An economic system for permanent ecological sustainability through market mechanisms, not central planning.

J.W. SHER

What Free Market Ecology Is

Free Market Ecology is the completion of capitalism. It extends the market’s proven information-processing power to the one domain capitalism currently ignores: the environment.

In our current system, the private market creates capital and allocates labor with extraordinary efficiency using price signals. Environmental protection, however, is left to government central planners who must manage ecological outcomes without real-time market information, much as communist states managed capital creation without price signals. Free Market Ecology moves environmental protection into the market, making it the focus of entrepreneurs and competitive innovation rather than bureaucratic administration. As I argue in Extending Capitalism’s Logic, this makes FME more capitalist than capitalism, not less.

Why Capitalism Is About to Break

Capitalism’s engine is the markup of labor. An entrepreneur pays a worker $10 per hour and sells the output for $20. The difference is profit. This single mechanism built the modern world. Every investment, every innovation, every competitive advantage ultimately comes down to getting more output per unit of labor cost.

AI and robotics are driving labor’s share of production toward zero. When robots do all the work and labor costs nothing, this markup mechanism collapses. The profit motive that directed centuries of innovation ceases to function. As I show in The Economic Math Behind Free Market Ecology, we run into a divide-by-zero situation: the optimization target of maximizing value per labor becomes undefined when labor is zero.

Humanity is about to get the genie. AI and robotics are the lamp. The genie will grant virtually unlimited production wishes. And without a market mechanism for ecological costs, it will run us into the limits to growth at meteoric speed. Every resource constraint that took human economies centuries to approach, the genie hits in years. Oceans fished empty. Aquifers drained. Atmosphere saturated. Not through the slow grind of human industry but through the tireless, infinitely scalable, impossibly fast work of machines that never sleep, never strike, and never ask whether they should.

What remains when labor is worthless? Raw resources. The physical limits of the Earth. The government must step in to regulate every use of resources, and that regulatory apparatus will have to grow until it touches nearly all economic activity. Capitalism will have reproduced central planning through the back door, as the environmental protection bureaucracy becomes the planning committee deciding who may use which resources and how much.

The Resource Markup: A New Engine of Equal Power

Free Market Ecology replaces the labor markup with something more powerful: the markup of resources.

Every significant natural resource and environmental externality is tracked through Resource Usage Rights (RURs), capped units that travel with materials through the entire supply chain. A producer who uses resources more efficiently than competitors can mark up the RURs in their products and keep the difference as profit. This is structurally identical to how capitalism marks up labor, but it operates across hundreds of resource dimensions simultaneously.

Consider a rare earth processor who develops clean technology that eliminates the acid lakes created by conventional processing. As described in The Rare Earth Tailing Pond Dilemma, the clean processor borrows almost no acid-land-damage RURs (because the actual damage is near zero), but sells the product at a markup that reflects the damage consumers would otherwise accept from dirty competitors. The entire spread between near-zero actual damage and the market price of damage becomes profit, paid in freed-up pieces of the Earth’s carrying capacity.

Crucially, the resource markup is zero-sum with respect to the Earth. The clean rare earth processor’s profit does not create new ecological budget. It redistributes consumption rights from dirty competitors to the clean innovator. The total cap remains fixed. What changes is who gets to use the budget and how efficiently they use it. The markup is the market’s reward for moving consumption from wasteful hands to efficient ones, not a license to consume more.

This is not one markup engine like capitalism has. It is hundreds of markup engines running simultaneously, each directing entrepreneurial energy toward a specific dimension of ecological efficiency. The cumulative force of these engines would drive resource-saving innovation with the same relentless intensity that capitalism’s single labor markup drove labor-saving innovation for three centuries.

Most critically, all of these tools operate on one dimension at a time. A carbon tax addresses carbon. A water rights market addresses water. A fishing quota addresses fish. This is not a design limitation that cleverer policy could fix. It reflects a physical reality: fresh water is not carbon. Nitrogen runoff is not habitat loss. These are fundamentally different ecological constraints that cannot be collapsed into a single metric without destroying the information the system needs to function. Non-fungibility across resource dimensions is physics, not a design choice.

Free Market Ecology creates hundreds of markup engines running simultaneously across every tracked resource dimension, each one an independent profit incentive for ecological efficiency. Consumers navigate this multi-dimensional budget through a resource exchange where they can trade their personal allocations: someone who cycles to work can trade unused fuel RURs for extra water RURs to fill a swimming pool. These exchanges shift the micro-distribution of who uses what, but the Ecological Central Bank never prints carbon RURs to cover water RURs. Each macro cap remains independently binding. The exchange trades allocations, not caps. No patchwork of single-dimension taxes and permits can replicate the systemic force of entrepreneurs competing to mark up resources across every dimension at once.

RURs Are Credit, Not Permits

The most common misunderstanding of Free Market Ecology is that RURs are just tradeable permits by another name. They are not. The difference is structural and it changes everything.

In cap-and-trade systems, a permit is an asset. You buy it, you own it, you can hold it forever. This invites hoarding, speculation, and the financialization of environmental markets. Goldman Sachs holding oil in tankers waiting for prices to rise is the current system working as designed.

In Free Market Ecology, RURs are a form of credit. They are borrowed from Ecological Private Finance (EPF) against posted collateral, and they sit on your ecological balance sheet as a liability. Holding them costs you interest every moment. The interest rate is not a flat administrative fee. The Ecological Central Bank sets a base rate, and competing EPF entities add a risk spread based on the borrower’s creditworthiness, exactly as commercial banks price loans today. A proven rare earth processor with a track record of efficient use borrows at a lower rate than a startup with no history. This risk-based pricing directs resources toward producers most likely to use them efficiently, because efficient producers are better credit risks. The RUR becomes a hot potato that everyone in the supply chain wants to move along as quickly as possible. Gold that comes into your possession must be accounted for with gold RURs on your balance sheet, and sitting on it accrues costs. The rational behavior is the opposite of hoarding: use the resource in production, sell the product downstream, and clear your balance sheet.

Because RURs are liabilities, not assets, the system is structurally resistant to financialization. You cannot pledge a debt you owe as collateral for another loan. Attempting to do so is check kiting, not secured lending. A carbon RUR on your balance sheet is an obligation to account for carbon you extracted or received, not a valuable instrument you can leverage. This eliminates the entire class of derivative speculation that plagues cap-and-trade markets. There is no RUR-backed security, no RUR futures market divorced from physical resource flows, no Goldman Sachs warehouse play. The only way to profit from RURs is to use resources efficiently and sell products downstream at a markup.

The interest that borrowers pay flows through a complete fiscal cycle. EPF entities collect interest from producers and pass it upstream to the Ecological Central Bank. The ECB transfers these revenues to government, which spends them on public goods and distributes a portion as resource UBI. This is resource seigniorage: the carrying cost of ecological credit, recycled through the economy exactly as central bank seigniorage is recycled today. The system is not deflationary. Every unit of interest collected is fully recycled through government spending, maintaining aggregate demand while enforcing ecological limits.

This credit structure creates a systematic preference for leaving resources in the ground until the supply chain is ready to consume them. Resources still in the earth cost nothing. Resources above ground cost RURs every moment they sit idle. The Earth itself becomes the optimal warehouse. As I describe in The Financial System of Free Market Ecology, this credit mechanism extends through the entire chain from the Ecological Central Bank through private finance to producers and consumers.

The Ecological Central Bank Is Not a Central Planner

The Ecological Central Bank sets scientifically determined caps on resource extraction, the maximum sustainable use of each resource type. This is the system’s only centralized function, and it is scientific rather than economic: determining how much oil, nitrogen, freshwater, and habitat the Earth can sustain, not deciding who gets to use it. The market handles allocation within the caps.

The knowledge problem that Hayek identified in “The Use of Knowledge in Society” (1945), that no central authority can process the distributed information needed for efficient allocation, is addressed through federalism. The Ecological Central Bank is not a single global institution. It is a federation of nested jurisdictions. A local watershed authority sets nitrogen caps based on local water quality science. A national government sets mineral extraction caps based on national geology. Global coordination is needed only for genuinely planetary systems like atmospheric carbon. Each jurisdiction manages what it can observe at its own scale, and competitive pressure between jurisdictions creates feedback: if one jurisdiction sets caps poorly, the consequences are local, and others learn from the failure. The risk of corruption in government resource sustainability estimates is real, but it exists in every conceivable system that manages resources. The only alternative that eliminates it entirely is eco-primitivism, abandoning technology and returning to a pre-industrial state. But eco-primitivism is not stable: within a few thousand years, societies reindustrialize and face the same problems with even fewer resources. FME does not eliminate the corruption risk. It contains it through jurisdictional competition and bilateral enforcement.

International trade between jurisdictions is governed by bilateral penalty rates, not global price discovery. Each importing jurisdiction decides which foreign caps it trusts and imposes penalty rates on RURs from jurisdictions it considers unreliable. A jurisdiction with credible, well-enforced caps faces no penalties when its products cross borders. A jurisdiction suspected of inflating its caps or tolerating violations faces penalty rates that make its exports more expensive, punishing its economy and creating political pressure for reform. This is a multi-dimensional generalization of William Nordhaus’s Climate Club proposal: instead of a single carbon tariff, each jurisdiction evaluates the full spectrum of ecological caps in its trading partners and sets penalty rates accordingly. No global inspector is needed. Each jurisdiction protects its own ecological integrity by penalizing imports from jurisdictions that cheat.

FME handles routine ecological accounting: the daily flow of resources, the carrying costs, the markup incentives. But criminal law remains for severe irreversible damage. Illegal dumping of toxic waste, deliberate destruction of critical ecosystems, knowing falsification of RUR records — these are not accounting errors to be corrected by interest rates. They are crimes prosecuted under environmental criminal law, with penalties including imprisonment. The RUR system makes routine compliance automatic and profitable. Criminal law handles the cases where someone bypasses the system entirely.

Why the System Enforces Itself

The most common objection to any tracking system is evasion: why wouldn’t producers simply lie? The answer is that FME’s enforcement is built into the financial structure itself, not layered on top as regulation.

Every RUR transaction is a bilateral credit relationship. When a producer borrows RURs from Ecological Private Finance and sells product downstream, both parties have a record. Default means collateral seizure — the EPF takes the producer’s posted assets. This is not a fine imposed by a regulator after years of litigation. It is automatic contractual enforcement, the same mechanism that makes mortgage payments reliable without a government inspector visiting every house.

Collusion between supply chain levels is self-defeating. If an extractor underreports resource use, the products entering the next stage of the supply chain carry anomalously low embedded RURs. Downstream competitors see these numbers and investigate, because anomalously cheap inputs from a competitor threaten their market position. The extractor who underreports also forfeits their markup on the unreported units — they extracted resources but cannot claim the RUR profit from selling them honestly. And the EPF entities that lend to producers have a direct profit motive to detect fraud, because undetected default means they lose their collateral.

Shell companies and fly-by-night operations cannot game the system because EPF requires collateral before issuing RUR credit. The collateral is physical: land, equipment, inventory with embedded RURs. Not cash, not promises, not paper assets that can be moved offshore. A shell company with no physical assets gets no RUR credit and therefore cannot extract or process resources within the system. Default means losing your business, not paying a fine that a shell company was designed to absorb.

Universal Basic Income Without the Resentment

Every UBI proposal runs into the same political wall: why should a worker subsidize someone else’s idleness? In a single-currency system, this objection is legitimate. Money from UBI gives the recipient a claim on other people’s labor.

Free Market Ecology dissolves this problem by separating resources from labor. Every person receives a daily allocation of RURs, their share of the Earth’s sustainable resource budget, funded by resource seigniorage: the carrying costs that producers pay on borrowed RURs, recycled through the Ecological Central Bank to government and distributed as a universal entitlement. This is not a tax on productive activity. It is the return on ecological credit, the same way central bank seigniorage funds government operations today. If a product is fully automated, produced entirely by robots with no human labor, its only cost is the resources consumed. The UBI recipient can acquire it by spending their RURs. No human worked to make it. No one’s labor is being commanded.

Traditional money continues to function for human labor, creativity, and subjective value. If a product involves human effort, it has a price in money on top of its resource cost. The person living on resource UBI alone cannot hire a plumber, eat at a restaurant with a human chef, or buy handmade furniture without earning money through their own contribution. The worker’s fairness intuition is respected because nobody commands their labor without reciprocating. As I discuss in Simplified Consumption in Free Market Ecology, the complexity of managing a multi-resource budget can be handled through resource exchanges, AI assistants, and all-inclusive service providers.

AI Safety Through Budgets, Not Bureaucrats

You own a mountain. You have a robot army. You tell them: carve this mountain into a 500-foot statue of me. In the current system, the only thing that stops you is a government bureaucrat. An environmental review board. A zoning commission. When AI makes the labor free, every person with access to robots can reshape their environment at industrial scale. The number of bureaucrats needed to review all of them is impossibly large. This is central planning arrived at through ecological necessity.

In Free Market Ecology, the AI does not need permission from a bureaucrat. It needs RURs. It checks the resource budget, calculates the ecological cost across every dimension, and reports: this project costs more RURs than you have. It then proposes alternatives that fit the budget. The constraint is structural, automatic, and operates at machine speed. One AI with a budget requires zero bureaucrats. A billion AIs with budgets require zero bureaucrats.

The paperclip maximizer problem, an AI converting mountains into paperclips because its objective function has no ecological constraint, cannot happen in FME. Every unit of production requires RURs. The AI hits its resource budget after the first few tonnes of steel and optimizes within the constraint instead of consuming without limit. This is AI safety through guardrails rather than guards, through budgets rather than alignment.

And the people who say AI will solve all environmental problems are proposing something worse than they realize. An AI managing resources without a market is just a central planner running on GPUs. It must decide who gets to live on the coast and who does not, who eats avocados and who does not, who flies and who stays home. Every allocation is a trolley problem, a political choice disguised as a technical one. Free Market Ecology keeps the market. People bid with their RUR budgets. Human creativity, taste, competition, and values determine allocation, not an algorithm’s approximation of those things. The result is both sustainable and free.

Why Resource Wars Become Obsolete

The history of wealth has three eras, and each era determined whether war was rational.

The Spanish viewed wealth as gold to be seized. Conquest was the path to riches. War was zero-sum: your gold is my gold if I take it. The British figured out that wealth was productive capacity to be built. Free workers with capital produced more than slaves. Conquest shifted from plunder to market access. War became less rational but still occurred over resources and trade routes.

Free Market Ecology redefines wealth a third time: wealth is the efficiency with which you transform ecological resources into human value. Under this definition, possessing resources is not wealth. Processing them efficiently is wealth. And efficiency cannot be seized. It must be developed.

If China processes rare earths more efficiently than America, the rational move is to send your ore to China and share the markup, not to fight a war over mines. Resource hoarding becomes as economically dead as the Spanish gold that caused inflation while England built factories. As I explore in Supply Chain Resource Tracking, the RUR system makes comparative advantage structural rather than advisory: resources flow to the most efficient processor not because a treaty mandates it, but because the markup makes it profitable for every actor in the chain.

This is the Westphalia of resource conflict. The Treaty of Westphalia ended the wars of religion not by resolving theological disagreements but by making them structurally irrelevant to interstate relations. Free Market Ecology does the same for resource disputes: it makes resource seizure structurally pointless by changing what wealth is.

The Existential Argument

When human labor becomes worthless, authoritarian systems face a terrible arithmetic. Every person alive consumes resources. Their economic contribution is zero. Fewer people means more resources for the remaining people. Every centrally planned economy in history has been tempted by this logic. AI and robot armies make it executable at total scale.

Free Market Ecology eliminates this incentive. Every person receives a resource allocation. No central authority controls aggregate allocation in a way that benefits from fewer people. Population stabilizes voluntarily as families balance the number of children against per-child resource availability, the same mechanism that reduced family sizes in every developed economy, but with resource visibility rather than just financial pressure.

The sustainable equilibrium FME creates is not the end of human progress. It is the platform from which we reach the next stage. As I discuss in The Economic Math, advanced bioengineering may eventually allow humans to be powered by electricity, freeing us from biological resource dependencies entirely. But we must survive long enough to get there. Free Market Ecology is how we hold civilization together through the transition: keeping the planet sustainable, the economy productive, the population stable, and the technological frontier advancing.

Getting There From Here

Free Market Ecology does not require a revolution. It requires a series of practical improvements to systems that already exist. Individual Transferable Quotas in fisheries are functioning single-resource RUR markets. Nutrient credit trading, as described in Extending Capitalism’s Logic, is a working piece of FME operating inside the current system. Carbon cap-and-trade markets, forest certification chains of custody, and water rights markets are all fragments of the framework.

A system this comprehensive was not feasible even twenty years ago. The transaction costs of tracking every resource unit through every supply chain stage would have exceeded the value of the tracking itself. The collapse of digital transaction costs — the same force that made global e-commerce, real-time payment processing, and blockchain-based record-keeping practical — is what makes FME implementable now. The infrastructure that tracks a package from Shenzhen to your doorstep can track the RURs embedded in it.

The implementation starts with critically depleted resources where tracking infrastructure already exists: fisheries, carbon, endangered hardwoods. It extends to established environmental markets: water rights, nutrient credits. It expands as the infrastructure matures and depletion pressures make the cost of not tracking exceed the cost of tracking. Not every resource needs to be tracked. Seawater will never need an RUR. The system covers only what matters, starting with what matters most.

The path from here to a fully functioning Free Market Ecology is not a single political decision. It is the organic expansion of resource tracking, jurisdiction by jurisdiction, resource by resource, until the system is largely in place without anyone having had to approve the whole thing at once. People do not vote for “replace capitalism.” They vote for “fix the fisheries” and “make carbon credits honest” and “track rare earth supply chains.” The pattern assembles itself from the pieces.

The Essays

The articles on this site develop Free Market Ecology from its foundational concepts through its financial architecture, practical applications, and implications for AI, national security, and political philosophy.

Core Theory

• The Foundational Essay (below) outlines the complete system: the state’s role, the consumer’s role, the ecological capitalist’s role, and why existing systems fail.
• Extending Capitalism’s Logic shows how FME improves on existing environmental markets like nutrient credits, and argues that FME is more capitalist than capitalism because it moves environmental protection to the market.
• The Economic Math demonstrates why FME is the only system that prevents the robot apocalypse and the economic neutron star of civilizational collapse.
• The Financial System details how ecological central banking, private finance, and RUR lending work in practice, with worked examples for carbon credits and rainforest hardwoods.
• Simplified Consumption addresses how consumers navigate a multi-resource economy without information overload.

Applications

• Producer Bartering solves the unusual problem of how producers exchange non-fungible factors of production in a resource-based economy.
• The Rare Earth Tailing Pond Dilemma is the definitive stress test: how FME brings the dirtiest industry home to democracies without coercion, and how the markup mechanism creates the most powerful profit incentive ever designed.
• Network State Identity shows how to implement FME today in voluntary communities using blockchain.
• Supply Chain Resource Tracking demonstrates a superior alternative to tariffs for managing strategic resource dependencies on foreign adversaries.

Critique and Fiction

• Economic Calculation in the CBDC/Digital ID/Net Zero Commonwealth revisits Mises and Hayek’s critique of socialism in the context of modern digital surveillance and programmable money, and shows how FME achieves net-zero goals through incentive rather than mandate.
• The Rise of Elias Mercer imagines the founding of the first AI nation state and the role of resource-based economics in a world of autonomous commerce and warfare.

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The Foundational Essay

The full text of the original Free Market Ecology essay follows.

Introduction

While writing my novel “The Undeserving Future,” I wanted to explore a world ruled by a government fanatically interested in implementing permanent ecological sustainability. By permanent ecological sustainability, I mean to create a society that could exist on Earth without destroying the planet for hundreds of thousands of years. Unlike many radical ecologists, they did not want to eliminate technological progress and return to a hunter-gather existence. I did not believe, as Yuval Harari does, that agriculture was our biggest mistake. I started this project because I thought that market advocates had run out of ideas about how to face sustainability and resource depletion and our planet’s limits to growth and that I needed to present new ideas to these problems.

The fundamental redesign of capitalism asks how you would have anything resembling a market economy in limited environments. It’s an alternative to the carefully centrally planned economies on the International Space Station or aboard a nuclear submarine. In these economies, administrators plan all production and consumption because running out of food, fuel, air or water can have catastrophic consequences and can happen suddenly without price signals and there are no alternatives that can replace these when they run out. Free Market Ecology provides an alternative for these spaces, which maps to roughly the same production and consumption as a planned economy in these trivial cases, but more importantly, it will scale to allow a decentralized market economy on a future Mars colony or a giant spaceship in deep space, or even, at a much larger scale, on a near future severely resource-limited planet Earth.

What does environment-first mean?

Environment-first means that there can be no compromises regarding the environment. We have to be able to live here on Earth forever. We cannot destroy this planet ever. All human values are subservient to our environmental responsibilities to the Earth. This belief does not mean we must eliminate humans, but we must accept the limitation that we only have one Earth, and we should be able to live on it forever in balance with nature. The choice is not contingent on the technology we have available. Indeed, technology will help us use resources more efficiently, but it will not give us a new earth. Even if unbelievably technologically advanced aliens landed and gave us faster-than-light travel and free energy technology, we would overpopulate and destroy every habitable planet in the galaxy within 10,000 years using our current economic model. If other intelligent beings are in the galaxy, this expansion strategy will inevitably bring us into conflict with them. But I digress. Even if we were to destroy all technology and revert to a hunter-gatherer state, we would eventually forget the mistakes of the past. In 20,000 years, we’d return to where we started with the same problems and an even more resource-depleted and polluted environment.

The Design of The Free Market Ecology System

The design of an economic system that could sustain a vibrant creative technological economy that will remain sustainable underwater, on Mars, or in deep space for the most extended possible length of time where humans cannot live without technology, and will sustain humans on Earth indefinitely is composed of three parts. The role of the state, the dual role of the consumer/laborer, and the role of the ecological capitalist are the three parts. A fourth component, the financial system that connects them, is detailed in The Financial System of Free Market Ecology, which describes how the Ecological Central Bank, private finance, and RUR lending create the credit architecture underlying the entire system. There remain inequalities where the best and most capable rise to the top in this system, but they do so ultimately by optimizing ecological sustainability. In this way, the system directs their greed and ambition at improving the ability for humans to live on Earth in a technologically advancing world indefinitely.

The State’s Role

Annual Resource Allocations

The heaviest task of the state is determining the maximum sustainable extraction of Earth’s resources. This determination applies to everything that is easily depletable. This determination will include crude oil extracted via various methods, soil nitrogen, minerals, ecologically sensitive land area use, livestock, and fish. For anything that people can’t use an unlimited amount of for hundreds of thousands and never run out, the government must specify a maximum upper limit for a given period regarding its consumption. Sunlight, since it is inexhaustible, would probably be free. Any manufactured resources recycled from the earlier economy the system would also consider free to encourage the reuse of materials, recognizing that these were previously extracted through necessary but ecologically costly methods.

Provenance

The financial system, not the state directly, tracks annual resource extraction through all use and production. Ecological Private Finance institutions post collateral with the Ecological Central Bank and open RUR lines of credit, which producers then borrow against to extract and process resources. For example, an oil driller would pull a gallon of crude oil from the ground. When he would sell the oil to a refiner, the oil would go off his balance sheet. The oil driller’s balance sheet would have an absolute maximum cap, after which he could not extract anymore. The system would incentivize the oil driller to transfer the oil to others to allow him to pump more oil. The financial system handles this by turning his right to use the oil into debt: he borrows oil RURs from Ecological Private Finance, and holding them accrues interest until he passes them downstream. He could charge a markup on the quantity of Resource Usage Rights for the oil, where he would keep some of the RURs for his consumption by marking up the amount of oil RURs he transferred to the refiner by a transparent percentage. The oil refinery would pass the oil extracted onto the gas station. The gas station would pass it on to the consumer, who would burn it in an engine. They would have a maximum amount of carbon dioxide they could release into the air daily. They could consume no more oil if they hit the cap because their balance sheet would have a maximum limit, and the amount they were allowed to burn daily would have maximum daily limits. The financial system’s job would be to keep track of all this on a blockchain. The blockchain would track who controlled what natural resource and how much at any given time. This grand undertaking requires substantial technological integration, but it is not impossible.

Enforcement is competitive, not bureaucratic. At every level of the supply chain, competitors have an incentive to detect fraud. If a rival extractor underreports resource use, their products carry anomalously low embedded RURs, threatening competitors’ market positions. Downstream buyers scrutinize incoming RUR accounts because accepting fraudulent numbers exposes them to liability. The system polices itself through the same competitive pressure that keeps businesses honest about prices and quality today.

Joint production — where a single input yields multiple outputs — is handled by conservation of RUR debt. When a barrel of crude oil is refined into gasoline, diesel, and asphalt, the total RUR debt across all outputs must equal the input debt from the barrel. The refiner allocates RURs across products based on mass, energy content, or another physical basis, but the total is conserved. No RURs are created or destroyed in the transformation, only redistributed across the output streams.

Individualized Daily Resource Rations (Resource UBI)

The state must also allocate individualized daily rations for each citizen, such as how much carbon they can release into the atmosphere. In a highly integrated system, the system would track the nitrogen content of plants they eat and the nitrogen through the biological waste they contribute back to further fertilize crops. Dealing with biological waste is distasteful, but F.H. King’s book “Farmers of 40 Centuries” claimed this was one of the keys to farmers in Asia being able to farm the same land for 4000 years. The resource rations for different extracted elements would be set individually for each person based on a reasonable and sustainable amount. This rationing does not mean that all people will have equal consumption. Ecological capitalists who successfully increase ecological efficiency can mark up the resources in the products they resell to consumers to have a resource profit and consume those resources obtained from the markup.

Individualized Resource Ownership Balance Sheets

The government will also be in charge of keeping track of each person’s balance sheet. For example, the government will put the resources contained in clothing on a person’s balance sheet if a person receives clothing. If they can completely recycle the clothing by giving it to a recycler, the system will take that resource off their balance sheet. If they throw it out, it’s still on their balance sheet and will limit their consumption permanently. This mechanism also disincentivizes hoarding and owning things in general. If you only rent something, it’s on your balance sheet while you use it and then goes off when you give it back. On Earth, these ownership quotas would be generous enough that most people would rarely encounter them in daily life. The strict constraints described here apply more to severely limited environments like a Mars colony or a deep space vessel, where every gram of material must be accounted for.

International Trade and Bilateral Enforcement

When products cross jurisdictional boundaries, the importing jurisdiction evaluates the ecological credibility of the exporting jurisdiction’s caps. Jurisdictions with credible, well-enforced caps face no penalty. Jurisdictions suspected of inflating caps or tolerating violations face bilateral penalty rates on their RURs, making their exports more expensive. Each jurisdiction decides for itself which trading partners it trusts, creating competitive pressure for honest cap-setting without requiring a global enforcement body. This is a multi-dimensional generalization of Nordhaus’s Climate Club: instead of a single carbon tariff, each jurisdiction evaluates the full spectrum of ecological caps in its trading partners.

Criminal Liability for Severe Ecological Damage

The RUR system handles routine ecological accounting through market incentives. Criminal law remains for severe irreversible damage: illegal dumping of toxic waste, deliberate destruction of critical ecosystems, knowing falsification of RUR records. These are not market failures to be corrected by price adjustments. They are crimes with penalties including imprisonment, prosecuted under environmental criminal statutes that exist independently of the RUR framework.

Grants of Resources for Basic Science, Biodiversity, and Other Government Functions

The government will give out grants for scientists to explore basic science matters as voted on by those ecological capitalists who are members of committees in various fields. These capitalists will have free access to the fruits of these basic scientific discoveries. More on ecological capitalists later. The government will give prizes to scientists who reach their research milestones. Similarly, those doing environmental restoration, such as care for endangered species, will receive prizes when population levels of those species rise to certain predefined targets.

The Consumer’s Role

The consumer receives a daily resource UBI, their share of the Earth’s sustainable resource budget, which they can spend over time. This budget is multi-dimensional: separate allocations for carbon, water, minerals, habitat impact, and every other tracked resource. In severely constrained environments like a Mars colony or during an acute resource crisis, additional ownership limits may apply, but on Earth the resource UBI is the primary constraint. Consumers can trade their personal allocations on a resource exchange — someone who walks to work can trade unused fuel RURs for extra water or food RURs. These exchanges shift who uses what, but the macro caps remain fixed. AI assistants and all-inclusive service providers handle the complexity of managing a multi-dimensional budget, so that most consumers experience the system as a single resource “price tag” on each product, with the multi-dimensional accounting happening behind the scenes. Consumers will be intensely concerned with the resource efficiency of all the goods they buy and consume. They will also be highly concerned with ensuring that every object they consume is recyclable or has high enough demand that they can resell the item. They will naturally switch to products offered in the market with the same value for fewer resources consumed. They will prefer to rent or borrow rather than own. They will be thinking about the entire product lifecycle of products they come into possession of and will rarely throw anything in the trash or obtain ownership of products that are not 100% recyclable.

The Worker’s Role

The worker allocates their labor to whatever ecological capitalists or organizations they wish to work for. Their employer will compensate them for their labor with currency operating similarly to our current system, and also with shares of resource markups from the products they help create. Every product involving human labor will have a cost in currency. However, even with an unlimited amount of currency, the resources contained in that product cannot exceed the daily ration for a consumer. Thus, products that machines produced without human effort will be free in currency terms. This economic structure provides a universal basic income for fully automated production processes. If a human effort is involved, the person purchasing must exchange currency at a market-negotiated price for that product. Thus, no one will likely starve in a highly automated world, but those who want to utilize the labor of others will have to contribute their labor.

The Ecological Capitalist’s Role

The ecological capitalist is the entrepreneur who profits by using resources more efficiently than competitors. The mechanism works through the financial system described in The Financial System of Free Market Ecology.

An ecological capitalist obtains RUR loans from Ecological Private Finance, which has posted collateral with the Ecological Central Bank to open a line of credit. Consider an oil driller: she mortgages her well to borrow 10 barrels of oil RURs, which permit her to extract 10 barrels of oil. She sells those barrels downstream for 11 barrels of oil RURs, a markup that reflects the market value of her extraction efficiency. She repays the 10-barrel loan plus interest to Ecological Private Finance and keeps the remainder as profit. A desalination plant operator works similarly: he borrows oil RURs, buys oil from the driller, uses it to desalinate water, and sells the water for RURs that cover the oil cost, the driller’s markup, and his own margin for efficient processing.

The spread between borrowed RURs and the markup at which the capitalist sells downstream is profit, structurally identical to how traditional capitalists profit from the spread between labor cost and selling price. Consumers switch to products that deliver more value per RUR, and the capitalists who achieve the greatest resource efficiency capture the largest markups. The economic system uses greed to advance the goal of creating as much value as possible out of as few natural resources as possible.

The interest rate on RUR loans is not flat. Competing EPF entities set risk-based rates, just as commercial banks do today. The Ecological Central Bank sets a base rate; each EPF entity adds a spread reflecting the borrower’s creditworthiness, track record, and collateral quality. A veteran driller with decades of efficient extraction borrows at a lower rate than a newcomer. This competitive lending market directs ecological credit toward its most productive use, because the producers most likely to generate markup are the best credit risks.

The interest collected by EPF entities flows through a complete macroeconomic cycle. EPF pays a portion upstream to the Ecological Central Bank. The ECB transfers these revenues to government, which funds public goods, scientific research, and resource UBI. This is resource seigniorage: the carrying cost of ecological credit, fully recycled through the economy. The loop closes when consumers and producers spend their allocations and earnings, generating new economic activity that creates demand for further RUR borrowing.

Ecological Private Finance also provides long-term capital for plant and equipment. A factory that processes rare earths cleanly requires significant upfront investment. Financiers lend the RURs needed to build and equip the facility, and the capitalist amortizes this cost over time through the RUR markups included in the price of every product sold. The different RUR constituents in each product’s price, oil, minerals, water, carbon, reflect the full ecological cost of production, and the financier’s return comes from the capitalist’s ability to mark up those constituents through superior efficiency.

The Economic Dynamics

Defeating Jevons Paradox

Jevons Paradox was the observation in the 19th century that the more efficiently a producer uses a resource, the more economic demand there would be for that resource. For example, the faster it is to get around with a car, the more people will drive. Thus, building larger highways creates even more traffic. With individual resource rations in Free Market Ecology, people will not consume more because there is more. Instead, as ecologically efficiency increases the same amount of resources will increase the number of wants they can satisfy. Capitalists aim to use resources more efficiently. Consumers switch to those products and consume the same amount but use the resources not consumed with the new more efficient process for other needs.

A Place for Excellence and Distributed Creativity

This system provides a much-needed alternative to communism and capitalism in that it preserves the motivation and benefit to the society of great entrepreneurs and creative engineers while being able to be operated in a resource-constrained environment. They top producers get to keep a part of their benefit to society and may become immensely rich through resource markups. Their work will also benefit people with low incomes, who will always have something because of their guaranteed resource UBI.

Problems with Central Planning and State Capitalism

Centrally planned and state-controlled economies in North Korea and Cuba have the problem that they are cornucopian in the end. Marx was not concerned with environmental preservation. There is always a glorious future ahead that depends on more resources becoming available through development. Besides, these Marxist economies had poor ecological records, especially the Soviet Union.

Even with a world government operating a command economy hammered out of a policy designed around Agenda 2030 or World Economic Forum plans, it would run inefficiently for all the information processing reasons central planning failed. Giving everything to artificial intelligence would lead to AI safety problems and struggles over who controls whose ends the AI would serve exactly. There is too much information in the economy, and if human life were no longer the ultimate standard for efficiency, a planner could succeed even by sloppily destroying capital and human capital in “Nazino Island” style disasters, and the system would still reward planners for eliminating environment-consuming people. Even for environmental extremists, if one is not interested in giving up on technology, at some point, there has to be a system that must create and preserve instead of self-destructing. That creation should be environmentally sustainable, and my design can build a market system that will optimize for that, as we shall see.

Problems with Free Market Capitalism

Ecological Problems

A boat that can drag a net across the ocean for fish is excellent in free market capitalism. The consumer gets cheaper fish. The fisherman gets higher profits, and everyone wins. Except eventually, there are no more fish. Then consumers will shift to eating potatoes, right?

Ignoring Lifecycle Problems

In free market capitalism, building a single-purpose object with huge maintenance costs, like a gigantic yacht that the owner will eventually scrap, is perfectly ok. Single-use plastic bags are acceptable. Filling landfills with stuff that will never degrade is fine. We can store all our nuclear waste in barrels underground. All these free market capitalist policies sound fine for next quarter’s results, but they don’t work for hundreds of thousands of years.

AI Safety Problems

In free market capitalism, a robot army turning a hill into paper clips or other useless stuff is perfectly ok. The robot army obeyed its prompt to make ten quintillion paperclips and chose the most efficient means. The landowner even had the mineral rights to the mountain, so it’s great. It was just a useless mountain, and now the owner can sell a box of paperclips for a penny! This kind of thing does not work for 100s of thousands of years or many people controlling robot armies.

Limited Environment Problems

The only option for submarines or space stations is a centralized planned economy. The only options for Mars or deep space will be a planned economy. That’s because selling air at market price will lead to someone running out of air or the whole place running out of air and everyone dying. Thus, each person has their entire consumption rationed and planned out beforehand. This economic system does not create an environment encouraging risk and technological innovation. I haven’t heard of any new businesses starting on the ISS or nuclear submarines. Mars and spaceships in deep space will likely operate similarly. Furthermore, there is no way to give up on technology and revert to a hunter-gatherer system in the ISS, a nuclear submarine, deep space, or on Mars. The technological system, the resources available, and humans must all work together to maintain each other, or everyone dies.

Perpetual ecological sustainability problems

Earth’s non-renewable natural resources will eventually run out in the current economic paradigm. Yes, kerosene replaced whale oil in the 19th century when whalers almost drove whales to extinction, but that sort of thing is not guaranteed to continue.

The inefficiency of a lengthy web of regulations

Environmental regulations are vast and numerous, difficult to understand, inefficient and time-consuming to comply with, and often do not cover all issues that need addressing. The market system of Free Market Ecology needs to direct behavior to environmentally beneficial actions automatically.

The Transition to Free Market Ecology

Command Economies

Command economies could implement this system tomorrow if they developed an excellent provenance tracking technology. They could even remain dictatorial but be vastly more efficient at it and do a much better job feeding their people and developing their economies sustainably. They could finally show the capitalist world that they can innovate.

Free Market Capitalism

This system became feasible only recently. The transaction costs of tracking every resource unit through every supply chain stage would have been prohibitive even twenty years ago. The same collapse in digital transaction costs that made global e-commerce, real-time payment systems, and distributed ledger technology practical is what makes FME implementable now.

Blockchain and distributed ledger technology provide the infrastructure for RUR-based resource provenance tracking through every stage of production. The initial step would have natural resource producers record extraction volumes on a shared ledger, with each unit of extracted resource tagged with RURs that travel with it through the supply chain. Refiners, manufacturers, and retailers would each account for the RURs in the materials they process, marking them up as they add value through more efficient use. The ledger makes the full ecological cost of every product transparent from extraction to final consumption.

As described in Network State Identity and Free Market Ecology, the system can also be introduced from the bottom up. Voluntary communities, cooperatives, or network states can implement RUR tracking among their members using existing blockchain infrastructure. These grassroots implementations serve as working demonstrations that resource-based accounting functions in practice, building the case for broader adoption. As described in Supply Chain Resource Tracking, the same ledger infrastructure that tracks RURs can replace tariffs as a mechanism for managing strategic resource dependencies, giving governments a market-compatible reason to adopt the system.

Conclusion

Those in the economic camp who believe that centralized planning is the wrong way to approach economic problems have not had many good ideas about addressing sustainability and resource depletion and other limits to economic growth. With this system, I aimed to provide new ideas that could catalyze a new era of economic growth that would lead in a technological and sustainable direction instead of into either ecological doom or inefficient and similarly ecologically doomed totalitarianism or at worst suicidal self-destruction or a war of all against all for the last resources of the planet. This economic system is not yet complete, but a starting point for economists who do not believe we can survive on this planet indefinitely with our current system and may also be looking to inhabit other worlds that are less hospitable in a way that doesn’t rely on overbearing and inefficient central planning.