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What would happen if ownership of an environmental resource was given to an individual business? To explore this question, let’s consider an example.

Imagine that there is a river, and there are just two users of the river. One is a manufacturing firm; they use the river to dump the by-products of their process. The other is a fishing club; they fish downstream from the factory.

It is already apparent that the two groups have competing interests. The factory owner will find that his standard of living increases as his workers produce more, but this will result in higher levels of pollution. As more pollutants go into the water, more fish will die. This will result in a lower standard of living for the people who like to use the river for that purpose.

What would happen if the ownership of the river was given to the people who like to fish? In the first instance, you might think that they would ban pollution altogether. However, the truth is that they are likely to allow a certain level of pollution as long as they are still able to fish. The difference is that in order to put the by-products into the river, the factory owner will now need to pay the fishermen. In other words, they will allow the factory to pollute until the benefit associated with the money paid to them for allowing this to happen is smaller than the benefit lost by not being able to fish. In this way, a balance is found.

This thought experiment can also be reversed – what would happen if ownership of the river passed to the factory owner? Once again, you might think that the factory owner would simply pollute the river with little regard for the people who like to fish, but to do so would mean sacrificing revenue. As such the actual outcome is likely to be slightly different.

In this case it is the fishermen who must pay. They will pay the factory owner for the right to take fish from the river. It is therefore in the best interests of the factory owner to ensure that there are enough fish to be caught, and once again a balance is found.

The most obvious problem associated with this thought experiment is that it is not possible to grant ownership of a river to either party. It is equally true to say that many people would argue that the optimal level of pollution is “no pollution at all”. These arguments carry weight, and they must be considered seriously if we are going to find a solution for these global problems.

For now, consider this open ended question - is it possible to maintain your standard of living without any impact on the environment at all?

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