One of benefits of the market mechanism,
by which, for example, economic goods are bought and sold, is that
self-interest is relied on; people don’t have to be told to buy or sell a product
because it can be in their self-interest to do so if the price is right. As an
alternative to regulatory standards, a government can create units of pollution-allowance
that businesses can purchase so to be lawfully able to pollute in so far as a
purchased unit allows. In the E.U.’s emissions trading system, “operators of
power plants and factories have to buy tradeable allowances to cover every
tonne of carbon dioxide they emit.”[1]
Business could buy and sell allowances so as to cover the amount of pollution
that is anticipated. In this way, the market mechanism efficiently allocates
pollution in line both with the interests of the companies and the public
interest—the latter being made concrete in the decision on how much pollution
per allowance and how many allowance units to create. Crucially, the company
private interests are put within the purview of the public interest; the
tail is not directing the dog. In political economies in which political-campaign
contributions by businesses are high, especially if unlimited, the tail can
indeed wag the dog, such that the public interest is determined by private
interests. This is one reason why the Citizens United (2010) U.S.
Supreme Court case is so significant. It allows corporations and labor unions
to spend unlimited amounts of money on political campaigns and directly on
advertisements—both being beneficial to elected officials in positions to curry
favor through legislation and regulations favorable to business (or labor). The
informal exchanges of political donations and legislation or regulation
comprise a market of sorts. So, the market mechanism, which is created or at
least regulated by government, can serve for good or ill, from the standpoint
of the public interest. Using the
mechanism, such as the E.U. president proposed in 2024, on behalf of ecosystems,
is for good rather than ill, and thus using, in effect, the self-interest of
farmers could be better than relying on regulatory requirements that farmers
expend some money and effort to beef up their local ecosystems.
At a conference on September 13,
2024, a Friday, E.U. President Ursula von der Leyen said, “We need new
financial tools to compensate farmers for the extra costs of sustainability and
compensate them for taking care of the soil, the land, the water, and the air.”[2]
The assumption is that the farmers would not otherwise do so because expending
the energy and paying the costs for the externalities would not add to their
profits from farming in the short or medium term. The time-value of money too
reflects the penchant in human nature for immediate over delayed gratification.
To extend the farmers’ “event-horizon” and broaden out their concern to include
their vicinity would be the purposes of “the market-based system of ‘nature
credits’,” which Von der Leyen hinted “could also be applied beyond the agricultural
sector.”[3]
This is part of the beauty of the market mechanism: it can be applying to
various things, serving various purposes, rather than only pertaining to economic
products and services.
Via “nature credits,” a water
company could have the incentive as per self-interest to help to take care of a
spring that that company depends on, and a fruit company would be more likely
to invest in the “essential work of pollinators.”[4]
That the language of long-term investment applies raises the question of why
farmers in general do not do what manufacturing businesses do as a regular part
of business. It would seem that making sure that a principal water source is
not lost or that bees stay in the area of the fruit trees would be in the
self-interest of the respective companies. Why would compensation by the government
be needed to run a sustainable business?
Is the managerial perspective really so delimited that the viability of
the business is not included?
Unfortunately, even by 2024, climate
change was perceived by many business practitioners still as a gradual and
outside process not germane to business. Johan Rockstrom of the Potsdam
Institute for Climate Impact Research, said at the same conference, “I can tell
you, science is clear today that the ultimate determinant, what regulates the
stability of the planet, its ability to stay in a desired equilibrium state is
nature.”[5]
According to a journalist, Rockstrom was “suggesting that action of biodiversity
and climate made sense even if purely pragmatic.”[6]
If farmers didn’t yet see it as such, “nature credits” would help render
biodiversity pragmatic from an agribusiness standpoint—essentially interiorizing
some externalities.
To be sure, even if a private interest broadens out to include some hitherto externalities, that interest is still not the same as the interest of the whole: the public interest. It would still be important to protect the public interest from being captured by a private interest; a large company or an industry that would implicitly presume to be in charge of its own regulation by dictating legislation and regulation to sycophantic government officials should be withstood by them. Even so, expanding the practical purview of private interests is in the interest of the whole, and the market mechanism can be used to make this so.
1. Robert
Hodgson, “Von
der Leyen Moots ‘Nature Credits’ Market to Avert Ecosystem Collapse,” Euronews.com,
September 13, 2024.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
