The Patuxent River is the largest river totally contained in Maryland, and its watershed is often considered to be a microcosm of the Chesapeake Bay’s watershed.

Nutrient discharges are threatening the health of this river in ways that have been known for at least 25 years. During this period, federal, state and county governments have been entering into agreements, signing memorandums of understanding, setting goals and ratifying plans to deal with the problem; yet the health of the river continues to deteriorate.

Changing this situation will require less focus on government decisions which, with a few minor exceptions, have no direct effect on the health of the river. The focus should be on why government decisions have so little influence on the millions of land and water-use decisions that do have a direct effect on the health of the river and are made by thousands of businesses, households and farmers in the watershed.

Scientific studies and various environmental “report cards” that document the declining health of the river provide evidence that the collective strategies used by federal, state and county governments in their attempts to influence private land and water-use decisions have not been succeeding. For purposes of forecasting the future health of the river, therefore, it is useful to determine whether the strategies that governments are planning to pursue in the future are likely to be any more successful.

Projected population growth in the Patuxent River watershed suggests that unless we can expect future strategies to be much more successful than past strategies, the health of the river will almost certainly continue to decline.

Cause of the Problem

To put the government’s options for protecting the river in the proper context, consider the chart on this page. It provides a broad overview of the two basic roles that governments play in our market-based economy: Governments deliver services and impose obligations. Providing services, such as police protection, wastewater treatment and supporting research about the river, is a government role that is clearly important. But for purposes of affecting private land and water-use decisions that are harming the river, the government’s role in delivering service is far less important than how governments attempt to use preventative and reactive strategies to impose obligations on private decision makers to reduce their nutrient discharges.

Preventative strategies, often called “soft” strategies, emphasize public education and outreach efforts, technical support and counseling to make sure that people appreciate how their decisions contribute to the problem. These soft strategies rely on appeals for voluntary restraints on land conversions, fertilizer use, creating impervious areas, septic system maintenance, and so on. They are based on the notion that people already have some sense of obligation to the river and to the common good, and will restrict their self-interested land and water-use decisions once they understand how they are contributing to the problems facing the river.

Reactive strategies, often called “hard” strategies, are based on the notion that some people will never restrict their decisions for the sake of the common good unless they are required by law to do so, and even then, only if these laws are enforced with meaningful penalties. Of course, reactive strategies should be made “hard” enough to provide sufficient deterrent effects to be, in effect, preventative.

Although soft strategies are popular, economic logic and applied economic research, as well as many recent business surveys and studies into the role of “game theory” in regulatory settings, indicate that they are rarely successful. The evidence also shows that “hard” strategies—setting and enforcing laws—are only effective when they are implemented effectively and consistently with meaningful penalties.

Clearly, some businesses and households can be expected to voluntarily restrict their decisions once they become aware of how they are contributing to some common problem. Even more citizens will restrict their decisions if required to do so by law regardless of the level of enforcement or the size of penalties. The evidence from nearly all modern economic research, though, is that there are many people who routinely adopt strategies that involve “gaming” regulatory programs by using political and legal maneuvering to prevent legal restrictions from being imposed; by avoiding being detected or cited for being “out of compliance” if restrictions are imposed; and by avoiding or minimizing penalties if they are caught.

Economic theory predicts and the evidence shows that without credible enforcement and meaningful penalties, many private decision-makers will not only ignore appeals for voluntary environmental restraints, but will also ignore environmental laws.

Application to the Patuxent River

In the fall of 2006, the declining health of the Patuxent River was the focus of several well-attended public workshops and was, for the first time ever, an important regional issue in the November 2006 elections. But government perspectives about what needs to be done seem to be based on misunderstandings about why current strategies don’t seem to be working.

A State of the River summit that took place in conjunction with the 2006 Patuxent River Appreciation Days festivities, for example, opened up with a bleak assessment of the declining health of the river by a prominent regional scientist. This was followed by a series of presentations by representatives of various state and federal resource agencies who not only concurred that the health of the river was declining, but emphasized that the situation is likely to get worse if the adverse effects of population growth in the watershed are not offset. In closing comments, speaker after speaker asserted that the health of the regional economy is linked to the health of the Patuxent River, and advised the audience that solutions will be found not by pointing fingers but by working together to increase scientific knowledge about the river and improve public education and outreach programs, as well as enlisting farmers, households and businesses to voluntarily make sacrifices for the sake of the river and our descendants.

At the conclusion of the summit, former state Sen. Bernie Fowler, a longtime champion of the river, issued an enthusiastic “call to arms.” He emphasized that “drastic steps need to be taken” and that they should be taken because “if we fail in the Patuxent, we’ll fail in the Bay, and if we fail in the Bay, we’ll fail internationally.”

A few weeks later, more than 30 candidates for state and county public offices, including Maryland Gov. Robert Ehlrich, took part in a “Meet the Candidates” forum in southern Maryland, where the Patuxent River is a particularly important part of the physical and cultural landscape. Each of the candidates was asked by the moderator how they would respond to Fowler’s much-publicized call to arms if they were elected. One by one, they responded with the same assertions and recommendations that the resource agency representatives had presented at the summit.

All of the candidates planned to support and encourage more research, education and outreach, more stakeholder involvement, more cooperation and less finger pointing. They were all confident that we could find ways to get farmers, land developers, and others to voluntarily restrict their land and water-use decisions.

Not one of them mentioned harder responses such as closing loopholes that developers use to get around environmental laws, beefing up monitoring or the enforcement of land and water-use restrictions, or increasing penalties for violating environmental laws. None of them mentioned any intention of addressing the corrosive effects of the widespread and growing public sentiment that savvy people just do what they want and pay the fine if they get caught.

To appreciate how households and businesses in the Patuxent watershed responded to the fact that public officials clearly prefer beefing up soft strategies to getting serious about hard strategies, consider the situation that was described to me by one resident of the Patuxent watershed during a recent interview.

The woman and her husband owned and lived in a home near a creek that feeds the Patuxent River. Next to their home was a wetland lot on the creek. The lot was not developable because it could not pass tests for a septic system, and as a result, the lot was for sale for only $25,000. For several years the couple considered purchasing the wetland lot with the family that owned property on the other side.

But in 2002, a developer purchased the wetland lot for the asking price of $25,000, and also purchased a house on the lot immediately upslope of it for $175,000. Over the next few years, the developer built a walkway from the upslope home through the wetland lot to the creek, cleared trees to give the upslope home a water view, and in the process of “repairing” a boat dock that had been damaged years earlier, extended a dock from the newly built walkway 80 feet into the creek to provide two deepwater boat slips.

During this time, the couple I interviewed and other neighbors complained in person and in writing to the county planning and zoning department that all of the land modifications and structures constructed by the builder were in violation of state wetland and local critical area restrictions. The outcome was that the developer paid $17,500 in fines and sold the home with the water view, water access, and two deep water boat slips for $475,000, a net profit of $257,500.

The more important outcome is that the couple I interviewed believe they now know “how the system works” and feel like total fools for not doing the same thing sooner than the developer. If they hadn’t been so naive, they would be $257,500 wealthier and, they correctly point out, the health of the river would be the same. Having learned this lesson, they told me they are now looking for similar properties where they can make a significant profit by employing what they are now convinced is the most reasonable response to weak, ineffective and selectively enforced county environmental regulations. They plan to do what they want and pay the fine if they get caught, and are telling their story and advising everyone they meet to do the same.

It is reasonable to assume that each time public officials advocate soft responses and shun serious hard responses to the problems facing the river, as was the case at the recent summit and candidate forum, an increasing percentage of those who listen will conclude, as did the couple described above, that the health of the river will continue to decline whether or not they voluntarily restrict their land and water-use decisions or comply with environmental laws.

Based on what economists call “rational expectations” about the collective response to weak government policies, increasing numbers of people will decide that the best choice for them is to join those who pursue their own economic interests rather than joining those who have been convinced that it is better to live with the moral satisfaction of knowing they did the right thing, even though they expect the river to continue to decline.

Summary & Conclusion

The economic perspective about the future health of the Patuxent River can be depicted in Figure 2, which shows two possible river health trajectories and two possible “tipping points.” The solid line predicts the decline in the health of the Patuxent River under the “no change” policy scenario and shows a “tipping point” at year t1 where there is a sharp increase in the rate of decline. The rate of decline after year t1 is due in part to expected increases in the population of the Patuxent watershed and also due to the increase each year in the percentage of households and businesses in the Patuxent watershed who conclude that the government’s feeble response will result in a decline in the health of the river regardless of whether they act responsibly or not, and decide to pursue their self-interest instead. As this percent of decision makers who choose profit and wealth rather than sacrificing personal gain in a futile effort to protect the river increases, the rate of decline in the health of the river is shown to reach a negative tipping point at t1 after which the river reaches a permanently poor state of health that is unlikely to respond to any future recovery strategy.

The dashed line in Figure 2 depicts the expected health of the river if governments respond to Fowler’s call to arms by initiating hard strategies that create expectations among land and water users that: a) their individual decisions to comply with environmental laws will contribute to a collective effort to restore the health of the river that may succeed, and b) their individual decisions to ignore environmental laws will be detected, and that they will be prosecuted and penalized.

Most Bay restoration institutions have incentives for wanting to be popular, and have therefore decided to promote soft strategies for helping the river with popular programs to raise consciousness, plant oysters, educate children and adults about environmental stewardship, and so on. These may help in the long run. But it is difficult to see how they will ultimately succeed unless these institutions help government leaders find the political will to pursue the less popular hard strategies that will protect the health of the river in the short run.

From an economic perspective, the only outstanding question about the future of the Patuxent River is whether we reach the positive tipping point—where incentives and penalties facing land and water users result in changes that favor the health of the river—before we reach the negative tipping point, where so many people lose confidence in our collective capacity to deal with the problem that they decide, reluctantly perhaps, to give up on the river.

And finally, it is important, from an economic perspective, to point out that the link between the health of the regional economy and the health of the Patuxent River, although important in some ways, is not really very strong. In fact, the economic welfare of the vast majority of business and households in the Patuxent River watershed is not linked in any way with the health of the river. This means that relying on self-interest and markets to solve the river’s problems is just as futile as relying on either soft strategies that emphasize research, public education and voluntary restraints or on billions of dollars in new federal river restoration funds that are unlikely to materialize.

From an economic perspective, measures of how government responds to the challenges facing the river by implementing hard strategies—passing and enforcing laws, prosecuting violators and establishing meaningful penalties—provides the most reliable leading indicators of the future of the Patuxent River.

The Problem with ‘Soft’ Regulatory Strategies

The simple model of the U.S. capitalist system is based on two rules:

  • Allowing individuals to act in their own best interest will result in the greatest overall good; and
  • Where decisions that are in the best interest of an individual will cause unacceptable public harm (such as rigging markets or dumping nutrients in the Bay), the government will pass laws that provide incentives and impose penalties that will make it in the interest of those individuals not to make those decisions.

In this model of how people live and expect their neighbors to live, there is no significant role for voluntary initiatives, especially those that involve asking individuals to restrict their resource use decisions for the sake of the common good.

While some environmentally minded or publicly minded people can be expected to respond to “soft” strategies, this simple model predicts that in the United States and in other similarly competitive economies, it is reasonable to expect that many people will not.

The “tragedy of the commons” is real. “Hard” strategies that involve passing laws and enforcing them uniformly is an essential part of keeping a free market economy operating efficiently without depleting publicly owned resources.