We can thank capitalism for environmentalism...

It's only really because of capitalism that we can celebrate Earth day.

Indeed, we wouldn't even have environmentalists in our midst were it not for capitalism. Environmental amenities, after all, are luxury goods. America -- like much of the Third World today -- had no environmental movement to speak of until living standards rose sufficiently so that we could turn our attention from simply providing for food, shelter, and a reasonable education to higher "quality of life" issues. The richer you are, the more likely you are to be an environmentalist. And people wouldn't be rich without capitalism.

Wealth not only breeds environmentalists, it begets environmental quality. There are dozens of studies showing that, as per capita income initially rises from subsistence levels, air and water pollution increases correspondingly. But once per capita income hits between $3,500 and $15,000 (dependent upon the pollutant), the ambient concentration of pollutants begins to decline just as rapidly as it had previously increased. This relationship is found for virtually every significant pollutant in every single region of the planet. It is an iron law.

Given that wealthier societies use more resources than poorer societies, such findings are indeed counterintuitive. But the data don't lie. How do we explain this?

The obvious answer -- that wealthier societies are willing to trade-off the economic costs of government regulation for environmental improvements and that poorer societies are not -- is only partially correct. In the United States, pollution declines generally predated the passage of laws mandating pollution controls. In fact, for most pollutants, declines were greater before the federal government passed its panoply of environmental regulations than after the EPA came upon the scene.

Much of this had to do with individual demands for environmental quality. People who could afford cleaner-burning furnaces, for instance, bought them. People who wanted recreational services spent their money accordingly, creating profit opportunities for the provision of untrammeled nature. Property values rose in cleaner areas and declined in more polluted areas, shifting capital from Brown to Green investments. Market agents will supply whatever it is that people are willing to spend money on. And when people are willing to spend money on environmental quality, the market will provide it.

Meanwhile, capitalism rewards efficiency and punishes waste. Profit-hungry companies found ingenious ways to reduce the natural resource inputs necessary to produce all kinds of goods, which in turn reduced environmental demands on the land and the amount of waste that flowed through smokestacks and water pipes. As we learned to do more and more with a given unit of resources, the waste involved (which manifests itself in the form of pollution) shrank.