Housing and Planning

Property rights and the environment – a response to Pope Francis’ encyclical

Pope Francis’ encyclical, ‘Laudato si’, is an important contribution to the theology and morality of the earth’s ecology in the context of a holistic conception of the human person. It follows in the footsteps of his predecessor, Pope Benedict XVI and, though I am not a theologian, the theology seems to me to be both excellent and clear.

Similarly, the call for moral restraint by businesses and individuals, and an end to seeing consumption as an end in itself, is important. Some may disagree with the message, but it is a point well made.

The Pope seems to entrust a large role to public policy when it comes to solving environmental problems and this was discussed in long sections of the document. They are not the best sections to say the least. This is a problem because misguided public policy in this area could have catastrophic consequences.

Firstly, as is often the case with Pope Francis, his analysis of the economic state of the world is unduly pessimistic. It is correct to say that pollution leads to premature deaths. Indeed, many would argue that climate change will do so and some that it already does so. But, there are trade-offs. And the underlying picture is one of huge increases in life expectancy and health because of the economic development that is taking place. Indeed, in many parts of the world, the environment is improving dramatically.

Within the document there are also various ad hoc attacks on the market economy, some of which are somewhat bizarre. For example, the Pope argues that water should not be privatised because it is a scarce resource. In fact, the purpose of markets is to allocate scarce resources. Whilst it is important that all have access to clean water – and improvements in this regard are a crucial element of the economic development of the last 30 years – to argue that it should not be provided by markets is no more sensible than arguing that food should not be provided by markets. Indeed, in many African and Asian countries (as well as in the US and Australia, for that matter), water shortages are seriously exacerbated by relatively wealthy industrial and farming interests benefiting from water subsidies and growing totally inappropriate water-thirsty crops. These subsidies are highly regressive.

Though he criticised water privatisation, nowhere in the document did the Pope mention fossil fuel energy subsidies – in other words, the policy of paying people to emit greenhouses gases. As The Economist put it: “It would be hard to find a worse [mistake] than energy subsidies. Recent research has shown that they enrich middlemen, depress economic output and help the rich, who use lots of energy, more than they do the poor…But now a new working paper by the International Monetary Fund highlights another cost too: damage to the environment. Including this, the authors reckon that the total drag on the global economy caused by fuel subsidies now amounts to a stonking $5.3 trillion each year…Poorer countries dole out the largest amount of subsidies; some spend up to 18 per cent of their GDP a year on them.”

Readers might ask why the Pope should mention something so specific? But he brought up many detailed issues. As well as criticising water privatisation, he also criticised carbon tax credits – widely regarded as the way to reduce carbon emissions that has the smallest cost to the poor.

There is much to debate, but that is not the impression given in the document. Nowhere is it recognised that the models of development that are criticised have led to rapidly falling rates of poverty, global inequality and deaths from natural disasters whilst access to education and healthcare has improved. Furthermore, nowhere is it acknowledged that the natural resource intensity of production falls dramatically as countries develop. The carbon intensity of production falls; we stop using whales for oil; we stop plundering forests and instead nurture them; and so on. This does not alter the fundamental moral problem the Pope was addressing but it does put a different spin on the models of political economy that we might embrace to achieve desirable results.

In numbers 142-152, there is much good material on the importance of institutions. This is interesting because economists see environmental problems as problems of property rights not being enforced or defined. For example, business ABC cuts down a rain forest in Brazil and destroys the livelihoods of indigenous tribes and causes flooding in a neighbouring country. In developed countries, these problems are generally solved. Sometimes they are solved using regulation and sometimes using traditional common law property rights. Good governance, the rule of law and the effective definition of property rights are essential pre-requisites for addressing many environmental problems. In many traditions, this is often combined with the engagement of the community whose property rights in fisheries, forests and so on are implicit but nevertheless crucial for the sustainable management of the resource.

Many economists are working or have worked in these areas, including the 2009 Nobel Prize winner (the first woman to win the Nobel Prize) the late Elinor Ostrom – she is somebody feted by both the left and supporters of markets. Indeed, this whole approach fits in so well with the great tradition of Catholic social teaching (interestingly, Cafod contributed to an IEA publication in this area). Given that poorly defined and enforced property rights lie at the heart of so many environmental problems, especially in poor countries, this whole area is a big omission from this encyclical. This is not a trivial issue or sniping from the sidelines. It is far more fundamental than many of the political-economic issues discussed by Pope Francis which really were a diversion from the excellent moral-theological analysis.

Prof Philip Booth is the IEA’s Editorial and Programme Director and Professor of Insurance and Risk Management at Cass Business School. This article first appeared in the Catholic Herald.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

4 thoughts on “Property rights and the environment – a response to Pope Francis’ encyclical”

  1. Posted 22/06/2015 at 15:46 | Permalink

    It’s always a problem when it comes to natural resources and markets. In the end, each society needs to decide what collectively belongs to them and what can be traded. Perhaps water has to be collectively owned, but gold can be prospected and mined by those willing to invest.

    To take this point ridiculously far, imagine someone created a device to harvest sunshine, and installed a massive screen across the sky making the country dark. Would that be allowed? No, of course not. Sunlight is a human right, as it were. Water is probably the same. There are parts of the world where underground supplies of water, used locally for millennia, are being extracted on an industrial scale. Is that right?

  2. Posted 23/06/2015 at 16:24 | Permalink


    Actually, access to sunlight and water are not fundamental rights, since rights are only a negative obligation on others to leave you alone. Everyone needs water, but the *means* to access it requires technology and effort which, if you can’t or won’t exercise yourself, someone else has to do. It is the *means* to obtaining things like water where property rights come into it. If I build a superb mechanism to extract water, I am not compelled to give you the product of my effort simply because water is a fundamental human need. The sunlight example is not comparable because it’s not so much that you have a “right to sunlight” but rather that nobody can impose their property negatively on others; for the same reason that, even in a free society and on your own land, you couldn’t rightfully build an obelisk 50 metres high was boomed out heavy metal music all day and night. (The arbitration of these matters is down to the Rule of Law.) There is a difference between positively harming someone’s health and wellbeing with a sun blocker and simply not being willing or able to share the means of your own hard-work under duress.

    Of course, it does no one any good to not share or sell their product with others – which is after all the raison d’etre of business (!), and only in the minds of fanatically lefties do truly independent business persons act so misanthropic. I believe that all commodities should be provided by private enterprise, precisely because they are so important.

    “In the end, each society needs to decide what collectively belongs to them and what can be traded.”

    To repeat what I said at the start, “society” cannot really make such a decision; only the rule of law should be applied to specific cases. And in cases of essentials like water and medicine, try not to think in terms of the finished substances themselves, but *how* they are going to be obtained, and *who* is going to do so. When you frame the situation in those practical terms, it is clear that the market approach is the answer.

  3. Posted 23/06/2015 at 16:32 | Permalink

    ps: I did structure my reply in paragraphs but these appear to have been lost!

  4. Posted 24/06/2015 at 07:26 | Permalink

    Thanks for your take, Gravity. I wont try and structure this post! What you say makes perfect sense if, say, someone was trying to desalinate seawater, which is in plentiful supply in its raw state. But a population will take some convincing that water falling on its land is anything other than a national asset. We can theorise as to how any particular social and market model might deliver the most cost effective outcome but in the end a democracy decides the boundaries of any particular policy and in a scarcity, essential resources are likely to be regulated, rationed or nationalised. Society can and does make decisions about collective ownership.

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