Environmentalism: A Self-Actualizing Pursuit

By: Dallin Johnson

The traditional understanding of environmentalism condemns market-based private interests in favor of government-mandated regulations. However, if innovation and a cleaner world are the end goals, policies promoting market-based solutions should be considered.

In 1955, the American Economic Review published Simon Kuznets’s findings on the relationship between economic growth and income inequality. His data suggested that as an economy grows and develops, income inequality first increases as populations shift from agricultural to nonagricultural sectors before decreasing as they become urbanized. Graphed as an inverted u-shaped curve, this relationship illustrates long-term income equality at the expense of short-term inequality.

The same relationship has been observed between economic growth and environmental quality. According to a primer from economists Bruce Yandle, Maya Vijayaraghaban, and Madhusudan Bhattarai,

“The EKC [Environmental Kuznets Curve] statistical relationship suggests that as development and industrialization progress, environmental damage increases due to greater use of natural resources, more emission of pollutants, the operation of less efficient and relatively dirty technologies, the high priority given to increases in material output, and disregard for — or ignorance of — the environmental consequences of growth. However, as economic growth continues and life expectancies increase, cleaner water, improved air quality, and a generally cleaner habitat become more valuable as people make choices at the margin about how to spend their incomes.”

This relationship draws parallels to Maslow’s Hierarchy of Needs; until a person’s physiological and safety needs such as food and shelter are met, self-actualizing needs such as personal growth are not priorities.

In broad, societal terms, environmental quality may be described as a self-actualizing need while economic and financial security may better be described as physiological or safety needs. Short-run losses in environmental quality can ultimately be reconciled with long-term gains as a nation becomes better equipped to address its self-actualizing needs.

Local pollutants tend to follow this pattern. A study of Tunisia between 1961 and 2004 found that per capita emissions of sulfur dioxide (SO2) increased until the nation’s average gross domestic product (GDP) reached a certain threshold:

As soon as that threshold was met, per capita SO2 emissions began to decrease, indicating the nation’s increased capacity to address this pollutant as its citizens became better off.

One of the ideas behind free-market environmentalism is that “property rights make the environment an asset rather than a liability by giving owners an incentive for stewardship.” Economist Theodore Panayotou proposed that better definitions of property rights could “flatten out” EKCs, softening the earlier impacts of economic growth on the environment:

“With full-cost pricing of resources that reflects growing scarcities and full internalization of externalities,” Panayotou explained, “the EK-Curve would not disappear but will be a shallow one.”

Nations shouldn’t have to give up their physiological needs, the economy, for the sake of pursuing their self-actualizing needs, the environment. And luckily, they don’t have to. To the extent that regulations limit a nation’s activities, market-based solutions allow innovation and stewardship to expand a nation’s economy, meanwhile cultivating a cleaner world.

Dallin Johnson is a student research associate at Strata Policy.

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