ABSTRACT
The market for federal water is expanding, although much remains to be done. The US Department of Interior in 1987 adopted a policy in support of voluntary transfers of reclamation water, including water markets. Free market environmentalism considers the potential for market solutions and the problems with political ones. Free market environmentalism challenges both the government planner’s motivation and his ability. The approach recognizes two facts. First, incentives affect all human behavior. Second, information costs are positive. Free market environmentalism stresses the importance of well-specified property rights as the proper mechanism to provide the incentive for entrepreneurs acting on specific time and space information. The “free” in free market environmentalism refers to the individual liberty that only markets can provide; and without that human freedom, environmental quality will be of little consequence. The opening vignette on Montana’s Ruby River introduced the free market environmentalism approach as an alternative to political conflicts over water.
