desrochers has had to inform (and counter) earlier writers who had ignored  past industrial recycling and more recent ones who reject his positive view of recycling without government coercion. “The extent to which by-product exchanges are facilitated by the market mechanism” is a ‘hotly debated’ issue,” wrote one of his critics. [7]

Hawks Are Part of Nature, Too

Let me conclude with the story of Rosalie Edge.[8]

Edge was an affluent and feisty divorcée in New York City in the early 20^th century. She loved birds and was a member of the National Audubon Society (NAS). But one day she learned that the NAS wasn’t interested in saving all birds. At the time, many states and counties had bounties on raptors like eagles and hawks, because they killed chickens and other small animals. NAS did not oppose the bounties; in fact, Audubon had an agreement with gun manufacturers that it wouldn’t oppose sport hunting,

Edge became an ardent but unpopular campaigner against bird hunting. Edith Roosevelt, the widow of Teddy Roosevelt, chastised her, although not by name. However, Edge figured out a way to save raptors without the National Audubon Society. She used the market.

In eastern Pennsylvania there was a mountain where every year hundreds of hunters gathered to shoot hawks as they flew by. She leased, and with others later bought, a portion of Hawk Mountain and closed it to hunters.

That land became the Hawk Mountain Sanctuary,, founded in 1934, a respected center for raptor research today. Rosalie Edge was ahead of her time in respecting birds of prey. And for free market environmentalists, she showed what one person can do in a market society.

There are many more examples of private protection of the environment, as well as justifiable critiques of the government’s efforts to protect the environment. You can find some here. In my view, they are  history stories worth telling.

[1] Harold Demsetz, “Toward a Theory of Property Rights,” American Economic Review 57, no. 2 (1967): 347-359, at 351.

[2] Demsetz, 352.

[3] Peter Davis, “Theories of Water Pollution Litigation.” Wisconsin Law Review 3 (1971): 738–816, at 777–80,

[4] Pierre Desrochers, “Industrial Ecology and the Rediscovery of Inter-firm Recycling Linkages: Historical Evidence and Policy Implications,” Industrial and Corporate Change 11, no. 5: (Nov 2002): 1031–1057, at 1035.

[5] Desrochers, “Freedom Versus Coercion in Industrial Ecology: A Reply to Boons,” Econ Journal Watch 9, no. 2 (May 2012): 78-99, at 86.

[6] Desrochers, “Market Processes and the Closing of ‘Industrial Loops,’” Journal of Industrial Ecology 4, no. 1 (January 2000): 29-43.

[7] Frank Boons, “Freedom Versus Coercion in Industrial Ecology: Mind the Gap!” Econ Journal Watch 9, no. 2 (May 2012): 100-111, at. 101.

[8] Richard Stroup, Eco-nomics: What Everyone Should Know about Economics and the Environment, 2^nd edition  (Washington DC: Cato Institute), 2-3, based on Diana Z. Furmansky, Rosalie Edge, Hawk; of Mercy: The Activist Who Saved Nature from the Conservationists (Athens: University of Georgia Press, 2010).