Ecology and Economy: The Keynote Address Given at the 28th Annual American Law Institute-American Bar Association Environmental Law Course of Study

Hon. Stephen F. Williams

Editors' Summary: This Dialogue analyzes nature as a model for environmental law. The author first identifies three valuable characteristics of nature and examines how they are created by ecosystems. Next, the author argues that the centralized and hierarchical regulation of environmental law ignores nature's valuable characteristics and, in fact, directly opposes nature's decentralized niche-based structure. The author asserts that such a centralized structure of environmental regulation lacks innovation, is subject to institutional bias, and results in incomplete decisionmaking. Last, the author notes that unregulated decentralized environmental regulation fails, but suggests that the use of some decentralized systems, such as marketable pollution permits, produces efficient self-regulating incentives to create innovative pollution control.

The author is a judge on the U.S. Court of Appeals for the District of Columbia Circuit. This Dialogue is the speech the author delivered at the 28th Annual American Law Institute-American Bar Association Environmental Law Course of Study (cosponsored by the Environmental Law Institute and the Smithsonian Institution) on February 12, 1998.

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This is a gathering on environmental law. In other words, on the overlap between the environment and the law. Both of the fields—the environment, or perhaps more strictly speaking, ecology, and the law—are systems. We speak of the ecosystem and the legal system. And a system is basically a way, a process, by which large numbers of individual things, animate and inanimate, relate to each other.

What I want to examine is whether the law, environmental law in particular, has anything to learn from the environment. The subject matter of your meeting, environmental law, reflects our interest in the environment, and the high value we place on it. But rarely does anyone ask, "Can the character of ecosystems tell us anything about how to organize our legal system, as a general matter, and particularly the legal system we use to protect the environment."¹ That is the question I want to pose. My answer is that it does, that as students of environmental law we can learn something from the character of the ecosystem.

There is a familiar hazard in this sort of enterprise. Not everything that happens in nature is a model for human behavior. Lots of animals are predators that ruthlessly devour weaker animals. We want to preserve the wolf, to be sure, but the wolf is not in every way a model for human behavior—at least not a model that can be followed slavishly. There's a gap between "Is" and "Ought." Whatever is is not necessarily right.

So I will try to proceed cautiously. First, I'll identify some characteristics of nature that I think we like, and that in part, explain why we value it. Then, I'll ask how the ecosystem tends to bring these characteristics into being, to make them prevalent. And finally, I'll ask whether the ecosystem's "methods" can be applied in the domain of environmental law.

What do we like in nature? Of course there are a lot of things, and my list will be selective. I want to mention three, all of which seem intimately bound up with nature as a system, with the way nature works. The three I have in mind are variety; spontaneity and unpredictability; and perhaps the most questionable, the progressive tendency toward greater complexity and variety.

The first is obvious. We like the fact that no two snowflakes, no two leaves, are alike. We laugh at Walter Hickel's famous statement, "When you've seen one tree you've seen them all." When we try to work with nature, at least when we do it successfully, we pursue the variety. Frederick Law Olmstead's Central Park, for example, gathers together [28 ELR 10252] hundreds of different species of tree. On a walk in the woods, we like the fact that the view changes constantly.

Second, spontaneity and, to a degree, unpredictability. Of course, this can get out of hand—we have some doubts about truly destructive storms. But we like the "wild" in wilderness. When (at my age) we send our children off on Outward Bound, we want them to grow by coping with the unexpected.

Finally, what I hesitantly call "progress," in the sense of an evolution toward greater complexity and variety. Maybe this is in part a repetition of our simple interest in variety, the first characteristic that I said we prized, but I think it goes deeper. Since Darwin and Lyell, we know that we've been preceded by a process of a few billion years, in which nature has been growing in variety. So one of our current pleasures in nature is thinking about how a species got the way it is, wondering about how current species may change into new ones in response to environmental challenge.

So what are the characteristics of the natural system that have brought about this variety, given it the endless capacity for surprise, and made it capable of continuously evolving toward further variety? To me, three characteristics seem to stand out: decentralization, trial and error, and niches.

Putting aside the possible role of a supreme being, no one is in charge of nature. No one is trying to coordinate the adjustment of the finch to changes in its terrain. No central decisionmaker is deciding the "right" amount of tallgrass prairie or of cottonwoods. Progress (if it is progress, and I think it is, at least in the sense of growing variety) comes through a decentralized process of sifting out the results of random change. Ecosystems do their thing without any guiding person or institution.

And the process is one of trial and error. Mutations occur, randomly and constantly. Most evidently fail. But if one works, adequately, then it survives, and perhaps flourishes. The system might be thought to involve a lot of "waste"—all those failed mutations. But the trial and error system means that nothing fails without at least one realworld experiment. There is no parallel in nature for the project "that never got off the drawing board."

Finally, niches are all-important in ecosystems. There is no such thing as a universally adapted or "desirable" species. In fact, even attributes of a species are hard to rank. What is good for a species under one set of circumstances (i.e., food supply, climate, set of predators) may be terrible for another.

Does our current system of environmental law share any of these characteristics? Quite the opposite. With rare exceptions, our approach to environmental issues has been the antithesis of decentralization, trial and error, and niches. We purport to decide these issues at the most centralized level available, the federal government. When the states play a role, it is little more than as federal functionaries, or flunkies, executing decisions made in Washington either by Congress or by a monolithic, hierarchically organized bureaucracy. There they determine such things as "best available technology," which then becomes holy writ for all firms in the industry. We proceed on the assumption that a single decisionmaker (aided, of course, by a few tens of thousands of assistants) can decide on the one best way to do things everywhere in the country.

And the centralized bureaucracy decides in advance—there is no trial and error here. Of course, entrepreneurs can conduct their own experiments (at least they can sometimes, depending on the applicable regulatory scheme), but the mutant is not simply launched into the world to see how it does. The assumption is that this can be assessed in advance, perhaps under laboratory conditions, but not in the real world.

And the niche plays little role in the system. Sometimes, of course, there are provisions for waivers or other minor local adjustments (typically handed out, or at least monitored by, the central bureaucracy), but the thought that an innovation might be desirable in one place, or a few, is rather alien to the current regulatory system. The system generally rejects the idea that a chemical might be bad in many uses but good in several others—or might at any rate be the least bad alternative.

So, oddly, in order to save a system, or a group of systems, that is decentralized, built on trial and error and on niches, we construct a system that is centralized and hierarchical, built entirely on the assumption that all relevant information can be gathered and synthesized in advance, and largely uniform across a 3,000-mile continent. In fact, among environmentalists generally, it seems to be widely thought that if some approach is all right for the United States, it must be good for the whole world. To save a system that we value for its variety, spontaneity, and evolutionarily progressive tendencies, we create one that lacks all those characteristics.

We talk of being in "the information age," and, indeed, in the design of environmental protection systems we ought to look at how systems handle information. In nature, the capacity for progress is not hitched to the ability of a single person or entity to scoop up information from all over to find out what mutations are most promising. The mutations occur locally, at the most local level imaginable—the individual being, plant or animal—and its capacities are then tested locally.

But in our bureaucratic use of information, we suppose that a single person can somehow gather all the information about all the effects of every process, both intended effects and "side" effects, its implications for productivity, its costs, and can choose right. And this person confronts every imaginable obstacle. Much of the information is in the hands of firms who obviously have their own agendas, which are not the agenda of the Administrator—or at least are not what her agenda ought to be if you expect the system to generate desirable results. In the scientific community, there are similar agenda problems. To some extent, the agendas may reflect the usual problem that he who pays the piper calls the tune. Whether the funding entity is a private firm or a government agency, it is likely to have its own distinctive goals, and the pursuit of pure knowledge is not necessarily at the top of the list.

Even if you didn't have the issue of institutional bias corrupting the information stream, the decisions would be unspeakably complex. When the D.C. Circuit Court plows through rulemaking records, trying to figure out if some party's attack on the agency's reasoning has been sound, I'm struck by the vast number of contestable decisions in which one person (nominally) is calling the shots. In most of these decisions, the information is self-evidently incomplete. A few fragments here and there are relied on to set some standard, while in fact the very best that a scientist could do with the data would be to describe a probability distribution and even that would be largely fictional.

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We have experience in the 20th century with systems that—on a broader scale—depend on information-gathering and processing on a fully centralized, noncompetitive, hierarchical bureaucracy. These were known as centrally planned economies (CPEs)—now all defunct (except North Korea and Cuba). Why? These systems lacked the ability to create and use information productively. The coordination problems at the center were mindboggling—exceeding even those facing our environmental bureaucracies. And, as is true here, the suppliers of the input information, individual firms, had all kinds of incentives that did not coincide with the purported goals of the center. Like so many agents, they wanted a quiet but comfortable life, fulfilling "the plan," and avoiding any risk of being held responsible for some error. The CPEs were not hotbeds of innovation.

It's a common saying around Washington that "all politics is local." So too is all information, and it is local in a deeper sense. New information necessarily starts in a single human brain (interacting, to be sure, with other human brains). Light bulbs turn on in the mind, individually, like the mutations that drive change in the ecosystem. Systems that encourage those bulbs to turn on, and allow the strongest lights to prevail, are likely to progress.

For those who had faith in the centrally planned economy, the impact of the computer must have been a jolt. Curiously, it might seem the perfectly designed instrument for carrying out central planning. By drastically lowering the cost of data-processing, it seemed to facilitate the kind of inputoutput calculations that central planning calls for. But instead it worked the other way—it only lengthened the gap between the CPEs and the rest of the world. Why? One reason is surely that computers provided the perfect field for decentralized systems to show their superiority. Instead of some honcho in Moscow or Washington picking the one best way, thousands of people, many literally working in their garages, cooperating on a voluntary basis, independently brought their brain power to bear on the hundreds of problems. And without central agency review, they offered their solutions into the market.

This is, of course, not to suggest that an unregulated market represents optimal environmental policy. Such a market, with decisionmaking decentralized—except for the limited centralization that may be required for enforcement of contract and property rights—falls short. The competitive process is subject to externalities. Of most interest for the environment are external costs, ones that the individual firm does not count because they are borne by others in the form of dirtying the water or air that others use. (Incidentally, they are external only because property rights in air and water are, under the common law, either nonexistent or illdefined.) So some sort of intervention in the competitive process is necessary. (It could take the form of a restructuring of property rights so that all air and water would be privately owned, with every owner entitled to at least damages and perhaps injunctive relief for the dirtying of his or her air and water.) But the case for some centralized control is not the same as a case for going straight to the Soviet model.

It is not as if we lacked competing models for environmental policy. One can sharply limit the number of environmental policy decisions that are taken on a centralized, hierarchical basis. The standard mechanisms are either pollution taxes or marketable pollution permits. With marketable permits (which deserve more focus because they are more politically feasible than pollution taxes), a centralized decision is made on a total amount of the pollutant that is found acceptable for the system. While the initial allocation of these rights may also be centralized and political (i.e., allocation by fiat rather than by auction), errors in that process make little difference if the rights are readily transferable. Under such allocation, firms, instead of having every incentive to convince an administrator that pollution control is costly or impossible, have every incentive to devise systems for controlling pollution as cheaply as possible. They are rewarded in such innovation by being able to sell off surplus entitlements. If they can, then the more they limit their pollution the more entitlements they have to sell. Thus, they have an incentive to innovate in "producing pollution control" in a way that parallels normal market incentives to innovate.

There are a number of other issues in environmental law on which we might learn from nature; for example, federalism, international trade, the role of nuisance and other forms of tort liability, takings, and risk-risk analysis. But I've talked long enough. We can get into them in the question period if you like.

As I prepared for this talk a line from Wordsworth kept running through my mind—"Little we see in nature that is ours." It's in the opening of a sonnet, one of the great statements of the romantic movement's feeling for nature:

The world is too much with us; late and soon,

Getting and spending, we lay waste our powers:

Little we see in nature that is ours;

We have given our hearts away, a sordid boon!²

It might be good if in designing systems of environmental law we managed to see a little more in naturethat is ours.

1. A rare exception is J.B. Ruhl, Thinking of Environmental Law as a Complex Adaptive System: How to Clean Up the Environment by Making a Mess of Environmental Law, 34 HOUS. L. REV. 933 (1997).

2. William Wordsworth, "The World Is Too Much With Us." 1.1 (1806), in BARTLETT'S FAMILIAR QUOTATIONS (14th ed. 1968).