The Free Market Case for World Government

(in five bullet points)

• The sine qua non of free market economics is secure property rights.
• The likelihood of severe and potentially catastrophic anthropogenic climate change is in part a consequence of our inability to enforce any right to protection from the harm to life and property caused by the cross-border impacts of greenhouse gas emissions.
• A secure regime of property rights requires enforcement and (in the long run) legitimacy.
• The existence of cross-border impacts requires the cross-border reach of enforcement and legitimacy.
• This implies a relatively strong version of world government.

What could be clearer?

–Paul Baer (pbaer@ecoequity.org)
Atlanta GA, USA

Comments:

  1. When people have argued against the possibility of any meaningful international agreement to take action on climate change I have sometimes cited the example of the WTO as an example of an international institution set up to ensure compliance with agreements between countries which does more or less work. And that is based on impeccable free market principles.

  2. Its a case, but its only compelling if you think economics trumps politics. There are no countries run on pure free-market lines. The US, for example, very clearly isn't.

    Economic grounds would have no customs duties for example.

    So on economic grounds this is fine. Since it ignores politics, it is doomed to fail.

  3. This is a response from a free-marketeer, in case any of you were interested. My apologies for the length - the issues are complicated.
    (If it's too long, then please reject it outright - I'm not happy about being edited or paraphrased.)

    The sine qua non of free market economics is the absence of coercion about what to trade, whether to trade it, and with who. Secure property rights are a prerequisite for trade, free or otherwise. Protectionism relies on secure property rights too.

    The argument in bullet point 2 isn't clear. International trade would be impossible without any form of property rights protection, or protection from harm to life and property resulting from that trade.

    Protection from harm done to third parties is not covered by free trade economics, but by adherence to JS Mill's Harm Principle, (that the only justification for society to coerce an individual is to prevent significant involuntary harm to others). Trade between nations is required to follow the laws in both jurisdictions. If you don't like those laws, then don't trade there. But what is being discussed here is the impacts on third parties with who no contractual or trading relationship applies. Thus, it is not directly related to free market economics - and indeed in seeking to create legal obligations between individuals who have not mutually consented to abide by them, is somewhat opposed to it. It is a constraint on the free market, rather than a consequence or requirement arising from it.

    I think this argument is alluding to the 'tragedy of the commons' issue surrounding 'public goods' (in the sense of being non-rivalrous and non-excludable, not in any more everyday sense). Where the benefits are individual but the costs are shared, there isn't the same motivation to balance the two, and everyone suffers consequences out of proportion to the benefits.

    One standard solution to a 'tragedy of the commons' is to introduce private ownership of the resource. In this case, the idea would be to create private ownership of the atmosphere over a patch of land, and charge people for the right to emit gases into it. You are not just emitting into the air above your own land, but also into the air above other people's land too. I assume this is what is meant by the reference to property rights.

    If this principle was accepted, it wouldn't even require harm to be proved. You could charge your neighbours for any and all changes in atmospheric composition. You could charge people for breathing, you could charge them for the oxygen that trees on their land release, and you could charge at any rate you liked, and they would have no choice but to pay since they can't prevent the gases crossing your land. That of course would result in retaliatory charges in response, and it would all eventually either cancel out, or go to the ones with the most vicious lawyers.

    It's fairly obvious from the above why such a right is not generally accepted. Private ownership of the atmosphere is not a viable solution in this case, because it is physically, not just legally non-excludable.

    The situation regarding harm done to others, on the other hand, does not rely on property rights. Harm done to a person with no property at all is still due compensation. There are already treaties in place that can handle some aspects of cross-border harm, so this is at least a legally feasible solution. However, it is true that it is limited by national sovereignty, which is required for democratic consent, through mutual acceptance that the harm is real.

    To illustrate the issue here (and drawing no parallels), consider the case of a strongly religious nation who believe that general sinfulness angers the Gods, thus putting all mankind at risk of divine retribution in the afterlife, and that they have a religious duty to prevent sin by any means necessary. They wish to obtain compensation for the harm you are doing to them by your sinful ways.

    What people do in their own country is their own affair, but for other nations who do not adhere to the same religion, and who do not accept that harm is being done, there is a clear requirement that any harm done has to be proven by means consented to by all parties. Sovereignty goes some way towards meeting that.

    Anyone proposing a coercive government solution to a problem should always consider what happens when their ideological opponents get into power. Each political party should always remember that the opposing party will inherit the same powers and precedents when they get voted in. Too many of these schemes are justified on the basis that the 'right people' will be in charge, and will apply the rules sensibly.

    The justification for liberty is that the harm done by bad people having power over good outweighs the benefits of good people having power over bad, (where 'good' and 'bad' usually means 'us' and 'them'). It's far better for nobody to have power anyone else, for all options to be freely chosen, and for all approaches to compete and demonstrate their merits by their results. It's not perfect - nothing is.

    And finally, I'll note that there are in fact perfectly viable free-trade options for addressing the harm done by anthropogenic climate change catastrophe. One of these is to trade 'climate bonds', which are time-limited agreements to pay out generously on the day a specified climate-related disaster occurs, such as the sea level rise passing one metre (or the reverse, if the end of term is reached without such a disaster happening).

    People who differ in their beliefs about future climate will differ in the value they assign to these bonds, and so will be willing to sell them and the corresponding obligations to one another. They can be used to raise funds for mitigation or Green technology development, or as insurance, an investment, or as compensation for lost business. It creates a present-day financial representation of future consequences, making them subject to the market mechanism. Prices will reflect people's real beliefs, and will converge on the truth as time passes. Those initially most certain of their beliefs will be the most personally vulnerable financially as new information comes in, and will soon be individually motivated to take action to limit their losses. Whoever turns out to be wrong about climate change will pay the price.

    A 'futures market' is a standard way of responding economically to an uncertain future, and the financing of the necessary responses, in just these sorts of situations. And it doesn't require a world government.

  4. Remind me: what was the purpose of national borders? Sovereignty is good for what, if wealth and resources are truly free to flow?

    Oh yes, law. Law distinguishes one country from another. Are some legal systems better than others? What if one country has a system of law that impinges on the legal scope of another country, such that (for instance) one system of law refuses to recognize external costs while the other does? Do we have room for that, when the atmosphere routinely transgresses national borders?

  5. Thanks for the thoughtful comment. Some of your points are quite plainly true, e.g., that non-free markets rely on secure property rights as well. And while I would argue that your definition of free markets means there aren’t any, I’ll accept it as an ideal type, and won’t quibble about whether a prerequisite for a sine qua non is also a sine qua non.

    You’re correct that I am looking at this as a tragedy of the commons, and unsurprisingly we come to the same conclusion about the non-viability of pure privatization of atmospheric rights. But it seems that we diverge after that because of a presumption on your behalf that granting coercive power to enforce liability against the citizens of sovereign states to a global institution is too dangerous to be tried. Your example plays to this intuition, but the premise you rely on – that “there is a clear requirement that any harm done has to be proven by a means consented to by all parties,” and that “sovereignty goes some way towards meeting that” – seems to me to be overtaken by events. That is to say, I believe that, given the evidence of the likelihood and magnitude of the harm from unabated emissions, the risks of not making the necessary concessions of sovereignty are the greater ones.

    More to say but not tonight!

  6. "But it seems that we diverge after that because of a presumption on your behalf that granting coercive power to enforce liability against the citizens of sovereign states to a global institution is too dangerous to be tried."

    Not precisely. I'm saying that in practice the exercise such powers can't be restricted to just those policies we like. To create the power for our own purposes is necessarily to grant our opponents the same power for their purposes. Knowing this, the wise always build in safeguards and controls into power, to limit the extent to which they can be used against us. National sovereignty is one such safeguard.

    Or to put it more directly, imagine creating this World Government with Senator Inhofe elected as its first president!
    The US government has the power to regulate its own CO2 emissions, but does not. China and India could agree to emissions cuts, but do not. Why would a World Government be any different?

    People arguing for coercive solutions usually implicitly assume that they or people of their own opinion will always be in charge. It seems to be a common blindspot. If they're permanently in the majority, that might be a reasonable assumption, but it's not a safe one.

    "That is to say, I believe that, given the evidence of the likelihood and magnitude of the harm from unabated emissions, the risks of not making the necessary concessions of sovereignty are the greater ones."

    That may be the case. The problem with it is though that many other people have said exactly the same thing about other crises, and "temporarily suspending democracy for the duration of the emergency" is such a favoured tactic that it has become a cliche.

    As a result, the safeguards have been explicitly set up so they cannot be so easily overridden, even in the case of a genuine emergency. If you can muster the necessary evidence to prove to everyone's satisfaction that it really is justified this time, then you'd be able to do it democratically anyway.

    Again, a coercive solution is being proposed - the power to override sovereignty in an emergency - without considering how it might be abused by one's opponents. The implicit assumption is that only we get to decide when it's justified and we will only do so for this particular emergency. Is that realistic?

    There may be a solution to this problem, but I don't know of one, and I do think proposals should at least address the issue. Hard to do in five bullet points, though!

    I shall look out for your next installment. 🙂

  7. Pingback: Another Week of GW News, March 3, 2012 – A Few Things Ill Considered

  8. You argue for world government, when governments are the biggest polluters of all. They simply make it legitimate to pollute on private property, and then individuals have no legal method of recourse.

    http://mises.org/rothbard/newlibertywhole.asp#chapter-13

    Read that one chapter, about ten minutes of your time, and tell me why a world government would cause less worldwide pollution.

  9. I did take the time to read the chapter you refer to. And I've been reading Hayek this semester already (I'm teaching an undergraduate course in political economy, and one of our readings is from Tom Woods, also of the von Mises Institute).

    So my main thought is this: much of what Rothbard writes is descriptively true, but I think he has a very poor understanding of why things happen the way they do, or how they could be changed. Why do governments allow some corporations to pollute, in violation of the property rights of "ordinary" citizens? Because the accumulation of private capital creates concentrations of wealth that that are able to unduly influence governments. What tools are available to prevent private interests from manipulating the politics in their cities or regions? Federal government. If government has become a problem because it is colluding with private interests, you have only democracy available to change it. But if you limit the power of government to regulate business, then you have only the courts. But how do courts enforce their judgments?

    The problem I raised in this topic, of course, was precisely that the polluters are in this case located in other countries. How besides world government (courts with associated enforcement powers) can you prevent greenhouse gas pollution from other countries?


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