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Tanstaafl: Economic Strategy for Environmental Crisis

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TANSTAAFL derives it's unusual title from a science fiction novel by Robert Heinlein. Heinlein imagined a lunar colony facing ecological catastrophe and outlined an old fashioned revolutionary war for independence, once that owed more to Thomas Jefferson than Che Guevara, as the solution. But how did this get to economics?

"The fundamental principle on which this strategy is built may be expressed in a simple slogan--There Ain't No Such Thing As A Free Lunch, the "TANSTAAFL principle," for short. The TANSTAAFL principle is closely related to the fundamental theorem of ecological economics, that everything depends on everything else. Everything worthwhile has a cost. Whenever you think you are getting something for nothing, look again--someone, somewhere, somehow is paying for it. Behind every free lunch there is a hidden cost to be accounted for."

"The task of ecological economics is to figure out how to restructure the economic system so that these hidden costs will be brought out into the open, with the ultimate aim that no one who benefits from the use of the environment will be able to escape without paying in full. The rest of this book is devoted to working out specific applications of this general strategy in order to deal with specific problems."

Those quotes are from the author, Professor Edwin Dolan, a leading Austrian school economist. The 'Austrians' are noted for their strong support for free market economics, generally arguing from philosophic and logical grounds, rather than from the more empirical approach favoured by most mainstream neoclassical economists. This book, written way back in 1971, addresses the concerns of the then newly emerging environmentalist movement from a free market perspective. This was the era of the first views of our planet from orbit. It was the era of "Spaceship Earth", "the Population Bomb" and the release of the Club of Rome's "Limits To Growth" report predicting a global ecological disaster by the end of the 20th century unless current growth trends weren't halted. Professor Dolan almost single handedly argued the case for a synthesis of Earth First and free market concerns. He saw this as not only possible, but vital for the achievement of the ends of both schools.

Dolan argued that the environmentalists' dependence on government regulation and control as their political means would ultimately undermine their ultimate environmental ends. Environmentalists needed the free market economy to help release them from their dead end relationship with big government. At the same time the free marketeers needed to realise that if the planet faced a genuine eco-crisis, as Dolan believed was in the offing, their traditional concerns for and achievements in establishing private property and individual freedom, could easily be lost, thrust aside by emergency measures in the absence of a genuine 'market liberal' environmental solution.

Since 1971, the old concerns of over-population and 'Limits to Growth' have rightly or wrongly been downgraded. The planet and mankind survived the 20th century and indeed most indicators of human welfare are at or near all time highs. Certainly the most alarmist warnings of the seventies now seem hollow. Dolan never took the hardline contrarian position denying these issues in his book, but he did argue against panic based reactions. History would have seemed to have validated Dolan's wisdom. Today the concerns expressed so crudely in the 'Limits to Growth' models have been diffused, if not exactly defused. Also since 1971, the collapse of the Soviet bloc has vividly highlighted the environmental failures of state socialism. Events again validated Dolan. This issue was barely noticed back when TANSTAAFL was written.

In a sense TANSTAAFL has stood the test of time well. And it still may be relevant. Instead of simple growth models predicting doom, today we have highly complex climate models predicting a planetary crisis somewhat less apocalyptic but certainly undesirable. So Dolan 1971 isn't obsolete. Unfortunately the gap between free marketeers and environmentalists is now not only wider than ever, but the relationship has evolved from mutual ignorance to mutual antipathy. This is bad for both groups.

Dolan's warnings about the 'public choice' biases of government as an "environmental umpire" are as valid today. Indeed more so. Governments and corporations have perfected their greenspeak and faux environmentalist 'astro-turf' lobbying abounds. Following on the heels of unsuccessful American supersonic transport builders using green concerns to handicap their competitors, the EU, in particular, has developed a wardrobe full of green disguises for old fashioned corporate protectionism. As Dolan warned, and environmentalists continue to ignore, governments are in the end more likely to protect their revenue base and the interests of their major supporters rather than the best interests of the ecosystem. The realities of political organisation mean that 'everybody's business' is frequently nobody's business. Mass green consiousness is just not going to change that. Environmentalists have something still to learn from Dolan.

Free marketeers likewise. Environmentalism has grown from a fringe concern to a mainstream election decider in virtually every electorate in every democracy. The contrarian position taken by many modern free marketeers certainly has it's curmudgeonly delights, but in the end curmudgeons don't win elections. Interestingly this self imposed fringe position is really something of a historical anomaly. The original classical liberals saw themselves as defenders of the natural order versus the arbitrary mechanics of mercantilism. Nature loomed large in their thinking. The physiocrats, the school of economic thought that provided the real roots for Adam Smith, saw themselves as the champions of the countryside versus city and industrial interests. Conservative sociologist Robert Nisbet in his book "The Social Philosophers" defined Adam Smith and the physiocrats, along with Benedict of Nursia, Proudhom and Kropotkin as advocates of "The Ecological Community". In the US, from about 1850 to 1950, the southern agrarians and northern agrarians, although not explicitly 'free market', were both heirs of the old physiocrat tradition and often more consistent opponents of big government than many conservatives who most loudly professed their allegiance to free enterprise. Today's "Crunchy Cons" are in their direct descent. In Europe the 'distributists' provided something of a parallel. Although generally not economics oriented, their opposition to what Belloc called 'The Servile State' certainly equalled Hayek's opposition to 'The Road to Serfdom'. Interestingly it's the distributists, and the highly original environmental thinker E.F.Schumacher (of 'Small is Beautiful' fame) who may indeed be pioneering the synthesis Dolan wanted.

Since Dolan wrote most, if not all, free marketeers have failed to take environmentalists' concerns seriously. They are all too ready to write off any and all green crusades as "just another scare campaign". There have been too many scare campaigns and the greens have cried wolf far too often. Still this doesn't let the market liberals off the hook. The boy who cried wolf, was actually, tragically, right in the end. Yes, there is a need to treat new scares with skepticism, but kneejerk denial is as blind as fear mongering panic. There is a need to develop the intellectual, and ultimately the institutional tools, necessary to allow the Spaceship Earth, and it's market based engine room, to work more in well tuned harmony and less like a jalopy with a wrongly geared motor.

It would be wonderful if Professor Dolan revisited TANSTAAFL today and reviewed it's historical performance. Interested readers will be happy to learn that he is still writing on eco-economic issues today. It would be great if he were to update TANSTAAFL and modernise it for our era of greenhouse gas and ozone holes. Still we have the original book so there is always a chance that the path not taken may eventually be returned to.