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The original edition of this seminal book, published in 1991, introduced the concept of using markets and property rights to protect and improve environmental quality. Since publication, the ideas in this book have been adopted not only by conservative circles but by a wide range of environmental groups. To mention a few examples, Defenders of Wildlife applies the tenets of free market environmentalism to its wolf compensation program; World Wildlife Federation has successfully launched the CAMPFIRE program in southern Africa to reward native villagers who conserve elephants; and the Oregon Water Trust uses water markets to purchase or lease water for salmon and steelhead habitats. This revised edition updates the successful applications of free market environmentalism and adds two new chapters.

In the first edition of Free Market Environmentalism, Terry Anderson and Donald Leal of the Political Economy Research Center sketched an environmental vision that eschewed government mandates in favor of markets, and replaced regulatory prohibitions with property rights. At the time, 1991, this was radical stuff. Ostensibly conservative policymakers had controlled federal environmental agencies for over a decade with little to show for it. Though the authors were reluctant to admit it, free market environmentalism (FME) was still a fringe idea. Environmentalists remained wedded to the use of government, and the federal government in particular, to achieve environmental goals. Some economists and policymakers used the language of economics in discussing environmental problems, or professed fealty to “market incentives,” but few were prepared to unleash unfettered markets on the ecology. Genuine free
market environmentalism—that is, the use of market institutions, particularly property rights, voluntary exchange, and common law liability rules to protect environmental resources—existed mostly in the minds of a handful of scholars and think tank researchers.
During the intervening decade, free market environmentalism has come of age. The failure of centralized regulatory systems has sent analysts searching for alternatives. Dissatisfaction with existing regulations has produced gradual experimentation with market approaches, while ecological entrepreneurs, what Anderson and Leal call “envirocapitalists,” have sought ways to make environmental protection pay. In 1991, FME may have been “more theoretical than applied” (p. ix). Now there are models that illustrate the FME paradigm in practice. The authors take advantage of this fact, providing numerous examples of FME principles put to practice in the real world. The result is a blend of theory and implementation that provides a highly useful introduction to the power of market institutions to advance environmental protection.
From the start, “free market environmentalism” may have been a bit of a misnomer. FME is not so much about “markets” as it is about institutional arrangements. As Anderson and Leal explain, “At the heart of free market environmentalism is a system of well-specified property rights to natural and environmental resources” (p. 4). Property rights provide the foundation for markets, and so establishing property rights in environmental resources enables individuals and organizations to pursue environmental goals in the marketplace. Pigouvian economists seek to alter human behavior by levying taxes and imposing regulations to correct for the “failure” of market prices to account adequately for environmental concerns.

Terry L. Anderson

Terry Lee Anderson is the Excutive Director of the Property and Environment Research Center (PERC), senior fellow at the Hoover Institute, and adjunct professor at the Stanford Graduate School of Business. He has been one of the most influential figures in the free market environmentalist movement. His first major book was Free Market Environmentalism, originally published in 1991.

His work helped launch the idea of free-market environmentalism and has prompted public debate over the balance between markets and government in managing natural resources.

Donald R. Leal

Donald R. Leal is a Senior Associate at PERC, editor or author of three books, and contributing author to six books that cover various aspects of environmental policy.