May 14, 2008

RALEIGH – Government leaders interested in “sustainability” should promote policies linked to individual liberty and a free-market economy, not policies that limit growth. That’s the key message in the John Locke Foundation’s third Macon Research Series report.

Click here to view and here to listen to Dr. Roy Cordato discussing this Macon Research Series policy report.

“So long as there is a free market system, where prices are allowed to fluctuate and entrepreneurs are free to pursue profits through creativity and innovation, sustainable development is assured,” said report author Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “Indeed what is most likely to retard this process are government programs meant to manage and direct the timing and kinds of technological change that should be pursued.”

Cordato’s report points to a major shift in thinking about sustainable development. “The standard view of sustainable development is not rooted in any coherent set of philosophical principles,” he said. “Advocates for sustainability tend not to focus their arguments on the basis of liberty, equality, or economic efficiency. Instead they push a collection of anti-free market ideas that have made up the core agenda of the major environmental advocacy groups since the 1970s. A United Nations report issued more than 20 years ago offers the basic language for the ‘sustainability’ movement.”

The key idea for most sustainable development advocates is that public policies should focus on restricting and managing human consumption and production decisions, Cordato said. “A rule of thumb guiding the advocates of sustainable development is that the smaller the amount of natural resources consumed the more sustainable the growth,” he said. “This implies that any growth needs to be managed through enlightened public policy. These advocates call for central planning to decide what people can and cannot do.”

Sustainability arguments have affected North Carolina public policy debates about energy use, transportation, and climate change, Cordato said. “You can see the impacts of the sustainability argument in the 2007 energy legislation called Senate Bill 3, in support for a concept called Transportation Demand Management, and in a group of 56 policy proposals that are purported to address global warming,” he said. “In each case, the answer to any alleged problem is central government planning of resource use.”
Unfortunately for North Carolinians who pay for the government plans, each policy is based on false assumptions, Cordato said. “Sustainability advocates believe we must restrict our use of resources in this generation to preserve them for future generations,” he said. “There is no empirical or historical evidence that any generation has been less prosperous than previous generations as a result of overuse of resources by previous generations. In fact, the evidence is exactly the opposite.”

A market exchange process unhampered by government interference has mechanisms that ensure sustainable usage, Cordato said. “Resources used as part of the profit-generating market process are economized in such a way that their ‘sustainable’ use is guaranteed,” he said. “When a resource becomes more scarce, prices increase. Suppliers will look for new ways to provide the resource or new alternatives to the existing resource.”

“On the demand side, higher prices encourage efficient levels of conservation,” Cordato added. “This is conservation that’s consistent with people’s individually determined goals in life, not the vision of sustainability advocates or government central planners. Plus, supply and demand are linked. It is the desire of consumers for less costly ways of achieving their wants and goals that stimulates entrepreneurial action on the supply side.”

Policy makers who want sustainable development should focus on creating an environment that encourages capital investment, entrepreneurship, innovation, and efficient resource use, Cordato said. “This environment has several pieces,” he said. “First, tax policy should be reformed to eliminate the bias against saving. Second, government should limit the taxes and subsidies that distort prices, so resource users will be encouraged to use resources that are least scarce.”

“Third, public policy should focus on keeping resource and energy prices as low as possible, consistent with actual market conditions of supply and demand,” Cordato added. “Fourth, private property rights should be well-defined and enforced. In a free society this is the fundamental role of government.”

The orthodox approach to sustainable development is inconsistent with traditional American values of private property, limited government, and individual freedom of choice, Cordato said. “In contrast, the alternative model of economic sustainability offered in this Macon Research Series report is not only consistent with principles of individual liberty and a free market economy, it flows directly from those principles and reinforces them,” he said. “Liberty, personal responsibility, and equality before the law do not have to be sacrificed on the altar of sustainable development. Policies consistent with those principles sustain both prosperity and liberty.”

The Nathaniel Macon Research Series generates annual papers from JLF analysts. The Macon Series applies free-market principles to current N.C. controversies. Its papers examine whether N.C. fiscal and regulatory policies help or hinder individuals as they seek to create or expand economic opportunities. Previous Macon Series reports have addressed certificate-of-need laws and price-control laws.

Roy Cordato’s Macon Research Series Policy Report, “Sustainable Growth: Principles and Policies,” is available at the JLF web site. For more information, please contact Cordato at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].