Hayek's Legacy for Environmental Political Economy

Defenders of “free-market” environmentalism have often appealed to the writings of F.A. Hayek to support their favored approaches to environmental political economy. Yet Hayek’s power to vindicate such perspectives is controversial. In fact, some writers have found in Hayek’s writings an invitation to extensive political interventions in the environmental arena. In this paper, I develop three environmentally relevant themes in Hayek’s writings in order to clarify his true legacy for environmental political economy. The first of these themes emphasizes that natural resources represent just one subset of the productive capital available to society and thus seeks to address environmental problems through the coordinating power of the market. A second theme stresses the challenges created by “neighborhood effects” in many environmental contexts, generating a potential case for political interventions aimed at preventing undesirable outcomes. A third theme highlights the need for principled protection of the complex, self-organizing systems on which humanity relies, potentially including certain natural ecosystems. On my analysis, the paradigm resulting from a synthesis of these themes makes significant room for political action to address environmental problems, contrary to the characterizations of some free-market environmentalists. But a Hayekian approach to environmental policy-making also demands that interventions respect certain constraints to preserve the functionality of economic markets. Ultimately, I argue that Hayek’s most important contributions to environmental debates can be found in his guidance for making public policies compatible with the functionality of the market order.