Environment and immigration

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.

This entry was posted in Uncategorized. Bookmark the permalink.

10 Responses to Environment and immigration

  1. Samuel J

    I agree with the last point on poor environmental policy which includes such decisions as not building dams and a carbon tax/ETS. Opposition to GMOs is another example of policy damaging the environment. Curiously, many if not most Greens policies are damaging to the environment. That’s because they don’t understand opportunity cost.

  2. Chris M

    Of course! Because the Somali, Iranian, Afghan, Iraqi and Pakistani immigrants really care about the environment.

  3. daddy dave

    Wow, lots of good points from Harry.

  4. C.L.

    A more intelligent reading of “market broadening” would revolve around industrial relations reforms, share ownership, wealth creating tax breaks and deregulation as well as the eschewal of Keynesian crowding out. Harry’s Nescafe Instant version, revolving around population increases, is baloney.

    If Australian environments do become poor that is not a consequence of excessive immigration but of poor environmental policy.

    Which ‘environments’ is he talking about? Two-thirds of the country is useless, uninhabitable scrub. Failure to build dams or open pointlessly quarantined ‘nature reserves’ – as well as wasting water resources on supposedly thirsty rivers – are the principal environment-impoverishing factors in Australia. Another 3 million people won’t alter these realities – in fact, the evidence suggests that a higher population will only encourage politicians to double down on stupid.

  5. TerjeP

    I shared my perspective on this issue in a set of two articles at the ALS recently.

    http://blog.libertarian.org.au/2011/02/13/giving-away-our-sovereignty/

    http://blog.libertarian.org.au/2011/02/15/liberalising-immigration/

    In a nut shell I think we should have “Fee Immigration” rather than “Free Immigration”. And the fee should take account of the political reality that immigration will be restricted and also the economic reality that some public infrastructure is a commons that is impacted by increased numbers but which can be readily expanded with immigration linked revenues.

  6. TerjeP

    p.s. I draw a distinction between restricted immigration and selective immigration. I can see the point of the former but less so the latter.

  7. Judith Sloan

    Following Jonathan Pincus’lead, I am not sure that the problem of congestion can be eliminated through correct pricing, eg. Pigovian tax. Sure, by imposing such a tax, the ‘optimal’ quantity of congestion is generated. But for all pre-existing residents, this is a higher level of congestion so there is a welfare loss for them. (This debate arose in relation to Max Corden’s call for a much higher Australian population.)

    This can be offset against the gains from trade of having a larger population but in this globalised world, I’m not convinced that a country needs to have a large population to exploit these gains, just openness to trade. In this sense, the Adam Smith world is a little different from now, because he could not envisage international trade in services, for instance.

  8. daddy dave

    Our National Park system is a disgrace. There’s no justification for locking ourselves out from vast areas of fertile, arable land that could provide food, housing, dams and other things.

  9. hc

    Judith, I wasn’t arguing for a larger population. I was simply setting out the respective viewpoints.

    For the congestion price the argument only goes through with privatised roads owned by current people. I don’t think that is broadly plausible. The only way around that is to levy a charge on entry equal to the expected damages and redistribute it to current residents.

    Trade can be a substitute for immigration – Heckscher-Ohlin theorem shows this – so too can capital exports as an alternative to labour imports. Lots of appeal with these options too since we don’t cop difficult to price externalities.

  10. Peter Patton

    I like this piece of Harry’s a lot. It is balanced, calm, respectfully pre-empts quibbles and dissents, treating them with respect and reason. Judith, I agree that harry was not arguing for a larger population. His whole line of thought leads to a negation of the possibility of such certainty, from a theoretical position. If I’m reading hi correctly, a kinda ore sophisticated version of Think Globally. Act Locally.

    4 Stars from me. Margaret?

Comments are closed.