American Environmentalism Turns on Markets, Mandates, and Institutional Tradeoffs

American environmental policy, as Terry Anderson framed it, should begin from a blunt premise: environmental problems do not have final “solutions” so much as tradeoffs that must be made by someone. Anderson took that premise from Thomas Sowell’s line, shown on his single slide: “There are no solutions. There are only trade-offs.”

Anderson said the line changed how he thinks about markets and the environment, including work he has long introduced through property rights. The ordinary language of “solutions,” in his view, hides the central institutional question: who decides what is worth giving up for what gain?

He used a deliberately small example. A leaky faucet appears to have a simple solution: fix it. But even there, he said, the real decision involves tradeoffs. Should he repair it himself with poor plumbing skills, or call someone who is better? The same logic applies to environmental policy, only with larger stakes. “Stop emitting carbon” may sound like a solution, he said, but it immediately raises tradeoffs.

For Anderson, the markets-versus-mandates question is fundamentally about how those tradeoffs are made. In a market setting, property rights allow owners, buyers, and sellers to decide whether to keep land or sell it, whether to continue one use or shift to another. The “willing buyer, willing seller” structure is what lets people discover gains from trade.

Mandates shift that decision-making to politics, politicians, and bureaucracies. Anderson said the environmental movement in the United States helped identify the environment as a problem, but “quickly morphed into a mandates approach.” He pointed to the “alphabet soup” of agencies and acronyms, including EPA, as evidence that mandates have dominated American environmental policy.

That dominance, in his view, is not inevitable. The project he described asks whether property rights and markets can structure environmental decisions in ways that better reveal costs, benefits, alternatives, and human ingenuity. The relevant comparison is not between caring and not caring about environmental quality. It is between institutional mechanisms for choosing among competing values.

Dominic Parker offered a complementary economic framing: imagine a graph with environmental quality on the vertical axis and economic freedom on the horizontal axis. Environmental quality, as he defined it, includes clean air, clean water, stable climate, and biodiversity. Economic freedom includes the options available to consumers, producers, and households: what to drive, whether to use plastic or paper straws, whether to use gas or electric stoves, whether to spray chemicals on lawns, where to hunt and fish, and what shower heads to choose.

On the far left of the graph is a command-and-control economy with little freedom. On the far right is a laissez-faire economy. Parker said most people value both environmental quality and freedom. If there is a short-run tradeoff between them, societies cannot have everything at once.

The slide made that tradeoff visual. A downward-sloping line represented the constraint between environmental quality and economic freedom. Points W and X sat on the line. Points Y and Z sat inside it. Red arrows showed movement among the points, allowing Parker to distinguish disagreement over preferences from avoidable institutional failure.

Points along the frontier cannot be ranked by a single universal measure, because people and places differ. Parker gave California and Idaho as examples. The median resident in California, he suggested, likely prefers a point with more environmental quality and less economic freedom. He noted that, in Patrick McLaughlin’s database on regulation, California is the most regulated state. Idaho, by contrast, is the least regulated state in that database, corresponding to a point with more economic freedom and, perhaps, less environmental quality.

Parker said the Markets vs. Mandates program is not primarily about settling whether California’s point is better than Idaho’s. The more important concern is avoiding positions inside the frontier — outcomes where society sacrifices freedom without getting environmental gains, or sacrifices environmental quality without getting freedom.

In his graph, that bad outcome was point Y. At Y, people could have more economic freedom without giving up environmental quality, or more environmental quality without giving up economic freedom. Parker described that as the kind of result produced by environmental regulations that “aren’t really working” because they do not deliver environmental quality commensurate with the restrictions they impose.

Parker’s first concrete example was plastic carry-out bag bans, including bans in some California jurisdictions. He cited research that he said has consistently shown, across the world and not only in California, that these bans do not meaningfully reduce plastic waste. At best, he said, their impact is small.

The mechanism is substitution. People stop using plastic carry-out bags, but buy more plastic grocery bags. Parker’s conclusion was that the mandate takes away freedom without yielding much environmental improvement, if any. In the terms of his graph, that is a movement from a freer point toward the inferior interior point Y.

The example also served a second purpose: to explain why Parker values environmental federalism not only as a way for people to sort themselves into jurisdictions that match their preferences, but also as a way to generate information. Different jurisdictions can try different policies. Successful experiments can be copied. Failed experiments are also useful because they reveal what does not work.

Parker made the point by referring to policy change elsewhere. Because he does not live in New York City, he said, he is “excited” about the regime change under the city’s new mayor as an economist: drastic policy changes create opportunities to learn what happens.

Parker’s second example was more favorable: conservation easements. He described them as state-level authorizations of partial interests in land for conservation, usable by conservation groups and voluntary for landowners, at least in the short run.

He did not describe conservation easements as perfect. But he presented them as a substitute for top-down, command-and-control land-use regulations. Based on his own research and familiarity with the data, Parker said they “work pretty well” and, in many cases, work better than top-down regulation.

Conservation easements can move policy out of an inferior position by allowing more freedom and producing more environmental quality. In his graph, this was the kind of movement from Y toward W: an institutional innovation that improves environmental outcomes without relying primarily on centralized prohibition.

That example also fit Terry Anderson’s earlier emphasis on property rights. Conservation easements depend on the ability to define, contract over, and transfer partial rights in land. They make environmental value legible enough for voluntary exchange. In the vocabulary of the presentation, that is what allows environmental services to be pursued through markets rather than only through mandates.

Dominic Parker treated the federal Clean Air Act as the most complicated example because, in his view, it illustrates two stages of policy movement. The initial 1970 Clean Air Act and later command-and-control requirements, including catalytic converters in cars beginning in 1975 and scrubbers in smokestacks, improved air quality quickly and effectively. He said these policies reduced sulfur dioxide, carbon monoxide, and other local air pollutants.

But he also said they did so at high economic cost and with substantial restrictions on freedom. In his schematic, this was a movement from X to Z: more environmental quality, but at a large freedom cost.

The later evolution of the Clean Air Act changed the mechanism. Parker emphasized the 1990 amendments, which introduced more flexibility and market incentives, including sulfur dioxide trading programs between power plants. Those reforms allowed more freedom while also improving environmental quality. In the graph’s terms, they moved policy toward a better position on both dimensions.

His conclusion was that mandates can hit a wall. The initial command-and-control approach may achieve gains, but further improvement may require flexibility, incentives, and market mechanisms.

This was one of the more important tensions in Parker’s argument. He did not deny that federal mandates improved air quality. He argued that their costs and limits become visible over time, and that market incentives can improve on the initial mandate structure by preserving or expanding freedom while continuing environmental progress.

Parker presented environmental federalism as part of the American tradition because it permits state and local action before resorting to federal action. He said Condi had pointed to that tradition earlier in the event, and said a later panel would discuss environmental improvements at the state level before federal intervention.

He also referred to his own Freedom Frequency essay on Earth Day and the environmental record since 1970. Earth Day, he said, helped initiate a wave of federal regulations such as the Clean Air Act and Clean Water Act. But he said data from the 1950s and 1960s show environmental improvements, including water improvements, predating federal regulations for some time.

That earlier record changes the baseline for judging which institutions produce environmental quality. Parker did not say federal policy did nothing. He said the common story beginning with 1970 can obscure earlier state-level, local, and non-federal progress.

Federalism, as Parker presented it, has two distinct functions. One is sorting: people can live under different combinations of freedom and environmental quality. The other is experimentation: jurisdictions can test different approaches, allowing others to learn from successes and failures. Both functions are hard to preserve under a single national mandate.

Parker tied his graph to three conference themes: trade, technology, and entrepreneurship. In each case, the question was whether these forces merely shift society along an existing tradeoff or expand the frontier so more environmental quality and more economic freedom are possible together.

Trade, in Parker’s account, is an expression of economic freedom and the root of economic prosperity. He said he tells students that “the root of all economic prosperity is trade” — between individuals, groups, and countries. Trade can expand the frontier by creating more possibilities. But he added that trade has complex environmental effects: many possibilities are good, some may be bad.

Technology matters because it improves measurement and monitoring. Parker listed emissions, methane leaks, and fishing activity on the high seas as examples where newer technologies make environmental outcomes easier to observe. That matters for markets because contracting requires measurement. If parties cannot measure what is happening, voluntary exchange around environmental outcomes becomes harder.

Anderson had earlier said markets depend on property rights. Parker extended the logic: markets also need a basis for contracts and evaluation. Technology can make environmental services more measurable, which in turn makes voluntary conservation and market mechanisms more viable. He mentioned that a lunch talk by Niraj would highlight how The Nature Conservancy is using technology to improve voluntary conservation.

Entrepreneurship supplied the final link. Parker referred to “enviro-preneurs” in the room from Hoover cohorts, including private-sector, nonprofit, and government actors. He described them as the force that nudges outcomes away from points like Y toward something better. That improvement does not happen automatically. Successful environmental entrepreneurs take existing economic freedoms as given and find ways to leverage them for environmental gains.

The shared test developed by Terry Anderson and Dominic Parker stayed close to institutions. Anderson emphasized property rights, willing buyers and sellers, and voluntary trade. Parker emphasized federalism, experimentation, technology-enabled measurement, market incentives, and entrepreneurship.

Their treatment of mandates was not simply that mandates never work. Anderson said mandates came to dominate American environmental policy after the environmental movement identified environmental problems. Parker said some mandates, including early Clean Air Act requirements, produced real and rapid environmental gains. But both speakers returned to a narrower question: when environmental policy restricts choice, does it produce environmental quality worth the tradeoff, and could property rights, markets, federalism, or market incentives do better?