The Endangered Species Act is a prime example of positive intentions leading to perverse incentives. Animals on the list intended to be protected are instead turned upon by property owners of their habitat. Out of fear of losing the right to use their land because of an endangered species living there, property owners engage in aggressive behavior known as “Shoot, Shovel, and Shut-up.” This refers to the practice of killing and hiding any trace of the animal, so that the government is unaware and unable to take their land. Other unintended consequences are cutting down trees before the species build their habitats. Since passage of the Endangered Species Act in 1973, 1,232 species have been added to the endangered species list.
When property rights are well-defined and enforced, stewardship is encouraged. This is because wealth of the property owner is at stake. Externalities are turned into contracts, and cooperation replaces conflict. This does not mean that markets perfectly account for all costs and benefits, but neither can government! Entrepreneurs are attracted to cases involving effects not accounted for in market transactions. Merely pointing out the gap the entrepreneur fills does not justify government intervention. Entrepreneurs create gains from trade by solving problems through contractual agreements. These individuals better manage pollution than government because they are directly responsible for their decisions. Any poor decisions made will result with them bearing the cost, and any positive decisions will be for their benefit. Better decisions are made under these conditions compared to ones made by government since government is not held responsible.
Elinor Ostrom won the 2009 Nobel Prize in Economic Sciences for her work recognizing the role that local entrepreneurs play in eradicating the “tragedy of the commons.” Just as entrepreneurs facilitate capitalism, environmental entrepreneurs (enviropreneur) serve the environment. Rather than lobbying for more ineffective laws that makes the problem much worse, they protect the environment by clarifying and marketing property rights. In their eyes, they see environmental externalities as environmental opportunities.