Harry Clarke has posted his notes for a Productivity Commission meeting on the interaction between population and environment policy.
These alternative views comprise two alternative extreme ways of looking at the relation between population size and the environment. The first dates to the Reverend Thomas Malthus’s An Essay on the Principle of Population. This sees environmental resources – Malthus took specifically agricultural land – as common property. With population increase, existing cultivated land must be more finely divided among the progeny who came to cultivate it. In the absence of technical progress, this division would reduce the productivity of labour on existing land and force cultivation onto land with lower agricultural productivity. Both at the intensive and extensive margin, the result was lower labour productivity and lower incomes. While Malthus focused on land his views apply to any common property resource subject to congestion externalities – fish populations, forests, water and biodiversity resources, congested roads or the right to pollute the atmosphere with CO2.
Environmental resources can, alternatively, be viewed as assets that are private property subject to clear property rights. With this extreme view, increased demand for use of resources by new people increases their value to the pre-existing people who own them. This ‘market-broadening’ view sees the arrival of new people as increasing the value of assets held by the original people making them better-off. Provided the new people who create these enhanced values judge their lives as worth living in the expanded society, the fact of extra people provides a Pareto improvement in social welfare. This is related to Adam Smith’s views in the early chapters of The Wealth of Nations on the ‘gains-from-trade’ achieved by increasing the extent of markets. Although Smith did not expressly address the population issue he saw market broadening as a source of economic gains. Indeed from this perspective having access to extra people is precisely analogous to removing a barrier to trade such as a tariff. Smith was mainly thinking too about trade in goods but his analysis applies today to owners of land and mineral assets, the rights to drive on private roads or, with privately-owned emission quotas, the right to pollute the atmosphere with CO2.
The Malthusian or common property view of the population-environment link clearly suggests restricting population size whereas the private property view suggests that such restrictions will reduce the welfare of both pre-existing and new people.
I think that sums up the two dominant perspectives quite nicely. Harry points to the need to steer a middle-path given that economies tend to be mixed. Of course, this takes us into the realm of public choice and the like. I do think this point is correct.
If the choice instead is made not to price the environment but instead to restrict population, then society must forego the gains-from-trade associated with population increase. We are better off pricing the environment properly because gains arise from doing that directly but also because we can then better enjoy the gains from a possibly larger population.
Assets and resources should be priced as much as possible – where our views diverge is on the expectation of what prices should be. Harry would expect that environmental prices should be high(er) and I expect they would be low(er). To my mind the fact that a more comprehensive set of property rights in the environment have not evolved is due to the fact that they wouldn’t be as valuable as, say, Harry would like them to be. So the gains form trade are not high enough, while Harry might point to rent-seeking from incumbents etc.
The other point well-worth emphasising is this.
If Australian environments do become poor that is not a consequence of excessive immigration but of poor environmental policy.