Steven Den Beste is applying his microscope to the Tragedy of the Commons. Garrett Hardin points out, in his book of the same name, that the real problem are unmanaged commons. The management can happen in any number of ways: through societal norms; through government action; or through conversion to private property.
Steven disagrees with this last, because he thinks it doesn't work. One of the reasons he refuses to be labelled with the term 'libertarian' is because of libertarians propensity to stick by principles even if doing so has negative effects. Libertarians love to solve commons problems by converting them to private property. He compares that to the government solution, which has been tuned over centuries, and which he admits is only a "good enough for government work" solution. Libertarians solutions haven't been tried and tuned simply because government solutions are thought to work well enough.
In this, Steve is committing a logical error: comparing the best that one system can do against proposed solutions underneath another system. The whole reason why free markets are better than controlled markets is because of better information flows. As the Cluetrain folks keep saying, a market is a conversation. If you could get a bunch of smart people (e.g. libertarians) in one room, and have them design a political system in full (e.g. Libertarianism), then you wouldn't need free markets. You would just design markets to work well. Instead, what is expected to happen is that Libertarian solutions which don't work will be discarded and replaced by ones that do work.
So, specifically, if you give people a property right to the air above their land, how might that work out? Steve anticipates that people who want clean air will sue everybody upwind of him, and prevent them from doing anything. "the entire nation would grind to a halt." he says. This only works if everybody is stupid. Fortunately, this is not the case. We *do* have some smart people who can fix things. For example, the legal system might not accept a lawsuit unless the damages exceeded the cost of adjudicating the lawsuit. What that would mean is that if you were damaged to the tune of $1, and a lawsuit cost $500 (a guess based on the fee that the American Arbitration Association charges), you would have to get 500 people together.
What would likely happen in the case of clean air property rights is that you would sell them to a consolidator. That company would either pay you, if your air was being polluted, or else you would pay it to defend your clean air. We would end up with a solution similar to what we have now, except that instead of having a monopoly enforcer, who enforces one rule for everyone all over the USA, there would be competitive enforcers.
Leftists would no doubt object to this by saying "But! But! It's clear that only poor people would be willing to sell their clean air." They are quite right. Said poor people already have polluted air. The difference between the current system and the libertarian system I propose (which I must reiterate may be nothing like what would actually happen) is that under the current system, government workers are bribed (and I include politicians here; call the bribes "campaign contributions" if you want) to ignore laws which prohibit pollution. It would be an improvement if the poor people were actually paid instead.
The other objection that Steve has to private property solutions is that not every private property owner has an interest in protecting the property. He points out that the present value of destroying a resource may exceed the total future value (as brought into the present). This may result in the resource, otherwise sustainable, being destroyed.
Steve has just discovered an important result of economics, which is that sustainability is not infinitely valuable. Sometimes something is best when used up. On the other hand, the example he gave is one in which the market is not completely free. I'm not an expert on the market for redwood trees; it may be that the market is hardly free. You can't use an example of how a controlled market works to describe how a free market will work. When controlled markets don't work well, you can't use that as evidence that free markets won't work well and conclude that one must control markets.
In a free market, interests are represented by purchases. If you have an interest in protecting redwood stands, you purchase the land. If the land is owned by a company and the company refuses to sell, you buy the company (or a portion thereof). Sometimes there's just no way to have your interest represented. This is not worse than our current system, where someone's interests as a California citizen are not represented by the state of Nevada.
People who have a belief in sustainability as a good unto itself have an interest in protecting redwood stands which might otherwise be harvested into extinction. They can express that belief by purchasing companies whose corporate charter (difficult to change) includes a committment to sustainable harvesting of redwood trees. Maybe there aren't enough of such people to have enough of an effect on the marketplace? If not, then there wouldn't be enough voters to affect the political process, so government is no solution for them.
This issue comes up again and again. People who dislike libertarianism because it's so market-driven don't see that markets express popular interest just as much as politics. Markets express interest better than politics, because political systems are often all-or-nothing. Either every redwood tree is protected, or none of them are.
Steven points out a commons where there is no ownership to concentrate: vaccinations. It may simply be that a libertarian government would not be perfect; that some problems currently solved would go unsolved. Other problems would be solved better, however. The question really is not whether libertarianism would be better in every respect than a coercion-based government. The question is whether it would be better overall. Those of us who count themselves as libertarian believe it will be better overall.
I need to say something about transaction costs, technology, and government, because they are strongly related to what a government can do efficiently. I'll leave that for another day, though.