But if you think the situation is hopeless, think again. In the past three centuries, free markets have channeled human creativity toward solutions to enormous challenges like hunger, poverty, and disease. Markets created our modern global society, with interdependent economies that encourage peace and tolerance. If humanity is going to fend off climate change, then it will be free markets that make it happen.
Before we dive into some of the ways that free markets are already tackling climate change, it’s worth clearing up a few misconceptions. Since the 1980s, the largest reductions in greenhouse gas emissions have actually come from free market economies. Data shows that wherever markets are constrained, the environment suffers.
This phenomenon was predicted decades ago by the Nobel Prize-winning economist Simon Kuznets. In the 1950s, Kuznets hypothesized that as an economy develops, free market forces first increase and then decrease economic inequality. Over time, as the economy matures and per capita income goes up, environmental health increases. The reason? When you’re struggling to feed your family, you can’t afford to take care of the environment. Clean air and clean water may be essential to our survival, but they’re also luxury goods for millions of people. What the so-called Kuznets curve demonstrates is that the best answer to pollution is economic prosperity.
In America, 56% of all forested lands are privately owned and yet we have more forestland than we did on the first Earth Day more than 40 years ago. And despite the fact that 91% of all the wood harvested in the U.S. comes from these private forests, the total timber stock on private land has doubled since 1953. That’s because individuals, families, and companies who own the land have skin in the game, they want to keep trees growing and replant what they take so that they continue to get value from it, whether that value is financial or purely aesthetic.
Let’s say you own a microbrewery. In 2020, the aluminum cans you use to package your beers are likely to use about 12% less metal than the cans of the 1980s. Why? Because computer-aided modeling allows engineers to design structurally perfect cans. And, crucially, because if you decide not to use the more efficient cans, your competitor down the road will, and she will be able to lower her prices and steal some of your customers. Competition and innovation are conspiring to save the planet.
McAfee is no climate change skeptic. His mantra is, “it’s warming; it’s us; it’s bad; and we can fix it.” But he is an optimist who argues that the trends in the developed world should give us hope for a brighter, cleaner future. McAfee is confident that what he calls the Four Horsemen of Optimism—technology, capitalism, public awareness, and responsive government—will continue to unleash the power of human creativity, creating a digital economy of abundance. People will be richer, the planet will be greener, but only if we let free markets lead the way.
Markets reward people for conservation. Buy a Prius and you’re not only helping the planet, you’re saving money. Buy a smart thermostat, you can keep your house comfortable with less electricity. Markets hold people and businesses accountable for environmental success. The same politicians who failed to meet the last CO2 targets, on the other hand, promise next time will be different. Climate change is too important to trust to politicians who may be out of office before society can measure their success.