Professor Philip Booth: Environmental problems and the “Big Community”

Professor Philip Booth is Editorial and Programme Director of the Institute of Economic Affairs.

The concept of “community-based” solutions to environmental problems should be attractive to both the Liberal Democrats and the Conservatives, given the former’s interest in decentralisation and the latter’s interest in free-markets.

What do community-based solutions to environmental problems involve? Professor Elinor Ostrom, the 2009 Nobel Prize winner in economics, gave us an insight last night at the IEA’s F. A. Hayek memorial lecture which was attended by about 600 people. There is some hard and abstract theory, but amidst that there are important principles that can be enacted in policy. It is a pity that the same intellectual effort is not put into examining how communities can manage their own environmental problems as has been put into, for example, Downing Street’s “Nudge” unit.

Ostrom’s ideas are designed to deal with “common pool resources” and the management of environmental problems. The basic idea is that the specifics of different problems are different along a wide range of dimensions but that the government often does best by setting general rules and allowing those who have an interest in solving the problem to design the specific rules and enforcement mechanisms.

Consider two problems to which Ostrom’s principles could be applied: smoking and fishing. The former issue, it should be said, is a tangential application of the ideas.

The smoking ban, in my view, is completely inappropriate. Whether people should be allowed to smoke on private property should be determined by the owners of that property. The market is quite capable of responding to demand for smoke-free areas. However, given that the government decided to act, what is the best approach? Should there be one set of rules for the whole of the country or should the government have given the power to regulate to the lowest level of local government? Local circumstances vary. In some areas, people spilling onto the streets smoking are more of a nuisance than people smoking indoors. In some areas, peer pressure is very effective. For some, the problem may be so trivial as to not merit the costs of enforcement. Elsewhere – in large towns, for example – there is lots of choice and pubs and restaurants are very large and have smoke extraction facilities so there may be no demand for action at all. Some councils may see the viability of the local pub as being of greatest importance and wish to exclude those institutions from regulation, and so on.

In other words, the government should repeal the smoking ban and give local councils the power to act in this area, if they wish. Why should we assume that the solution in Hackney should be the same as in the Isle of Skye?

More directly in Ostrom’s area of work would be the problem of fishing. Given the UK’s geographical position, the catastrophic state of EU fish stocks, the apparent interest in the coalition in environmental matters and the desire by the Conservative Party for EU decentralisation, it is shocking that so little interest is shown in this matter in government. As Professor Ostrom said in her lecture, the ecological systems in the Baltic, the North Sea and the Mediterranean are entirely different and need different solutions. The only centralised EU responsibility here should be to provide appropriate courts for the adjudication of disputes.

Effective conservation systems might include, for example, tradable quota shares whereby trawler owners hold a right to a proportion of the agreed total catch. The important feature of the system is that this is an infinite (or very long-term) right so that the trawler owners – who set the annual total catch themselves without political interference - have an incentive to conserve fish stocks because they get the benefit from the long-term flourishing of the fishing grounds (and that benefit is immediately reflected in the value of the quota share which could be sold). These systems work. Indeed, self-policing is often even possible because every trawler owner has an incentive to stop other owners fishing more than their share. It is important, however, that the community itself is able to allow the rules to evolve and that these are not imposed from above. Sadly, there is not much chance of progress here, it would seem: the Conservative Chairman of the Environmental and Rural Affairs Select committee has explicitly rejected the idea of tradable quotas. And, decentralisation is not exactly at the top of the EU’s agenda.

There are many other applications of these ideas – in land-use planning for example. We marvel at the success of community-managed developments such as Bourneville, but our only response is to smother house building with more and more government regulation, much of which prevents developers from using the sorts of private regulatory mechanisms that are used in the Bourneville development.

So why is the government not interested in these ideas but so interested in Nudge? Perhaps it is because, at heart, Nudge is simply a different form of centralised control. Even if we are nudged rather than forced to do something, the government is still setting the objectives. The politicians are in charge. And, Nudge is being used to increase government control of our lives and not to replace existing regulation – auto-enrolment into pensions being an especially good example.

On the other hand, politicians fear experimentation. Tony Blair promised to abolish post-code lotteries. If we do so, we jettison important processes of experimentation and learning; and we prevent the evolution of local solutions that work best at the local level. Perhaps it is too much to expect that the pursuit of “post-code lotteries” will become explicit government policy, but the government needs an entirely new approach to policy that celebrates variation, experimentation and learning and which allows the community to solve its own problems and, often, enforce its own rules.