Can Free Markets Protect the Environment?

Many people believe that free markets cause environmental problems, but in fact the absence of markets—often called the “tragedy of the commons”—underlies most environmental problems. This tragedy occurs where there are no private property rights, or where private property rights are flawed or incomplete. Government regulation is often adopted to solve the tragedy of the commons, but it does not necessarily achieve the goal, and if it does, it may not do so in an equitable or efficient manner.

To answer the question of whether free markets can protect the environment, you should understand the concept of the tragedy of the commons, the benefits of private property rights in environmental protection, and the nature of government regulation.

  1. “An Interview with Terry Anderson,” by Lynn Scarlett. 2001. Tech Central Station, at: http://www.perc.org/perc.php?subsection=9&id=436.
  2. “The Tragedy of the Commons,” by Garrett Hardin. 1993. Concise Encyclopedia of Economics, ed. David R. Henderson, at: www.econlib.org/library/Enc/TragedyoftheCommons.html.
  3. “Business and the Environment: Is There More to the Story?” by Jane S. Shaw.2005. Business Economics, January, at: http://www.perc.org/perc.php?subsection=10&id=538.

You might also want to read “Bootleggers and Baptists in Retrospect,” by Bruce Yandle. 1999. Regulation. 22(3). Go to www.cato.org/pubs/regulation/regv22n3/reg22n3.html and then click on title of article.