Freeman

ARTICLE

Who Conserves Our Resources?

JULY 01, 1962 by RUTH SHALLCROSS MAYNARD

Dr. Maynard is Assistant Professor of Eco­nomics, Lake Erie College, Painesville, Ohio.

"Who should conserve our re­sources?" If a poll were taken, a large majority probably would answer: "Our federal and state governments." And if one were to ask why this view is so widely held, he would find among other "reasons" the following:

1)      that the free market is chaotic, gives profits to the few, and is unmindful of the great "waste" of our diminishing limited resources;

2)      that "people’s rights" are above "private or special inter­ests" and only the government can properly serve the public interest;

3)      that government has access to more funds;

4)      that government has the power and facilities to obtain all the necessary data and to do the research needed for the best "sci­entific" decisions on resource con­servation;

5)      that the price system does not operate in the interests of conservation because of the "unre­strained pursuit of self-interest";

6)      that the concentration of power in some corporations fur­ther threatens our dwindling re­sources and must be regulated by government.

Refuting the "Reasons"

These "reasons," of course, do not indicate how a government agency would go about attempt­ing a solution to the conservation problem—this is always just as­sumed—but consider them briefly:

(1a) The free market is any­thing but chaotic. Competing nat­ural market forces reflect in prices the wishes of both buyers and sellers—millions of individu­als, separately accountable and re­sponsible for their own actions in their own field of economic ac­tivity. All persons seek their own advantage when allowed a choice, but in the free market a producer cannot profit unless he pleases consumers better than his com­petitor does. Since he must think of efficiency and lowered costs in order to survive, it is false to as­sume that he alone profits from the use of natural resources from which are made. the products wanted by consumers. All gain who use the resulting products.

(2a) Can there be "people’s rights" superior to the rights of individuals? All individuals have special and private interests and rights. Therefore, the "people" cannot have rights except individ­ually; and the right to life car­ries with it the right to maintain it by private and special means.

(3a) The government has no funds that have not been taken from the people by force, whereas many a large private undertaking has come forth from voluntarily contributed funds. In fact, the en­tire industrial development in this country has been a continuous ex­ample of this voluntary way of creating the facilities for produc­tion by giving the consumer what he wants at the price he is willing to pay in competition.

(4a) Offhand it would seem that a government might have ac­cess to more data about scarce re­sources than would a private en­terpriser. But government can­not bring forth the detailed in­formation so vital to sound deci­sion. The kind of detailed knowl­edge needed simply isn’t "given to anyone in its totality," as Hayek has pointed out.1 "Knowledge of the circumstances of which we must make use never exists in concentrated or integrated form," he states, "but solely as dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess." Yet, producers need such informa­tion before they can decide how to act. The chief communicator of this knowledge is free price move­ments. If the price of a given re­source continues upward, this tells producers all they need to know about its increasing scarcity and signals them to conserve it, to use it sparingly and for the most val­uable products. Advocates of gov­ernment planning never seem to grasp how this works, for they are constantly tampering with market forces, distorting the deli­cate price signals that could otherwise guide them. Thus, gov­ernment planners must rely on using general data obtained by crude polling methods which are unreliable for action in specific economic areas and are out of date before they can be collected, analyzed, and summarized. More­over, such studies cannot tell the government controller as much as free price movements tell indi­viduals acting in a particular market as buyers or sellers.

(5a) The role that prices play in the free economy is so little understood that many people be­lieve government must set prices lest they reflect only the "selfish interests" of the producers. The price system not only tells pro­ducers and consumers when scar­city of a product exists (prices rise) or when it has become more plentiful (prices drop); it also supplies the incentive to act in the interests of conservation by seek­ing a substitute for the high-priced scarce material. Competi­tive prices allocate scarce re­sources to those who will pay more (not those who have more, as is al­leged) for the right to try to serve consumers efficiently and profitably.

(6a) If concentration of power in corporations is too great to be permitted, what about the ulti­mate concentration of power in a government institution beyond the regulation of market forces? Gov­ernment is unaccountable in the sense that it is not obliged to please consumers in order to stay in business. If it does not show a profit, its losses can be covered by tax money. Big corporations can behave in monopolistic fashion only if they enjoy government privileges of some kind. Potential competition, substitution, and elasticity of demand force them to keep prices close to the competi­tive level.²

When Government Controls

The foregoing arguments, how­ever, do not touch upon the basic problem involved in the conserva­tion of resources. Let us assume that Congress passes a conserva­tion law setting up "The Federal Bureau of Conservation." Tax money must then be appropriated for this Bureau. The director, a political appointee, must find a building and hire a staff large enough to justify his salary. To investigate and collect data on what is being done is a time- and tax-consuming job.

Turning the conservation prob­lems over to an agency with po­lice power does not mean solution, however. It only means that the director has been given the au­thority to find a solution and to force it on those individuals who are in the market for natural re­sources. This does not assure the public that the director has any special grant of wisdom concern­ing the problems involved, or that he will even know what they are. This appointment would lead him to assume that individual enter­prisers were not doing their jobs well. He would undoubtedly define his task as one of finding what individual enterprisers are doing wrong and stopping it. Such in­terference could only prevent pri­vate individuals from utilizing their creativity and energy in seeking a solution to both imme­diate and long-run conservation problems. Having stopped this flow of creative endeavor, he would need to find a "positive" so­lution—such as stockpiling by force certain quantities of those materials deemed most scarce.

Difficult Decisions

But for whom would the di­rector be stockpiling? Would he sacrifice the present generation to future ones? And, if so, which ones? The next generation, the one after that, those living a hun­dred years from now, or whom? And how could he possibly know what those generations would want or need? Moreover, he would have the problem of what quan­tities to stockpile and what grades (best or worst) to save. Would some items have alterna­tive uses? Would he plan for pos­sible added or new uses in the future? These questions never seem to be asked by the authors of books and articles on conserva­tion, whose specialty is to con­demn private enterprise.

Stockpiling only aggravates the very scarcity given as the reason for stockpiling. The more scarce a stockpiled item, the higher the price, and the more complaints to be heard from the users. Where­upon, the director probably would seek power to fix prices lower than market levels. This, of course, could only lead to in­creased demand and pressure on prices, leading to black markets or government rationing, or both. Allocation by rationing would pre­sent the problem of whom to f a­vor and whom to slight. His au­thority to discriminate would subject the director to strong politi­cal pressures. If not by political favoritism, the director could se­lect by personal preference, or first come, first favored. Any sys­tem is discriminatory. The system of government planning implies arbitrary discrimination by one man with police power who de­cides who shall get what. With­out personal favoritism, the free market "discriminates" against those who would waste scarce ma­terials—it lets their businesses fail—and "discriminates" for those who would most efficiently use the resource to serve con­sumers—their profit depends on their capacity to conserve the scarce resource.

The government system is based on arbitrary decisions of man over man, with strong prob­ability of political influence; the free market system is influenced by nonpolitical and nonpersonal forces. There is no other alterna­tive. The first system leads to static conditions which cannot meet the changing needs and de­sires of consumers, the "people" most involved and presumably those whom a conservation agency ought to protect. The business way encourages search for substi­tutes when price rises indicate growing scarcity. This not only aids conservation but also affords the consuming public more rea­sonably priced alternatives in times of scarcity. When prices are fixed below market levels by the government director, this discour­ages conservation and gives a false signal as to the degree of scarcity all the way from the natural re­source level to the final consumer.

Private Enterprisers Conserve What Is Worth Saving

Until someone discovers that a resource has a specific use, it has no value for which it should be conserved. Alexander the Great had no use for the reservoir of oil beneath his domain. The under­developed countries do not lack resources. But they have not yet found the key (personal saving and competitive private enter­prise) by which to utilize the re­sources to meet the people’s needs. Private enterprisers are constantly trying to find new ma­terials and new uses for known resources, always looking ahead to see which ones will be available and how efficiently they can be utilized. Pick up any trade journal and note the articles on how to cut costs, utilize waste materials, be more efficient. Because the government told them to? No. The hope of profits acts as a powerful compulsion to be efficient, to im­prove, to conserve. The following examples show how private enter­prisers eliminate waste and utilize natural resources to meet the needs of the consuming public. Until natural gas was known to be useful as a fuel, petroleum pro­ducers burned it to get rid of it. Until ways were found of storing and transporting gas with safety, it had only local use. Competition forced the search for further uses and wider markets, and profits re­warded those who best served con­sumers. As ways were found to handle -gas beyond local markets, consumers elsewhere gained a wider choice of fuel, and other fuels were thereby conserved.

Reliance on Hindsight

Accusations of waste in private industry are always based on hind­sight. Any statistics of inadequate use of natural resources are his­tory. When a new method or new use is discovered, it is easy to point out past waste and misuse. The assumption is that industrial­ists are wasteful if they haven’t seen in advance all possible uses for all materials.

The meat-packing industry over the last century has used all but the squeal of the pig. But this did not come all at once. Nor did or could it have come from govern­ment decrees. It came slowly through individual efforts to cut costs and increase profits in com­petition with others.

In the lumber and pulp-paper industries, uses have been found for virtually all of a tree, in­cluding the bark, branches, and sawdust which were formerly "wasted." The "waste" lignin, after removal of the carbohy­drates, has been the concern of many a pulp company as well as scientists at The Institute of Paper Chemistry, who have yet to find a use that will meet ade­quately the competitive market test of consumer choice.

With the increasing scarcity of pure water, the pulp and paper in­dustry has used less and less of it per ton of product. When wood became scarce in Wisconsin, the "Trees-for-Tomorrow" program was instigated, encouraging farm­ers to grow trees as an added cash crop. As salt cake from Saskatche­wan grew scarce, the Southern kraft-pulp mills learned how to re­claim it and cut the amount needed per ton of pulp by two-thirds or more. Could such a con­servation measure have been forced by government decree? It is most doubtful.

In the agricultural field are many illustrations of continuous improvement: of tools (the his­tory of the plow alone would make an impressive volume); of methods of utilizing land, fer­tilizers, insecticides, and seeds; of knowledge of genetics, hydropon­ics, and radioactive materials.

All of these have played a vital part in getting better farm prod­ucts to the people with fewer man-hours and at less cost. These all conserve time.

Time also is a resource. Con­serving time can save lives from starvation, give relief from back­breaking jobs, enable individuals to further achieve their respective purposes. Improved tools have won time for more leisure, for increas­ing recreational, cultural, educa­tional, and religious activities.

Individual Improvement

Improvement of the well-being of individuals, rather than con­servation, is the chief goal in the utilization of resources. Absolute conservation could lead to the ab­surdity of not utilizing our re­sources at all, and thus conserving to no purpose—no freedom and no improvement of our lives. J. S. Mill has expressed it thus: "The only unfailing and permanent source of improvement is liberty, since by it there are as many pos­sible independent centers of im­provement as there are individ­uals." The energy of the police force of a government agency must by its very nature be nega­tive. Enterprisers are positive, constantly trying to solve spe­cific problems. It is impossible to force the release of the creative energy of millions of individuals who, if free, are each highly moti­vated to release it in trying to im­prove their status. Thus, force only inhibits the real sources of improvement.

Because individuals have been free to find the best use of land resources, the American farmer today feeds himself and at least 25 others. In our early history food production was the principal occupation, and in some countries today as high as 90 per cent of the population still spends long hours of backbreaking work farm­ing for a bare subsistence.

Who Is Responsible for Waste?

The real waste in resources comes from government policies. It is seen especially in wartime, but more and more in peacetime programs. The government farm program has encouraged waste of land, seeds, fertilizers, labor, and capital by subsidizing the produc­tion of surpluses to be stored in bins that dot the countryside. The foreign aid program has wasted various resources, sending them to countries where little if any use has been or could be made of them. Waste occurs in such proj­ects as the TVA that floods per­manently many fertile acres which formerly provided millions of dol­lars worth of food products and which the Army Engineers have estimated would not be flooded by the natural forces of the Tennes­see River in 500 years.

Rising taxes also promote waste. The corporate income tax of 52 per cent of earnings, for example, encourages industrialists to en­gage in questionable and wasteful projects which appear justified only when purchased with a 48-cent dollar. This is not in the in­terests of conservation.

However, the errors individuals make and their waste of resources are small and inconsequential compared with those made by gov­ernment agents in controlling a major supply of a scarce resource. Those in civil service positions are rarely dismissed or otherwise held accountable for their errors. A private individual stands to lose personally if he wastes re­sources in his field of economic activity, and has a built-in moti­vation for attempting to correct his mistakes as soon as they are reflected in rising costs or de­creasing demand. A government agent, however, risks no personal loss when he misuses resources, he cannot recognize mistakes by ris­ing costs when prices are fixed arbitrarily, nor is he motivated to correct his mistakes even when recognized.

Natural resources are best util­ized and conserved where they meet specific economic require­ments in the most efficient way as determined by competition in the free market. Government control of natural resources reduces the freedom of choice of producers in using these materials and this affects adversely the freedom of choice of consumers who buy the final products made from them. There is no effective method of determining the economic require­ments of the people when the free market is not allowed to reflect them, nor can force solve the problem of conservation. It is a false panacea that is centuries old, advocated by those who de­sire power over others whom they neither trust nor respect. Con­servation will take place in the best sense where individuals are allowed to seek solutions to their own personal problems as they arise. Necessity is the mother not only of invention but of conserva­tion as well.

 

***

Ben Moreell

We conserve natural resources by using them in the most efficient and economic manner… If a given project cannot pass the test of economics, that is a sure sign that it is not conservation but waste.

Our Nation’s Water Resources—Policies and Politics

Foot Notes

1 F. A. Hayek, "The Use of Knowledge in Society," The American Economic Re­view, Vol. XXXV, No. 4, September 1945.

2 Hans Sennholz, "The Phantom Called Monopoly," THE FREEMAN, March 1960.

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