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More insights on what’s wrong with Haiti and how it can be fixed

January 22nd, 2010 No comments

What needs to be done? Simply, an end to corrupt rule and heavy taxes and regulatory burdens, central planning and intrusive foreign aid “development” schemes (that feed local elites and foreign contractors), and free and open trade with foreign nations.

Further to my prior post, here are some additional resources on Haiti:

Walter Williams, Only Haiti can end its deeper tragedy (Columbia Daily Tribune, January 20, 2010)

Jonathan Finegold Catalán, Haiti: Two Hundred Tragic Years (Economic Thought, Jan 19th, 2010)

Garrett Glass, A solution in Haiti: Try Freedom (Digital Freedom Network, Mar 3, 2004)

Regarding the issue of past responsibility of other countries, I also thought this reader comment to David S. Landes piece, Slaves and Slaughter; Haiti’s horrible history (TNR, March 10, 1986) to be telling:

What the professor of economics fails to discuss was the fact that
European and American countries almost completely cut off trade with
Haiti in the aftermath of its revolution, given its status as a nation
governed by freed blacks in an era of pervasive slavery. International
isolation was what ultimately crushed Haiti’s export economy
.

Further insightful academic resources can be found at The Digital Library Of The Commons (Indiana U.), by searching through titles for Haiti. Here are a couple:

Smucker, Glenn R.; White, T. Anderson; Bannister, Michael, Land Tenure and the Adoption of Agricultural Technology in Haiti, 2002

White, T. Anderson; Gregersen, Hans M., Policy Lessons from Natural Resources Projects in Haiti: A Framework for Reform, 1994 

 

As a bonus, readers might be interested in this paper, written by a seventh grader, that was the Junior Division Winner of the National
History Day’s 2000 student research paper competition; the paper lucidly describes many of the US responses to and repercussions of the Haitian slave rebellion:

Jim Thomson, The Haitian Revolution and the Forging of America (The History Teacher, 2000)

[Update] Some food for thought on who (US/UN/others/Haitians) and what is responsible for making and keeping Haiti poor

January 19th, 2010 No comments

[Note: Richard Ebeling`s piece on the Jan. 19 Mises Daily page (“Real Economic Reform for a Hurting Haiti“) is the most thoughtful libertarian take so far.]

I found these four pieces (two post-quake, two before) interesting.

Haiti Didn’t Become a Poor Nation All on Its Own — The U.S’s Hidden Role in the Disaster  (Carl Lindskoog, AlterNet, January 15, 2010)

Exporting Misery to Haiti: How Rice, Pigs, and US Policy Undermined the Haitian Economy (James Ridgeway, Reader Supported News, Jan.18)

Haiti: the land where children eat mud (Caitlin Moran, Times Online, May 17, 2009) (a fairly graphic report, with references to international debt, starting with France)

Of course, there is plenty of blame to be shared by Haiti`s rulers, as poor Haitians obviously desperately need what most of us take
for granted (and what Dominicans on the other half of the island have):
property rights and some semblance of rule of law.  Most of the country is a government-“owned” commons (that is,
unprotected), and the state of property rights protection of the rest
of the land is extremely poor. Apparently the nation faces a widespread tragedy of the commons situation.

See this very insightful analysis:  Apocalypso: Haiti’s Chosen Poverty (Joe Katzman, WindsofChange.Net, January 7, 2005).

It is heart-warming to see the current level of interest in the US and elsewhere in helping the Haitians. But the very real question is, how can the tragedy of the commons be ended in Haiti?

Avatar at Home? Those pesky Somali pirates have hampered the pillage of East African seas, leading to higher fish catches by locals

January 12th, 2010 1 comment

As a follow-up to my earlier posts (note: link fixed) on how the rape of East African fisheries ($200-300 million per year) & ocean dumping by Western nations led to the rise of Somali piracy, I just ran across this interesting recent report by AP (“Kenya fishermen see upside to pirates: more fish“) on how the presence of the pirates has boosted local fisheries.

Nice Post by David Henderson on "Avatar", property, corporatism & right of natives to live as they please

January 12th, 2010 No comments

David R. Henderson has a nice post up at Antiwar.com, titled “In Defense of Avatar”, in which he takes issue with reviews of Avatar by Reihan Salam and Edward Hudgins. (My earlier comments on Stephan Kinsella`s review of Avatar are here.)

I would just note that Henderson has presumed that the Avatar natives – non-humans – have “rights” that we are obliged to respect.. I think that history tells us that, even for humans in other civilizations, “property rights” are respected only when it suits the purposes of both sides (viz., can be protected by the side claiming them, as I`ve noted on several occasions, most recently here).

A few excerpts:

I don’t think Avatar is an attack on capitalism. One could leave
the movie and have no idea, based on just the movie, about James Cameron’s
view of capitalism. And while it did have some clichés (most movies
do), I didn’t find it loaded. So what is Avatar? In fact, Avatar
is a powerful antiwar movie – and a defense of property rights. For that reason,
I found it easy to identify with those whose way of life was being destroyed
by military might. …

“But here’s the crucial question, a question that neither Salam nor Hudgins
addresses: Do savages, noble or otherwise, have rights?

If given a choice between high-tech, with all its creature comforts, and the
jungle life of Tarzan, I, like Salam and Hudgins, will take high-tech every
time. But that’s not what the movie’s about. It’s about people from a high-tech
civilization using technology to make war on people from a more primitive society
so that they can steal their stuff. That’s a very different choice. I would
choose not to kill them and take their property. What would Salam or Hudgins
choose? They don’t make their answers clear, although they show zero sympathy
for the victims of the attack. …

To the extent that it makes any statement about capitalism, Avatar
is a defense of capitalism. Capitalism is based on property rights and
voluntary exchange. The Na’vi had property rights in the crucial tree and various
other properties surrounding it. Did they own it as individuals or as community
tribal property? We can’t be sure, but probably the latter. They had refused
to sell the property to the outsiders. There was nothing the outsiders could
give them that would make it worth their while. What should we, if we are good
capitalists, conclude? That, just as in the Kelo case, the people currently
sitting on the land value it more than the outsiders. The land is already in
its highest-valued use. Hudgins and Salam could argue that that’s implausible.
Surely there would be some finite price that the Na’vi would take in return
for the Unobtainium. Maybe, maybe not. But once the Na’vi have made it clear
that they’re unwilling to exchange it, that should be the end of things, shouldn’t
it?…

Hudgins argues that James Cameron is claiming, “That’s capitalism for
you.” As noted earlier, it’s not clear that Cameron is so arguing. But
if that’s what Cameron believes, shouldn’t Hudgins’s response be, “No,
that’s corporatism for you.” …

Read through everything Hudgins has written on Kelo
and you won’t find a wisp of discussion about how low-tech or high-tech, savage
or civilized, Mrs. Dery is. And that’s because it doesn’t matter. People
in high-tech societies have rights. So do savages. It would be nice if Hudgins
showed even one tenth of the concern for the “savages” over whom
the “non-savages” of the U.S. military and CIA roll as he shows for
an old woman who lives (or used to live) in a house. …

 

Avatar is an eloquent defense of the right of people in other civilizations
to live as they please.

Thoughts of an envirofacist avatar on "Avatar"; or Resources, Property Rights, Corporations & Government-Enabled Theft

December 22nd, 2009 1 comment

My pal Stephan Kinsella has a remarkably enviro-friendly post (“Avatar Is Great and Libertarian”) up regarding the new movie “Avatar”; his remarks and others on the thread prompted me to leave a few comments, which I copy below (in furtherance of my nefarious and/or insanely misguided agenda .

Many thanks to Stephan for aiding and abetting this. Ive added a bit of emphasis, fixed a typo or two, and a few additional comments, in brackets.

Published: December 22, 2009 2:38 PM

TokyoTom

Stephan, I welcome you to the dark, enviro-facist side!

– “you have to fight for and use might to protect your rights”

I see you are starting to buy into my real-world view of property rights, that “principles” and force are just two different ways we seek to protect what we consider ours, with the first being most efficacious within a community [and recourse to the later perhaps being necessary]. As I noted on a previous thread of yours,

“The deep roots of “property” are not in principle but in simple competition, physical defense of assets valuable enough to make the effort worthwhile, and in the grudging recognition by others – more willingly offered by those who share bonds of community – that yielding to others’ claims may be more productive than challenging them. This is as true for rest of creation as it is for man. While we have developed property to a very sophisticated degree, at its core property remains very much about the Darwinian struggle to survive and prosper, violence, theft and calculations as to when challenging control over an asset is not worth the effort.”

http://tokyotom.freecapitalists.org/2009/12/21/quot-property-quot-weird-thoughts-evolution-society-quot-property-rights-quot-quot-intellectual-property-quot-principles-structure-justify/

Sounds like this struggle over resources is at the core of Avatar, along with a boatload of Western guilt over our historical theft of land and assets from indigenous peoples, whom of course have also been involved for eons in bloody battles for resources with other tribes.

Far from being simply a dead relic of the past, however, the often violent struggle to take resources from indigenous peoples continues in many places, though out of sight from most of us (not simply those who are trying hard not to see) – oil & gas, minerals, timber, ranching, soybeans, oil palms, World Bank-funded dams and roads, fisheries – you name it, a violent conflict that the natives are losing to kleptocratic governments & elites can be found.

Western corporations are often in the thick of such conflicts, but even where not, modern technology (and growing consumer markets) provide the key tools and incentives for such conflicts, in which natives may be more or less hapless. Local governments typically either “nationalize” the resource or turn a blind eye, with the result that resource exploitation frequently takes on the appearance of a tragedy of the commons.

Western liberals sometimes exacerbate these problems – not simply by seeing “greed” and capitalism as the problem, and not kleptocratic regimes (often supported by the West and by aid money) or the lack of enforceable property rights – but also by demanding misguided policies such as “biofuels” incentives, which lie behind tropical forest destruction in much of SE Asia.

Libertarians should be familiar with these problems, which are a large part of the dynamics in petroleum-cursed nations and elsewhere. Such problems are also linked generally to “aid” efforts and to other centrally-directed development schemes. Elinor Ostrom was awarded the Nobel Prize in part for her work in showing that local communities, if their rights are respected, can generally do a good job of managing their own resources [and how government efforts frequently go astray].

I’ve commented on these issues a number of times, but here are a couple of links for those who might care to scratch the surface:

http://mises.org/Community/blogs/tokyotom/archive/2007/09/28/too-many-or-too-few-people-does-the-market-provide-an-answer.aspx

http://mises.org/Community/blogs/tokyotom/archive/2007/12/16/bison-markets-the-tragedy-of-the-commons-and-the-indian-war.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/11/26/theft-and-the-tragedy-of-the-commons-mother-jones-ponders-quot-conservation-indigenous-people-s-enemy-no-1-quot.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/05/24/capitalism-the-destructive-exploitation-of-the-amazon-and-the-tragedy-of-the-government-owned-commons.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/01/07/somali-piracy-flows-from-the-greater-and-continuing-western-theft-and-abuse-of-somali-marine-resources.aspx

http://mises.org/Community/blogs/tokyotom/archive/2008/06/02/environmental-damage-as-theft-report-by-prominent-enviros-quot-highlights-the-need-for-secure-ownership-of-wildlife-resources-by-poor-people-quot.aspx

http://mises.org/Community/blogs/tokyotom/archive/2007/10/12/libertarian-reticience-other-than-to-bash-enviros.aspx

Stephan, if youve made it this far, let me remind you of our conversations about corporations [most recently here], which have very unfortunately been inescapably tainted with statism from the get-go, in ways that play out negatively both abroad and at home. Ive devoted a fair amount of time to examining the entanglement of corporations and government: http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited

  • Our state governments were wrong to get into competition with each other to grant corporate status to investor-owned enterprises, in exchange for fees and later taxes. Corporate status freed owners from down-side risk, by limiting liability to the amount of capital contributed. This incentivized investors to encourage corporations to embark on risky activities that shifted costs to innocent third parties; the concentration of wealth in corporations (that now have unlimited lives and purposes, subject to survival in the market); the corruption of the court system that once protected third parties from damages caused by others (by replacing strict liability with balancing tests); and the ensuing battle over legislatures and courts to check corporate abuses.What happens abroad at the “Avatar” is pretty basic, but the same nonsense, with taxpayers, investors and consumers playing the role of victim, can be seen at home. Has anybody seen the jaw-droppingly appalling report that the WSJ has run on “Fixing Global Finance”, based on their “Future of Finance Initiative”, in which they cheerlead a bunch of financial firms in their efforts to abandon free markets and to structure global regulation and regulators, to be staffed by a revolving door of themselves? [I think Im being fair to see this as posing a threat to markets and freedom at least as great as what others see in the more multi-faceted climate change muddle.] Even Paul Volker was appalled, not at their willingness to create more regulation, but at their unwillingness to confront the moral hazard problems (tied to regulation of public corporations and the financial sector) that lie at the core of the financial meltdown. [Volker seems to overlooked the crucial role of government in driving and feeding the moral hazard problems.]Heres the link, for those of you who missed it:
    http://online.wsj.com/public/page/future-of-finance-121409.html

 

Property rights, corporations and government-complicit theft? Hmm. [Sounds familiar. Maybe some of those who want to battle corporate excesses might not be so crazy after all, even if they neglect to understand the risks of negative consequences of seeking help from government. And maybe someday libertarians will get a little more serious about addressing the festering concatenation of corporate-linked problems that are generating so much rot at the core of our government and public company/financial company sector.]

 

Oh, I almost forgot to remind everyone for the need for group holiday cheer (as alternative to productive engagement on a libertarian, Austrian-based climate agenda):

http://mises.org/Community/blogs/tokyotom/archive/2007/12/16/holiday-joy-quot-watermelons-quot-roasting-on-an-open-pyre.aspx

 

Strange But True IV: NOAA proves govt CAN learn – and seeks to end tragedy of commons in fisheries by implementing "catch share" quasi-property rights!

December 21st, 2009 No comments

Fellow libertarians, O Cynical Ones, you might be surprised to note that, at least in some cases, it MAY be possible to educate thick-headed and corrupt government bureaucrats and political appointees about the reasons for policy failures, and the government MIGHT even actually decide to cean up  its act. While the task may be difficult, it is apparently NOT impossible; there is a silver lining; and persistence may pay off in greater local authority.

The case in point? Signs of hope that the US government is learning from the painful lesson of many disastrously managed fisheries, and is starting to empower fishermen to self-manage that the resources on which they rely, by setting policies that favor “catch share” programs. (I have blogged on the fisheries “tragedy of the commons” a number of times; serious problems continue.) “Free-market” enviro-libertarians have been making the case for such changes for thirty-odd years or so.

(BTW, this is exactly the point that Elinor Ostrom has been making for years, and why she was awarded the Nobel prize in economics. Further, as I have previously noted, even mainline enviro groups – those enviro-facists – have been specifically calling for “catch share” programs as a way to slow the disastrous tragedy of the ocean commons.)

Here are excerpts from a December 10 online release bu the , “NOAA Encourages Use of Catch Shares to End Overfishing, Rebuild Fisheries and Fishing Communities”: (emphasis added)

NOAA released today for public comment a draft national policy
encouraging the use of catch shares, a fishery management tool that
aims to end overfishing and rebuild and sustain fishing jobs and
fishing communities
. In doing so, NOAA recognized that catch shares are
not a panacea or one-size-fits-all solution, but are a proven way to
promote sustainable fishing when designed properly at the fishing
community level.

“We have made great progress in rebuilding many fisheries, but more
than 20 percent of our fish stocks have not been rebuilt, and even
larger proportion of our fisheries are not meeting their full economic
potential for the nation,” Secretary of Commerce Gary Locke said.
“Catch shares is a tool that can help us realize the full economic and
biological benefits of rebuilt fisheries.”

Catch share
programs, which include Limited Access Privilege programs and
individual fishing quotas, have been used in the U.S. since 1990 and
are now used in 13 different commercial fisheries. Four new programs
will begin over the next year. 
NOAA estimates that rebuilding U.S.
fish stocks would increase annual commercial dockside values by an
estimated $2.2 billion, a 54-percent increase over current dockside
values of $4.1 billion, and help support jobs in the seafood industry
and across the broader economy.

“From Florida to Alaska, catch share programs help fishing communities
provide good jobs while rebuilding and sustaining healthy fisheries and
ocean ecosystems,”
said Dr. Jane Lubchenco, under secretary of commerce
for oceans and atmosphere and NOAA administrator. “Although this is a
national policy, our emphasis is on local consideration and design of
catch shares that take into consideration commercial and recreational
fishing interests.”

A catch share program differs from traditional fishery management by
dividing up the total allowable catch in a fishery into shares. These
shares are typically allocated based on historical participation in the
fishery. They may be assigned to individuals, cooperatives, communities
or other entities, who would be allowed to fish up to their assigned
limit.
Catch share participants also agree to stop fishing when they
have caught as much as they are allowed.

Under traditional
management programs, fishermen compete for a total allowable catch.
This has lead to fishermen racing each other to catch as many fish as
they can before the total catch limit is reached. This results in more
boats and gear than necessary, quotas being exceeded, increasingly
shorter fishing seasons, unsafe fishing and high levels of bycatch. It
also may result in too many fish brought to market at once, reducing
their market value to fishermen and coastal communities.

“Catch shares allow fishermen to plan their businesses better and be
more selective about when and how they catch their allotment, because
they know their share of the fishery is secure,”
said Dr. Jim Balsiger,
acting administrator of NOAA’s Fisheries Service.
“They can plan their fishing schedules in response to weather, market,
and individual business conditions. Catch share programs help eliminate
the race to fish, reduce overcapacity and bycatch, enhance the safety
of fishermen and their vessels, and improve economic efficiency. They
also help ensure fishermen adhere to annual catch limits because the
value of their share is directly linked to the overall health of the
fish stock and its habitat.”

While catch shares are not
always universally embraced when they are first introduced, their
benefits have been well proven. “We fought against the program right up
until the time it passed,” said Alaska fisherman Rob Wurm, referring to
the halibut and sablefish catch share program, which began in 1995.
”But to my surprise, it really has worked well. It has created a lot of
stability, stopped the race for fish and changed the fishing
environment in ways that have made it safer and allowed us to avoid
bycatch.” …

Members of NOAA’s Catch Shares Policy Task Force, which includes
participants from each of the eight councils as well as NOAA experts,
provided significant input on the draft policy.

Among the policy’s components:

  • Development
    of a catch share program is voluntary. NOAA will not mandate the use of
    catch shares in any commercial, recreational, or subsistence fishery.
  • The
    individual fishery management councils will consult fishing communities
    to evaluate the data, effects, and enforceability of any potential
    catch share program before moving forward. In some cases, councils may
    find catch shares not to be the most appropriate management option.
  • NOAA
    will provide leadership and resources and work in partnership with
    fishery management councils, states and members of the public to help
    with the implementation of catch shares. This includes assisting
    fishing communities as they make the transition, and conducting
    regional workshops, online seminars, and other educational and outreach
    programs.
  • Well
    thought-out and developed catch share programs will promote sustainable
    fishing communities by supporting good jobs, and promoting preservation
    of wharfs, processing facilities, and fuel and ice suppliers.
  • Catch
    share programs can be designed to set aside shares to allow new
    participants into the fishery, including new generations of fishermen,
    small businesses, or others.

NOAA encourages
those councils adopting catch shares to consider a royalty system to
support science, research and management as fisheries become more
profitable under the program. NOAA will also seek appropriated funds to
supplement what may be collected through cost recovery and royalties to
assist in the design, transition period and operation of catch share
programs.

Readers may note very close parallels between NOAA`s approach and the common principles for sucesssful management of open-access resources that Ostrom has identified.

Let`s hope that the US and other nations can use similar approaches to begin to manage any number of fisheries that are crashing or are under severe pressure around the world – due both to government-instigated commons problems and to races to catch fish in pelagic regions not subject to meaningful government control. We could use approaches that actually empower the fishermen, and end both government mismanagement and politicization and chaotic systems of widespread, roving and destructive “fish raiders”. The alternatives of fisheries that have crash and been placed under bans (under the CITES convention) and politicized deadlocks that we see for whales under the IWC are not very attractive.

So, we ARE making some progress.  Forgive me for suggesting that similar efforts by libertarians to play a productive role regarding energy policy might also eventually pay off?

Bruce Yandle on the tragedy of the commons, evolution of cooperation & property, and the struggle against government theft

November 20th, 2009 No comments

[I note that this is one of my earlier Avatar-themed posts. 2010/02/15]

I`ve often referred to Bruce Yandle, a “free-market environmentalist” who is dean emeritus and Distinguished Professor of Economics Emeritus at Clemson University`s College of Business & Behavior Sciences, Distinguished Adjunct Professor of Economics at the Mercatus Center, a faculty member with George Mason University’s Capitol Hill Campus, and a Senior Fellow at PERC – the Property and Environment Research Center (a free-market environmentalism think tank which has great links to his many works).

I`d like to draw attention attention to one short paper by Yandle which I find insightful in providing a perspective on the evolution of prperty rights and problems with resource management which arise from government owenership, even as he has short-shrifted the importance of community property mechanisms, which Nobel Prize-winner Elinor Ostrom has so extensively researched and documented (as I keep noting).

Yandle`s paper, The Commons: Tragedy or Triumph?, was published by the Foundation for Economic Education in its April 1999 online edition of Freeman. Here are few portions (emphasis added):

The feeder is a commons, but not just for hummingbirds. Bees are
attracted to it as well, and oddly enough, they can drive off the
larger hummingbirds. So even if the dominant bird is able to deflect
competition from other members of the species, that is not enough to
protect the nectar, and the defense itself is costly in energy burned.
The feeder contents are never secure.

Hummingbirds have no way to stake a claim to the feeder. So far as
we can tell, hummingbird communities have no constitution that reflects
socially evolved rules for establishing a social order. Most likely, a
long process of adaptation and selection has generated a hummingbird
capable of living in a world where nourishment is a common-access
resource, a commons. Hummingbirds live a life of flight, engaging in a
constant search for nourishment to feed their high-energy lives and, at
times, fighting for temporary control over valuable resources.

Human Commons

We all know the tragedy of the commons story. Wonderfully written
by Garrett Hardin in 1968, the highly stylized rendering is about a
pasture devoid of rules, customs, or norms for sharing.[1]
It is open to all comers. In this never-never-land, shepherds logically
add sheep to their flocks as long as doing so adds an increment of gain
for the particular flock. Uncoordinated in their effort, and unaware of
the effects of their individual actions on others, the unconcerned
shepherds collectively destroy the pasture. What could be a story of
plenty, if only the shepherds understood, turns into a story of
poverty. The passive shepherds are like hummingbirds. [Yandle has this wrong; Hardin posits competing shepherds who don`t talk w/ each other,and so look after only their narrow self-interests.]

As Hardin artistically puts it: “Therein is the tragedy. Each man
is locked into a system that compels him to increase his herd without
limit—in a world that is limited. Ruin is the destination toward which
all men rush, each pursuing his own best interest in a society that
believes in freedom of the commons.”

Garrett Hardin’s words beautifully bundle aspects of an endless
human struggle to form communities, accumulate wealth, and improve
well-being. With that phrase—tragedy of the commons—the essence of the
challenge hits us squarely between the eyes: When there are no property
rights—formal or informal—that limit use of a scarce natural resource,
human action leads inevitably to untimely resource depletion and
destruction.

But people are not hummingbirds. People can build institutions that
take the edge off frantic commons behavior. People have unwritten and
written constitutions that help to establish social order. People can
and do accumulate wealth. People communicate, invent lines of kinship,
and develop customs, traditions, and rules of law that limit
anti-social behavior. People define, enforce, and trade property
rights. People can and do avoid the tragedy of the commons. Indeed,
instead of living with tragedies, people triumph over the commons. But
the triumphs are never perfect or complete. There is always another
commons to manage.

The Ascent of Man

I wish to put forward the notion that encounters with the commons
form the fundamental stimulus that yields, instead of tragedy, what we
today call civilization.
The ascent of man from a primitive existence
with no wealth accumulation to life as we know it is fundamentally a
story about triumph over, not tragedy of, the commons. Let me explain.

Our very existence as human beings is defined by evolved
institutions for avoiding tragedies. We have names, which serve the
economic purpose of identifying us as parties to contracts and
agreements. Those names, first and last, form webs of communication
that reduce the social cost of assigning responsibilities and
liabilities. They enhance truth-telling and promise-keeping; they raise
the cost of engaging in anti-social behavior. They limit a tragedy of
the commons.

We have abstract symbols of ownership—deeds, titles, and
contracts—that define spheres of autonomous behavior. We speak of our
homes, our cars, our clothes, our families, and our pasture. Even
language has evolved to provide a possessive form that accommodates
triumph over the commons.

We write and observe contracts, wills, and marriage agreements that
define relationships, identify turf, and conserve wealth. We accept
evolved bodies of law and law-enforcement activities to assure the
integrity of our agreements. We carry papers that enable us to acquire
property, extinguish debt, cross borders, drive vehicles, and
communicate effectively with strangers. And we have locks, keys, walls,
fences, brands, and encryption devices, all this in an effort to avoid
a tragedy of the commons.

Property rights define who we are and what we have. Property rights
guard others from our unwanted advances and prevent us from
contributing to a tragedy of their commons.

Avoiding a tragedy of the commons is costly. The benefits must be large. …

The tragedy is found where for reasons having to do with power,
intolerance, or cost, human beings have not yet defined private
property rights. Or, as we shall see, where evolving property rights
encouraged by man the institution builder have been destroyed.
What was
once a triumph can become a tragedy. …

What about fisheries? How can we avoid a tragedy of the commons
there? Long before the Europeans arrived on the scene in the Pacific
Northwest, Native Americans had figured it out. Small tribes in what is
now Washington State had salmon fishing rights.
Don Leal tells us that
“in some cases, the tribe owned the rights; in others, families or
individuals or a combination owned the rights.”[5]

And what happened when the Europeans arrived? You guessed it. Leal
tells the story this way: “Instead of recognizing the well-defined and
enforced fishing rights, the U.S. government allowed newcomers to place
nets across the mouth of the Columbia. This quickly depleted salmon
runs, so traps and weirs were banned—only to be replaced by purse seine
boats powered by internal combustion engines. The race to catch salmon
moved to open waters. Ironically, from the country where private
property is considered sacrosanct came a socialistic legal system
driven by politics and military power.”[6]

What had been private property was turned into a commons. What had been
an institution-builder triumph became a political tragedy. …

For centuries before anyone in the United States thought much about
environmental quality, our common law defined and protected the
environmental rights of ordinary people.[10]
Enforced by judges in courts across the land, common law protected the
right of downstream property owners to receive water and air in
undiminished quality for reasonable use.
At common law, rivers could
not be treated as open sewers if doing so imposed costs on downstream
rightholders. Industrial plants could not blow smoke and emissions onto
the land and property of ordinary people. The record is filled with
cases, here and in Canada, decided under English common-law traditions:
where farmers sued industrial plants and won; where citizens of one
state sued polluters in another state, and won; and where common-law
judges ordered polluters to clean up or shut down. There are also cases
where this did not happen, where judges turned away from
property-rights enforcement and behaved as policy makers. But when the
judges got it wrong, their decisions affected a small number of people,
not an entire nation. [I note Walter Block disagrees strongly and views this change in common law as leading to the rampant pollution that set the stage for federal legislation.] This, of course, changed with the advent of
legislation.

Prior to the passage of federal pollution-control statutes, every
major city in the United States had taken steps to define public
property rights to air quality. Many states, including California, had
taken a river-basin approach to the management of water quality, this
in addition to the use of common law. Multi-state compacts were
forming. By the 1960s, environmental quality was improving rapidly in
many locations. The property rights institution builders were on their
way to avoiding a tragedy of the commons. Common law was converting the
commons to private property.

This was changed with the passage of federal legislation that
effectively nationalized air and water quality in the United States.
What was becoming private property was made public property, almost a
commons. The new system of command-and-control regulation allowed
polluters to operate legally if they had a permit. With permits in
hand, new polluters could enter already crowded river basins. The new
regime provided political access to industries and municipalities that
hoped to postpone the day of reckoning in common law courts.

This work sheds light on mankind’s struggle to avoid the tragedy of
the commons. It tells us that at very low levels of income, what might
be called stage one, human beings cannot afford to do much about
property-rights enforcement and the commons. They live in a world where
custom and tradition sustain them. As incomes rise and losses from the
commons expand, stage two is entered. Fences go up, and rules are set
for protecting the commons. Finally, in stage three, markets evolve
along with rules of law that define spheres of private and public
action. Private rights replace public control, and the triumph replaces
the tragedy of the commons.

[Yandle ignores government mismanagement here, and how Western markets and Westernized leaders have seamrollered native institutions.]

Life for mankind began on a commons where tragedies were
commonplace and the incentive to improve was powerful. Out of the
struggle to survive and accumulate wealth evolved markets, property
rights, and the rule of law—a triumph on the commons.

But just as bees compete with hummingbirds in the struggle to
control access to nectar, institution builders who seek to support
markets and property rights compete with others who seek to
redistribute wealth. Actions to redistribute wealth blunt the incentive
to protect property rights and create wealth. This converts triumph to
tragedy.

Positive sum games: Get yer Elinor Ostrom here! A reprise of posts on rolling up our sleeves to address real problems that "markets" (& govt.) now aggravate

October 16th, 2009 No comments

I excerpt below, in chronological order, portions of my prior posts here that refer to Elinor Ostrom (the political scientist who recently was awarded the Nobel prize in economics) and are indebted to her thinking.

Perhaps items 3 and 10 are most accessible for readers in a hurry to find links to her own work.

1.   Too Many or Too Few People? Does the market provide an answer?, Sep 28 2007:

Too many or too few? Good question, Dan.
I agree with you that the population question is like any other aspect
of the social order: best addressed by the market and by free societies.

There are just a few small problems – even within the developed
world (and very clearly outside of it), there are many important
resources that are unowned and thus not fully priced in the “market” economy.

Unowned resources include almost all of Nature.  Primary
productivity (the amount of vegetation produced from photosynthesis)
has changed little, so as we use technology and our organizational
abilities to divert more and more of it to feed us, this is an
inevitable cost to other species, either directly or in the form of
altered environments that support less life (and less diversity of
life).

In altering our environments to suit us, we are of course no
different from other life forms that compete for resources to live and
propagate, but with our technical and organizational abilities, mankind
has clearly triumphed over the rest of nature (except perhaps evolving
microbes, to whom we represent an increasingly large and relatively
untapped food source). But at what cost?

Through the centuries we have wiped out many wild systems of food
and other resources – because they were never owned, and because our
improving technology enabled us to race each other to take the
resources before others (or from others, in the case of many native
peoples). Not only Jared Diamond`s “guns, germs and steel”, but
also forms of social organization have played deciding roles in the
competition between human societies for survival, growth and
dominance.  In this regard, societies that recognize and protect
property rights and utilize free markets have proven clearly superior
in the competition with other societies to obtain and utilize available
resources.

But our struggle has been not only to capture resources and to use
them before others do, but also to manage and protect them
effectively.  Evolving ownership systems have been a key means of
limiting wasteful “tragedy of the commons” struggles (see Yandle; von Mises),
but even where ownership systems have been implemented, we have
generally replaced complex natural systems with simpler systems
designed solely to feed us (and particularly so where, due to higher
consumptive demand, we have replaced common property systems with
private property systems (Ostrom)).

Meanwhile, virtually all of the natural world – the world’s oceans,
atmosphere, tropical reefs, tropical forests and other great commons –
remain unowned and thus unmanaged and unregulated (or indigenous
occupants have been forced aside).  For example, the great cod fishery
off of the Grand Banks that fed Europe for centuries has now
disappeared, and other fishery stocks worldwide are crashing – to be
“replaced” by “farmed” fish that are fed to a substantial degree by
catching and grinding up fish stocks that humans prefer not to consume
directly, and in part by fish firms that are established by destroying
the mangroves that are estuaries to various fisheries.  The same is
true of the replacement of vast tracts of tropical forests with
soybeans or oil palm plantations, with the rapid increase in
atmospheric CO2 (and attendant risks to climate) and with the
correspondingly geolologically rapid increases in ocean acidification (and
threats to plankton, corals and shellfish).

While populations in the developed economies are now relatively
stable, demand from our markets (as well as the burgeoning developing
markets) continues to strip out unowned (or mismanaged “public”)
resources from the oceans or undeveloped countries, aided by
kleptocratic elites who are happy to steal from the peoples they
supposedly represent in order to line their own pockets.  

As Dan points out, property rights failures in poorer nations
contributes to population growth there by delaying the demographic
transitions that we have experienced.  Developed economies face similar
problems with respect to “public”, state-owned lands, for which
rent-seeking by and sweet deals to insiders are enduring problems and
sources of politcal conflict (as markets cannot work to allocate
resources).

Dan states that the stunningly rapid growth of human populations
from the Renaissance to the present (6+ billion now expected to nearly
double again soon) “actually represents the rise of capitalism and
capital development … [and]  shows … the stunning capacity of
freedom to provide for the whole world.”  While partly correct, this
misses completely the question of our massive impact, within a very
short period of geological time, on the environment in which we evolved
over millions of years, the fact this has occurred because clear and
enforceable property rights have not been created in many of the
resources that have been consumed, and the corollary fact that
we continue to lack the ability to manage our impact on our endowment
of natural resources.

The market clearly does NOT send accurate pricing signals with
respect to goods that are unowned or ineffectively owned; these goods
are either unpriced or underpriced, so the effect is overconsumption
until the point that the resource is greatly degraded, at which point
attention is turned to the next unowned resource.
Thus, human
populations are responding to rather imperfect market signals.  And
where resources are unowned, individuals and groups with differing
values and desires cannot adjust or realize those desires by means of
private, market transactions.  As a result, we are seeing a recourse to
the public and political arenas – and the inevitable discordant debates
– as various parties seek to use either moral suasion or the levers of
government (locally, nationally and internationally) to advance what
they consider to be their own interests.
  (Of course, in a “tragedy of
the commons” situation, all resource users share an interest is the
future availability of a resource; the difficulty is in the prisoners’
dilemma negotiations at the primary user level about how to allocate
short-term pain in the interest of long-term gains, compounded in the
case of multinational resources by rent-seeking with each national
participant.)

A cynic may say that our ongoing assault on nature is only
“natural”, presents no moral or philosophical issues and that we hardly
owe any responsibilities to “nature” or even “future generations” –  so
let’s just all keep on partying, consuming for today, and patting
ourselves on the back at how marvelous our market systems are.  And
that we should keep on hurling invective at those evil “enviros” who
want to crash the party and drag us all back to the Stone Age.

Perhaps I suffer from a want of sufficient cynicism.

2.    Using the State to solve common resource problems?, Oct 12 2007:

How exactly do you transfer commons into private ownership in a fair way, even for easily divided up stuff like land?

Libertarians do not insist that open-access resources (or common
property resources/CPR) be divided up by creating individual property
rights; cooperative ownership  via formal agreements or informally
developed practices and customs (such those developed by Maine
lobstermen, English angling clubs, indigenous peoples and Wikipedia and
online communities) may work better at solving the prisoners’ dilemma
issues and are just as acceptable
.

But technological advances and greater demand often swamp CPR
regimes, so such regimes remain vulnerable if they are not accorded
legal protection. My understanding of the UK enclosures in this regard
is that they were actually a legislative theft of common property by
the powerful.

Can states play positive roles in solving problems? At least
internally, it is rather clear that the answer is that the state works
best by allowing, and providing judicial mechanisms to enforce, private
transactions, and works least well when it tries to specify detailed
and rigid “solutions” itself – since the government itself never has
perfect information, often plays favorites and once a regulatory regime
is put in place, parties have no ability to work out their differences
directly with each other, but are forever in the position of trying to
influence the state and in adversarial positions vis-a-vis each other. 
But states can also play a positive role by disseminating information
and by acting to facilitate deals between various resources users,
particularly in cross-border/multi-state problems.

Elinor Ostrom is the guru of CPR regimes; anyone interested
should look into her fascinating and highly-regarded work, particularly
her seminal Governing the Commons (1990).

[She is a member of the American Academy of Arts and Sciences, the
National Academy of Sciences, and the American Philosophical Society,
and a recipient of a number of prestigious awards. Her other books
include Rules, Games, and Common-Pool Resources (1994); The Commons in the New Millennium: Challenges and Adaptations (2003); The Samaritan’s Dilemma: The Political Economy of Development Aid (2005); Understanding Institutional Diversity (2005); and Understanding Knowledge as a Commons: From Theory to Practice (2007).]

Here is one link to get readers started:  Elinor Ostrom et al.,
Revisiting the Commons: Local Lessons, Global Challenges, Science 9
April 1999: http://conservationcommons.org/media/document/docu-wyycyz.pdf

Technology seems to provide us ability to create property rights regimes in ocean fisheries.

The
stickiest problems are those where the resource is located in a country
where we cannot ourselves create or enforce legal rights and in the
atmosphere, which no one owns and to which all have access.
 
Unfortunately, many libertarians don’t even want to acknowledge, much
less discuss, these problems. Since they are not confined to any one
country, clearly we need to coordinate with others – for which
purposes our state apparatus cannot be avoided.

Reaching any kind of effective solution for problems of this type
will require much more focussed attention and bridge-building (abroad
and at home), and if libertarians do not want to be part of the
discussion, clearly they will have little influence on the results.

3.    Sophomoric optimism?, Oct 16 2007:

Our states are merely one subset of the wide universe of formal and
informal institutions through which we cooperate with one another. 
States are not a market, to be sure, but then neither are corporations,
and there is a spectrum of ownership types between the two.  We can
study all of these institutions and use that knowledge to direct how we
make use of them.  Such study has informed, for example, the deliberate
shifts in policy that have led to the ongoing (yet incomplete)
privatization of the former USSR and of China. 

A study of institutions governing common pool resources by guru Elinor Ostrom makes the following point:

 “Whether people are able to self-organize and manage CPRs also depends on the broader social setting within which they work. National governments can help or hinder local self-organization. “Higher”
levels of government can facilitate the assembly of users of a CPR in
organizational meetings, provide information that helps identify the
problem and possible solutions, and legitimize and help enforce
agreements reached by local users. National governments can at times,
however, hinder local self-organization by defending rights that lead
to overuse or maintaining that the state has ultimate control over
resources without actually monitoring and enforcing existing
regulations.

“Participants are more likely to adopt effective rules in
macro-regimes that facilitate their efforts than in regimes that ignore
resource problems entirely or that presume that central authorities
must make all decisions.
If local authority is not formally recognized by larger regimes, it is difficult for users to establish enforceable rules.

Elinor Ostrom et al., Revisiting the Commons: Local Lessons, Global Challenges, Science, 04/09/99 http://conservationcommons.org/media/document/docu-wyycyz.pdf

Was von Mises foolish to suggest we can use the state to reform our institutions?

“It is true that where a considerable part of the costs incurred are
external costs from the point of view of the acting individuals or
firms, the economic calculation established by them is manifestly
defective and their results deceptive. But this is not the outcome of
alleged deficiencies inherent in the system of private ownership of the
means of production. It is on the contrary a consequence of
loopholes left in this system. It could be removed by a reform of the
laws concerning liability for damages inflicted and by rescinding the
institutional barriers preventing the full operation of private
ownership.

http://mises.org/humanaction/chap23sec6.asp

And Cordato, for suggesting that Austrians take particular policy approaches to environmental issues?

“For Austrians then, public policy in the area of the
environment must focus on resolving these conflicts over the use of
resources that define pollution, not on obtaining an ultimately
unobtainable “efficient” allocation of resources. …
For Austrians, whose goal is to resolve conflicts, the focus is on clarifying titles to property and rights enforcement.

http://mises.org/daily/1760

Sorry, but I cannot believe that we are condemned always to repeat
all mistakes, despite our rather constant human nature.  Rather, as Yandle notes, our very history as a species is about our success in evolving, devising and adopting ways to manage shared problems.   http://www.fee.org/publications/the-freeman/article.asp?aid=4064

This is a message of profound optimism, not cynicism — said the fool.

4.    Ron Bailey of Reason congratulates Al Gore , Oct 15 2007:

1.  You were right last year when you
said that “In the end, the debate over global warming and its obverse,
humanity’s energy future, is a moral issue.”
http://www.reason.com/blog/show/113924.html

2.  I share your understanding of the
economics and institutional problem and agree that a straightforward
explanation of these is important for very many.

3.  However, you forget what
evolutionary psychology, Ostrom and Yandle have explained to us so well
about how our innate moral sense drives and underpins mankind’s success
as a species by enhancing our ability to cooperate and to overcome
commons issues.

Ostrom: http://conservationcommons.org/media/document/docu-wyycyz.pdf
Yandle: http://www.fee.org/publications/the-freeman/article.asp?aid=4064

Our long history of developed rules and
institutions (informal and formal now overlapping) are based on our
moral sense and the effectiveness of these rules depends critically on
our moral investment in accepting their legitimacy – witness our views
on murder, theft, lying and “not playing by the rules” – and in
voluntarily complying with them.

Our moral sense reinforces our judgments
about when rules/institutions are not working and the need to develop
new ones in response to changing circumstances and new problems.  When
we see a problem that we think requires change, it is unavoidable that
we respond the the status quo, the behavior of people within it and the
need for change with a moral sense. 

This is simply a part of our
evolutionary endowment.  (Of course, other parts of our endowment
accentuate our suspicions of smooth talkers and help us catch free
riders and looters and to guard against threats from outsiders.)

4.  Accordingly, while it’s unclear how
deliberate Gore’s talk of “a moral and spiritual challenge” and
“lifting the global consciousness” is or whether this is a
productive approach for some people, I think it is fairly clear that,
in order to build consensus for a solution to the climate commons
problem (and other difficult commons problems) and to ensure that any
agreed solutions are actually implemented, we will need to bring our
moral senses to bear.

In other words, it is RIGHT to worry
about climate change, but no meaningful/effective “solution” can be
reached or implemented unless it is FAIR and the parties involved have
sufficient TRUST (backed by information) in each other.

5.    Not Climate Change Welfare, But Capitalism and Free Markets, Jan 22 2008:

[F]ar from “forc[ing] rich countries to become poor”,
figuring out how to manage a global commons like the atmosphere, while
it may have the effect of imposing a cost on the release of carbon, is
basically aimed at privatising externalities, with the intention of
increasing the efficiency of private transactions and net wealth.
  Climate
change is, of course, just one of a broad range of pervasive problems
that occur when markets encounter resources that are not clearly or
effectively owned or managed.  http://mises.org/Community/blogs/tokyotom/archive/2007/09/28/too-many-or-too-few-people-does-the-market-provide-an-answer.aspx

3.  Most importantly, while Lockitch correctly diagnoses the illness
– poor countries need to “embrace free markets and private property
rights and attract the investment of profit-seeking entrepreneurs to
create wealth and drive economic growth” – he simply fails to address what wealthy nations SHOULD be doing, if anything, to assist the cure.  This,
of course, is the main dodge, because Lockitch fails to own up to the
true difficulties involved in trying to help the developing nations.
 

Trying to build “soft” infrastructure in the form of rule of
law and property rights (ending kleptocracy and theft of “public”
resources) is tremendously difficult – perhaps a problem that is even
more difficult than the wealthy nations deciding how to share the pain
of GHG reductions
(as I noted in comments to a post on Amazonian deforestation here: http://sciencepolicy.colorado.edu/prometheus/archives/climate_change/001043lahsen_and_nobre_20.htmlHeck,
the wealthy nations have a hard enough time doing the easiest things to
speed development of poorer nations, which is simply to open import
markets by removing domestic tariffs, import restrictions and subsidies.
 
Rather, it seems that the richer nations have to feed their more
powerful elites first, while hamstringing competition from poorer
nations in products for which they should be able to exploit a
comparative advantage.  If Lockitch was truly interested in
helping the poor of developing nations, you’d think he’d note how
enduring rent-seeking at home serves to keep the poorer nations down.

And if the wealthy nations should do something to help
poorer nations, which seems implicit in Lockitch’s analysis (if not
conventional aid, then aid to build soft, governance infrastructure),
then can’t some of those efforts easily dovetail with efforts to
establish carbon pricing in the wealthy countries?  Why couldn’t aid
budgets be funded by carbon taxes at home, for example?  And can’t
demand for “carbon credits” help to establish incentives to improve
governance infrastructure in poorer nations?  In other words,
“mitigation” (efforts to limit climate change) in developed
nations need not conflict with any efforts to help poorer
nations “adapt” to climate change or otherwise become wealthier.

4.  Lockitch asserts that the concern of enviros for the world’s
poor is “feigned”, but this is a cheap and unproductive ad hominem –
and one that can easily be turned around.  While some enviros may not
understand the institutional sicknesses that hinder development, this
illness has been fed much more by governments and corporations at home
than by enviros, many of who have been involved in the long,
hard effort to build local infrastructure and to protect traditional
private and community property rights.
 

On the other hand, just what is it that evidences that
Lockitch himself – or other skeptics – have any “real” concern for the
world’s poor?  Does the wheel of this concern ever hit the road, or is
it simply spinning noisily, to welcoming nods from  domestic special
interests who benefit from the continuation of climate externalities?

A key insight of Austrian economics relating to the environment is that man does not harm the environment per se, but that social
welfare or efficiency problems arise because of interpersonal conflict
associated with irresolvable inefficiencies – inefficiencies that
cannot find a solution in the entrepreneurial workings of the market
process
 because of institutional defects associated with the
lack of clearly defined or well enforced property rights.  (See Roy
Cordato
, http://mises.org/daily/1760). 
It is both ironic and disappointing that many Austrians and others
similarly minded, rather than focussing on the difficult task of
conflict resolution in the case of the climate, seem to prefer the
emotional rush of conflict itself over analysis and bridge- and
consensus-building.  But this is nothing new (and is certainly
tempting, given our tribal nature)(http://mises.org/Community/blogs/tokyotom/archive/2007/12/17/holiday-joy-quot-watermelons-quot-roasting-on-an-open-pyre.aspx). 

No one owns the world’s atmosphere, so all are entitled to
their opinions about managing it.  And clearly the world continues to
struggle with the rapid exploitation of other unowned, “public” or
poorly defined or protected physical resources, in the face of growing
populations, growing markets and technological advances that lower the
costs of access to the commons.  I suggest that rather than ad
hominems, we would be better served by frankly acknowledging problems
of this nature and starting to build shared understandings.
  The writings of Elinor Ostrom are a good place to start:  http://www.conservationcommons.org/media/document/docu-7e8akm.pdf

In honestly engaging on these issues, it is perfectly
appropriate – nay, essential – to be aware of the self-interests of
various participants and to caution against the problems of
rent-seeking, “rent-farming” by politicians, and frequently unaligned
incentives of bureaucracies
.

5.  Finally, this is a quibble, but Lockitch is wrong to assert thay developing nations need to “industrialize”.  What they need to do is to better govern themselves by protecting investments, markets and human rights, and then getting out of the way of their people. 
What results will be these countries’ own path, which will naturally
differ from Western industrialization (leapfrogging it in some ways).

6.   Rob Bradley cheers on coal, but are all those who want to better manage commons and environmental impacts “Malthusian” idiots, or only in the case of coal?, Feb 5 2009:

Rob Bradley has a new post up at MasterResource, cheering on big (and now “clean”) coal, which has apparently received assurances from the Obama administration – after being bad-mouthed by NASA scientist Jim Hansen, Steven Chu and Obama himself – that, despite pressures from the “Malthusian anti-energy crusade” regarding climate change impacts, the recent massive TVA fly-ash spill and opposition to destructive mountaintop removal practices in Appalachia, coal will remain profitable during Obama’s term and central to US energy supplies.  Hooray!

But I wasn’t quite clear on all of Rob’s message, so I asked him a few questions in the comment thread:

Rob, are the John Badens, Terry Andersons, Bruce Yandles, Elinor Ostroms
and others who want to find ways to manage our commons better – by
improving ownership, incentives and pricing signals – also part of a[n
evil] “Malthusian crusade”?

I just wanna make sure I know who to hate.

As for that big fly-ash breach/spill in
Tennessee, I’m glad that you didn’t point out how this was a result of
government ownership of TVA, with the added benefit that costs will be
borne not only by direct and indirect victims, but by taxpayers as
well. No sense in pointing out how government is so often in the way,
particularly if it detracts from our “we hate enviros!” message. Last
thing we ever want to do is to reach a shared understanding with
enviros of the institutional underpinnings of problems, since that
means our funders might lose some of their fairly purchased,
government-given special privileges.

While it’s clear that “free-market” Rob cares little about whether the coal industry continues
commercial activities that shift the environmental costs and risks
(including potential costs arising from GHG emissions) to others
,
I forgot to ask Rob whether, as a hearty cheerleader for those poor
coal underdogs, he also supports their position that the government
should subsidize their change in business model by (a) having Uncle Sam pay the bulk of capital costs for IGCC (integrated gas combined cycle plant) [something like $1 billion for the first one with CCS], (b) giving them a further break (reduced royalties) on the sweet deals they already have
for stripping coal from public lands and (c) – now that the federal
government is getting into the busy of running the financial sector –
making sure that power producers that want to use coal have easy access
to credit, by twisting the arms of those uppity Wall Street financiers
who with their fancy new “Carbon Principles” and “Enhanced Due Diligence” seem a bit too reluctant to extend credit for coal-fired power plants.

Here’s hoping Rob weighs in further.  I want to make sure I’m not
messing up when I try to distinguish the “white hats” from the “black
hats”.   From what I can tell so far, seeking to manipulate government
policy for your own benefit is evil – as long as you’re not a coal
firm – and we call the evil ones “Malthusians”.  Right?

7.     More stupid from Tierney; this time on “Kuznets curve” and the dynamics of “wealthier and greener”, May 12 2009:

Tierney seems to believe that the Kuznets curve means that greater
wealth magically makes for a cleaner environment.  To the contrary, it
is the hard work of people, expressing their desires to protect their
own property and to realize other preferences regarding shared
resources, to increase wealth by finding means (property rights
institutions, litigation and government regulation) to end tragedy of
the commons-type situtations, who improve their environment.
 That is, working to close externalities leads to both wealthier and greener societies.  

(I`ve remarked on the Kuznets curve before; interestingly, conservatives seem to misunderstand it more than liberals.)

So
I tried to offer a more libertarian understanding, which I`ve taken the
liberty of memorializing here (with typo correction and emphasis and
further links added):

Andrew, food for thought on enviro Kuznets:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=kuznets
http://mises.org/Community/blogs/tokyotom/archive/2008/01/22/poor-countries-need-capitalism-not-climate-change-welfare.aspx
http://mises.org/Community/blogs/tokyotom/archive/2007/09/27/too-many-or-too-few-people-does-the-market-provide-an-answer.aspx

Unfortunately, Tierney simply fails to understand that the enviro
Kuznets curve does not tell us that problems relating to environmental
cost-shifting or to the over-exploitation of unowned commons are best
resolved by ignoring them and simply hoping for the best. Rather, it
affirms that as people become more wealthy, they care more about
protecting the environment and put more elbow grease into achieving
improvements – via improved property rights protection, improved
information disclosure, greater consumer pressure and even through
greater regulation (which is the path the West has largely followed),
and reaching agreements with others sharing the relevant resource).

In other words, the work relating to global, regional and various
national commons (atmosphere, seas, forests, water, etc.) is still
ahead of us. Libertarians can advocate for property rights (and
privatization of public lands) as ways to have a more efficient (and
just) path on the curve, or they provide implicit support for powerful
and dirty industries by standing by and waiting until citizen pressure
groups force government to act in heavy-handed ways.

  •  
    • Andrew. I suggest that you start with this short article by Yandle.

      I have plenty more links on my blog to him, Terry Anderson, Mises, Cordato, Block, Rothbard and others on Austrian approaches to environmental issues, fisheries, and climate. Ron Bailey (at Reason) has good posts on fisheries; leading enviro groups all agree that more privatization is desirable:http://mises.org/Community/blogs/tokyotom/archive/2009/01/15/for-crashing-fisheries-coalition-of-mainline-us-enviro-groups-calls-for-property-rights.aspx

      Commons remain commons either because government ownership
      prevents privatization (as in the Amazon, US public lands and most
      fisheries management) or because full privatization is difficult. There
      are many examples of the latter case that involve semi-privatization
      and commons management,
      like traditional forestries, fisheries and water rights. Elinor Ostrom is the expert on commons; I have plenty of links to her too. …


    • People and firms invest all the time in doing
      things in response to incentives, both positive and negative; viz. they
      also try to reduce costs, including the costs their activities impose
      on others if those they injured have rights of recourse. The effort to
      reduce costs is one of the chief factors driving technological advances.

      Surely you`re not suggesting that the best way to encourage
      wealthier societies is to free people from responsibility for the
      damages they cause others? That`s hardly a Lockean or libertarian view.
      A “Laissez Faire approach” leaves government out, in favor of voluntary
      transactions and enforecment of property rights, including rights not
      to be injured. The regulatory state has in fact been a boon to the most
      powerful producers, by giving them rights to pollute, often
      grandfafthering dirty plants, while forcing the highest costs on more
      nimble and cleaner producers.
      If you^re interested in learning
      about libertarian approaches to the environment, again, I suggest you
      look at Rothbard, Cordato, Block and others, whom I link to on my blog.

      You seem to make reference to the enviro Kuznets curve, and how
      wealthier societies bring pollution dow, while completely missing the
      dynamics. Wealthier societies clean up because they insist on
      bringing an end to tragedy of the commons-type exploitation of
      resources. A society that focusses on property rights typically has a
      lower curve than societies that fail to enforce property rights (needed
      for Coasean bargaining) in favor of government regulatory approaches.
      Our own curve remains too high, because wealthier investors prefer to
      use regulation to shift costs to the rest of society.

8.   Libertarians to lefty-enviros: without community-based property rights, sustainable fisheries are impossible, May 11 2009:

Elinor Ostrom has
also been a leader in documenting the ways that a community of users
(NOT the dread and sloppily misused “soc-ial-ism”) may effectively
manage a shared resource.

Readers might be interested in the World Bank`s Oct 2008 report, “The Sunken Billions; The Economic Justification for Fisheries Reform”.

With support from the World Bank, PERC is in the middle of hosting a conference
on approaches to sustainable fisheries (and on ending the massive
over-harvesting and wasted subsidies and mal-investment under current
regulatory approaches).

I also urge readers to look at what the organization Defying Ocean’s End (co-founded by Conservation International, The Nature Conservancy, Natural Resources Defense Council, The Ocean Conservancy, Wildlife Conservation Society, The World Conservation Union, and World Wildlife Fundhas to say about protecting fish:

“Most of the solutions that have been
implemented or proposed to fix the world’s fisheries center on
command-and-control measures: regulators or courts telling fishermen
how to fish through the imposition of controls on effort (e.g., fishing
vessel length, engine horsepower, gear restrictions, etc.).
Prescriptions like these work against strong economic incentives for
maximizing catch, which are not addressed by such measures, and are of
course usually resisted by fishermen. Often, prescriptions create
incentives for “work-arounds” and set up a cat-and-mouse game between
fishermen and regulators – for example, if regulators impose a
restriction on vessel size, fishermen may purchase two vessels to
maintain high catch levels.

“As in most natural resource
problems, more effective solutions will address the fundamental drivers
of unsustainable fisheries. In this case, the key necessary reform will
be to designate secure catch privileges. It is important to understand
that such privileges can be allocated to different kinds of entities in
different ways, and indeed, they should be tailored to specific
fisheries and communities to fit with local customs, traditions,
values, and social structure.”

I`ve linked a number of my other posts on fisheries here.

9.   The tragedy of the panicked enviro II; understanding the “tragedy of the commons”, Aug 29 2009:

Sure,
the Western
world has managed to create many environmental problems, but we`ve
largely cleaned up our own messes, haven`t we?  While it by no means
excuses our own faults, far worse environmental problems have been
created and are still stewing in Russia and other state-directed
economies, and it`s no coincidence that the vast pollution being
created in China and India are tied to governement-owned enterprise and
an inability of injured people to sue for damages or to stop harmful
activities.
  And the great waves of extinctions created as man spread
around the globe tens of thousands of years ago can hardly be laid at
the foot of either the Western world or of private property rights (nor
can the collapse of earlier civilizations).

The
“tragedy of the commons” is NOT a “simplistic market morality”, but a
description of cooperation problems and incentives relating to shared,
open-access resources.  The tragedy of the commons and problems of
cooperation – and theft – are not even limited to mankind, but permeate
nature.
  This perceptive article by Bruce Yandle touches on competition
in nature, and links the ascendance of man to our evolution of
relatively enhanced cooperation
:
http://www.thefreemanonline.org/featured/the-commons-tragedy-or-triumph/

The
“tragedy of the commons” paradigm is useful to analyze, but the
paradigm doesn`t “seek to moderate” anything, and is just as useful in
looking at the ways Western nations still contribute to environmental
problems around the world (as I point out here:
http://mises.org/Community/blogs/tokyotom/archive/2007/09/28/too-many-or-too-few-people-does-the-market-provide-an-answer.aspx) as it is in examining:

– environmental devastation in Haiti (which has little or no property rights, and vast free-for-all “government” holdings),


deforestation in Indonesia and the Amazon:
http://mises.org/Community/blogs/tokyotom/archive/2009/05/24/capitalism-the-destructive-exploitation-of-the-amazon-and-the-tragedy-of-the-government-owned-commons.aspx,

– pollution in China: http://mises.org/Community/blogs/tokyotom/search.aspx?q=china, and


crashing fisheries around the world as a result of government of marine
resources (producing free-for-alls and fleet subsidies) and a
free-for-all for other unowned or unprotected resources:
http://mises.org/Community/blogs/tokyotom/search.aspx?q=fish.

You
say: “The rate of exploitation and the decline
of resources, water, energy, fisheries, soil, minerals, etc., all
occured under a free market, private property paradigm.”  This is
clearly demonstrably wrong, and draws entirely the wrong lessons. While
private property is certainly no panacea, neither are they what is
wrong.  Very often, is is governments that have been and are wrong,
though there is certainly some learning going on.

While
Garrett Hardin`s “The Tragedy of the Commons” certainly represents a
hypothetical situation, it is actually a very powerful analytical tool
for understanding and fashioning solutions to countless “real life”
problems. See Elinor Ostrom et al., Revisiting the Commons: Local Lessons, Global Challenges, Science, 04/09/99 http://conservationcommons.org/media/document/docu-wyycyz.pdf

“In real life,
corporations own, or vie to own, resources or access to them for the
purpose of extraction and profit and they seek to maximize profits
through economies of scale, that is industrial extraction methods,
drift netting, blowing up mountains, tossing mining waste into clear,
pristine lakes.

What
you describe here is a conflict between preferences over how resources
are used.  Do you prefer a free-for-all, or a situation where those who
use a resource can protect it, negotiate with others who wish to see
other values preserved, and who are responsible for negative
consequences caused to others (not always a part of some property
rights systems), or perhaps a situation where governments make all
resource exploitation decisions?”

“The money is in the resource and when the resource is
exhausted they will move on to the next one.”

The
money is never in the “resource”, but in the ways that people can use
it or otherwise value it (and of course people also value pristine
environments).

10.  Tragedy of the panicked enviro III: learning from Elinor Ostrom about cooperative action, Aug 29 2009:

Let me add some further nuance to Mr. Worstall`s comment by saying
that Hardin`s fertile observations have fuelled extensive further
research on common property problems, with Elinor Ostrom being recognized as a leading light.

Here is one general bibliography on commons research: http://www.indiana.edu/~workshop/wsl/tragedy.htm

Ostrom
has refined Hardin`s work in the following way (quoting from a review
of Ostrom`s 1990 ground-breaking and extensively researched book
, GOVERNING THE COMMONS, The Evolution of Institutions for Collective Action):

Ostrom uses the term “common pool resources” to denote natural
resources used by many individuals in common, such as fisheries,
groundwater basins, and irrigation systems. Such resources have long
been subject to overexploitation and misuse by individuals acting in
their own best interests. Conventional solutions typically involve
either centralized governmental regulation or privatization of the
resource. But, according to Ostrom, there is a third approach to
resolving the problem of the commons: the design of durable cooperative
institutions that are organized and governed by the resource users
themselves.

“The central question in this
study,” she writes, “is how a group of principals who are in an
interdependent situation can organize and govern themselves to obtain
continuing joint benefits when all face temptations to free-ride,
shirk, or otherwise act opportunistically.”

The
heart of this study is an in-depth analysis of several long-standing
and viable common property regimes, including Swiss grazing pastures,
Japanese forests, and irrigation systems in Spain and the Philippines.
Although Ostrom insists that each of these situations must be evaluated
on its own terms, she delineates a set of eight “design principles”
common to each of the cases. These include clearly defined boundaries,
monitors who are either resource users or accountable to them,
graduated sanctions, and mechanisms dominated by the users themselves
to resolve conflicts and to alter the rules. The challenge, she
observes, is to foster contingent self-commitment among the members
….

Throughout the book, she stresses the dangers of overly
generalized theories of collective action, particularly when used
“metaphorically” as the foundation for public policy. The three
dominant models — the tragedy of the commons, the prisoners’s dilemma,
and the logic of collective action — are all inadequate,
she says, for
they are based on the free-rider problem where individual, rational,
resource users act against the best interest of the users collectively.
These models are not necessarily wrong, Ostrom states, rather the
conditions under which they hold are very particular. They apply only
when the many, independently acting individuals involved have high
discount rates and little mutual trust, no capacity to communicate or
to enter into binding agreements, and when they do not arrange for
monitoring and enforcing mechanisms to avoid overinvestment and overuse.

Ostrom
concludes that “if this study does nothing more than shatter the
convictions of many policy analysts that the only way to solve common
pool resource problems is for external authorities to impose full
private property rights or centralized regulation, it will have
accomplished one major purpose.”

A
profile of Ostrom, who is a member of the National Academies of Science
and and Editor of its Proceedings, is here:
http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1748208

Her work can be found here: http://scholar.google.co.jp/scholar?q=Ostrom,+Elinor&hl=en&btnG=Search and

here: http://de.scientificcommons.org/elinor_ostrom

One
thing worth noting is that the historical and ongoing records are rife
with examples – such as our crashing local fisheries – where government
intervention has done more harm than good.
  In these cases and in
others, Ostrom introduces an analytical approach that is acceptable
widely across the political spectrum, even if differences in opinion
will remain.  See, for example, this discussion at libertarian-leaning
George Mason U:  http://www.theihs.org/bunnygame/

Categories: ostrom, tragedy of commons Tags:

Elinor Ostrom? Austrians praise the Nobel laureate’s work on how human communities successfully manage resource conflicts

October 15th, 2009 No comments

Elinor Ostrom awarded the Nobel prize in economics? Who? no doubt some of you are wondering.

Well, sharp-eyed readers will have noted that I have referred to her any number of times (which I will reprise later, as this post has gotten too lengthy).

I excerpt below some of the praise Elinor Ostrom has been receiving from Austrian economists familiar with her (emphasis added).

1.  First, though, from the press release:

Elinor Ostrom has demonstrated how common property can be successfully managed by user associations. Oliver Williamson has
developed a theory where business firms serve as structures for conflict resolution. Over the last three decades these seminal
contributions have advanced economic governance research from the fringe to the forefront of scientific attention.

Economic transactions take place not only in markets, but also within firms, associations, households, and agencies. Whereas economic theory has comprehensively illuminated the virtues and limitations of markets, it has traditionally paid less attention to other institutional arrangements. The research of Elinor Ostrom and Oliver Williamson demonstrates that economic analysis can shed light on most forms of social organization.

Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.

The background explanation is useful and contains a pointed criticism of many centrally-directed approaches to common pool resources (emphasis added):

If we want to halt the degradation of our natural environment and prevent a repetition of the many collapses of natural-resource stocks experienced in the past, we should learn from the successes and failures of common-property regimes. Ostrom’s work teaches us novel lessons about the deep mechanisms that sustain cooperation in human societies.

It has frequently been suggested that common ownership entails excessive resource utilization, and that it is advisable to reduce utilization either by imposing government regulations, such as taxes or quotas, or by privatizing the resource. The theoretical argument is simple: each user weighs private benefits against private costs, thereby neglecting the negative impact on others.

However, based on numerous empirical studies of natural-resource management, Elinor Ostrom has concluded that common property is often surprisingly well managed. Thus, the standard theoretical argument against common property is overly simplistic. It neglects the fact that users themselves can both create and enforce rules that mitigate overexploitation.
The standard argument also neglects the practical difficulties associated with privatization and government regulation. …

There are many …. examples which indicate that user-management of local resources has been more successful than management by outsiders. …

[T]he main lesson is that common property is often managed on the basis of rules and procedures that have evolved over long periods of time. As a result they are more adequate and subtle than outsiders – both politicians and social scientists – have tended to realize. Beyond showing that self-governance can be feasible and successful, Ostrom also elucidates the key features of successful governance. One instance is that active participation of users in creating and enforcing rules appears to be essential. Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated. Likewise, monitoring and enforcement work better when conducted by insiders than by outsiders. These principles are in stark contrast to the common view that monitoring and sanctioning are the responsibility of the state and should be conducted by public employees.

2.  Words of praise from libertarians:

Vernon L. Smith (2002 Nobel laureate for economics), Forbes, October 12:

For many of us she has long occupied our radar screen. Let me tell you why.

Relentlessly, Ostrom has pursued answers to two questions:

(1)
Since “everybody’s property is nobody’s property,” how is it that there
are so many cases where collectives of ordinary people with no
education and with none of the economists’ knowledge of “the tragedy of
the commons,” in fact discover ingenious rules (institutions) for
taking the “tragedy” out of a productive resource they hold in common?

Numerous other examples include Japanese lands held by thousands in
common under governance structures that avoided “tragedy;” also ancient
solutions to communal water and irrigation systems that create
effective enough private rights conferring benefits and costs that
constrain use.
This should not be too surprising, because “property
(originally propriety) rights” are about human rights and the challenge of defining them incentive-compatibly for mutual benefit.

(2)
As a distinguished political-economic scientist she will be the first
to tell you that there are also plenty of commons problems that
represent institutional failures and fragilities
; she has asked why,
and what makes the difference between success and failure? The
fragilities include inshore fisheries and groundwater basins with
continuing commons problems; failures include salt water fisheries and
irrigation systems hamstrung by the complexity of the rules.

Success is associated with clarity in the definition of and
bounds on individual rights (and opportunities) to take action, and the
geography of the commons; details for monitoring, operations, sanctions
and mechanisms for conflict resolution emerge from within the
collective and out of motivated people’s direct experience with
environmental context and each other.
When too many of these
problem-solving elements fail, the governance systems fail or require
continuing attention to their fragility characteristics. A fatal source
of disintegration is the inappropriate application of uninformed
external authority
, including intervention to prevent application of
efficacious rules to political favorites. Also detrimental to good solutions is the OPM (other people’s money) problem.

Peter Boettke, The Austrian Economists, October 12:

I told David [Henderson] that she is amazing and well deserving of the Nobel award for her pioneering work on rational choice theory (as if the choosers were human) and institutional analysis.  I then bent his ear about her work on governing the commons, institutional diversity, and learning. …

What Lin’s work demonstrates … is how individuals can in a variety of settings work to find (or stumble upon) institutional solutions that promote social cooperation and human betterment.  It is about voluntary civic association, a subset of which is commercial life, that her works highlights; not the absence of individual choice.  … My blurb on the back of her book, Understanding Institutional Diversity reads as follows: “What emerges from Elinor Ostrom’s book is precisely what the title suggests — an understanding of the diverse nature of institutions that exist in human societies to promote human cooperation or to hinder it.”

She is both a methodological individualist (rightly understood) and a spontaneous order theorists.  In this regard, Lin Ostrom (and Vincent) have represented one manifestation of the research program in the sciences of man (praxeology) by Mises and Hayek in the 1940s.  Actors of limited cognitive capabilities are studied for how the[y] shape and our [sic] shaped by the social structures that emerge in a variety of situations to provide voluntary solutions to complex and difficult problems, and they do so in a way that promotes social cooperation under the division of labor.  Read Human Action, chapter VIII, and Individualism: True and False, pp. 11-14 (in Individualism and Economic Order), and then look at Lin’s work in Governing the Commons; Understanding Institutional Diversity; and the 3 volume McGinnis, edited volumes, Readings from the Workshop in Political Theory and Policy Analysis and I think you will see what I am talking about. She has done fundamental research on the central idea of Ricardo’s Law of Association as Mises termed it.  Humanly rational choice and institutional analysis combine to address the most pressing question in the social world — why do some institutional patterns produce societies of peace and prosperity, while others produce societies that suffer under violence and poverty?

Lin Ostrom is firmly seated in the mainline tradition of economic scholarship from Adam Smith and David Hume to F. A. Hayek and James Buchanan …..  [H]er methods were chosen to be appropriate to the task she was pursuing.  Humanly rational choice, institutional analysis, field work, and experimental design were her tools for social understanding.  She did not limit her work to that of Max U notions of “choice” nor instituitonally antiseptic models of ‘markets’ nor one size fits all models of economic development.  Instead, she has been a major contributor to public choice economics, new institutional economics, and to our understanding of polycentricity and political economy.

[in comment] At the
home page for her institute — The Workshop in Political Theory and
Policy Analysis — they describe their work as a New Science of
Governance for a New Age. And they describe their task as follows: “The
betterment of humankind depends on the ability of fallible human beings
to make decisions, manage resources, and govern themselves. This is the
basis of democracy, and of civilization itself. It is also the basis
for more than 30 years of research and inquiry at the Workshop in
Political Theory and Policy Analysis at Indiana University in
Bloomington.

The Workshop’s teaching and research probes the inner workings of
human institutions—structures of rules used to govern people and
resources, in this usage—in order to better understand what works and
what does not. Institutions affect every facet of life, from public
services to family and community structures to natural resources and
beyond, and the Workshop’s research helps people design and adapt their
institutions so that they generate better outcomes.”

This is why the work is so intriguing. First, at the core is a model
of man as fallible — cognitively limited. Second, is a focus on the
emergence of institutions — not necessarily state-led institutional
impositions. Third, is a focus on governance, not government.

 

Peter Boettke, comment at Marginal Revolution, October 13:

She is a former President of the Public Choice Society, as was
Vincent. She uses game theory, she engages in institutional analysis,
she has conducted experiements in the lab, she has conducted field work
both in the US and abroad, she considers herself a political economist,
etc. Her presidential address to the APSA summed up her theoretical agenda as “A Behavioral Approach to the Rational Choice Theory of Collective Action.”

She
is most deserving of this Nobel, and she has made a unique contribution
theoretically and empirically to the study of self-governance. But
there is no need to pick a fight where one isn’t there. Her prize fits
nicely in a stream of recognitions ANALYTICALLY
by the committee to scholars such as Hayek (1974), Buchanan (1986),
Coase (1991), North (1993), and V. Smith (2002). These are all scholars
within the discipline of economics/political economy that recognize the
cognitive limitations of man, and focus analytical effort on
institutional analysis.

Lin Ostrom’s contributions come from
an analytical framework that grounded in rational choice theory (as if
the choosers are human) and builds to an institutional analysis
(as if
history mattered). The distinction between “rules in form” and “rules
in use” means she studies in close detail the social norms that
underlie self-governance in the management of resources and the
management of social relationships.

It is amazing body of work.

Alex Tabarrok, Marginal Revolution, October 12:

Elinor Ostrom may arguable [sic] be considered the mother of field work in development economics.  She has worked closely investigating water associations in Los Angeles, police departments in Indiana, and irrigation systems in Nepal.  In each of these cases her work has explored how between the atomized individual and the heavy-hand of government there is a range of voluntary, collective associations that over time can evolve efficient and equitable rules for the use of common resources.

With her husband, political scientist Vincent Ostrom, she established the Workshop in Political Theory and Policy Analysis in 1973 at Indiana University, an extraordinarily productive and evolving association of students and professors which has produced a wealth of theory, empirical studies and experiments in political science and especially collective action.  The Ostrom’s work bridges political science and economics.  Both are well known at GMU since both have been past presidents of the Public Choice society and both have been influenced by the Buchanan-Tullock program.  You can also see elements of Hayekian thought about the importance of local knowledge in the work of both Ostroms (here is a good interview).  My colleague, Peter Boettke has just published a book on the Ostrom’s and the Bloomington School.

Elinor Ostrom’s work culminated in Governing the Commons: The Evolution of Institutions for Collective Action which uses case studies to argue that around the world private associations have often, but not always, managed to avoid the tragedy of the commons and develop efficient uses of resources.  (Ostrom summarizes some of her findings from this research here).  Using game theory she provided theoretical underpinnings for these findings and using experimental methods she put these theories to the test in the lab.

For Ostrom it’s not the tragedy of the commons but the opportunity of the commons.  Not only can a commons be well-governed but the rules which help to provide efficiency in resource use are also those that foster community and engagement.  A formally government protected forest, for example, will fail to protect if the local users do not regard the rules as legitimate.  In Hayekian terms legislation is not the same as law.  Ostrom’s work is about understanding how the laws of common resource governance evolve and how we may better conserve resources by making legislation that does not conflict with law.

Bob Subrick, Stationary Bandit, October 12:

Ostrom’s “Governing the Commons” develops Hayek’s theme of spontaneous order through numerous real world examples.  Non-market institutions solve collective action problems that the price mechanism cannot.  That is the point of Hayek’s later writings– non-market institutions coordinate behavior.  Also, her emphasis on the lack of a “one-size-fits-all” approach resonates with those who are sympathetic to Hayek.

Paul Romer, Charter Cities, October 12:

Elinor’s fieldwork, followed up by her experimental work, pointed us in exactly the right direction. To understand BOTH why we don’t need police officers in some cases AND
why police officers don’t follow the rules in other cases, we have to
expand models of human preferences to include a contingent taste for
punishing others.
In reaching this conclusion, she arrived at a point
similar to that reached by Avner Greif (whom the Nobel committee
correctly cites.) They, more than anyone else in the profession,
spelled out the program that economists should follow. To make the
rules that people follow emerge as an equilibrium outcome instead of a
skyhook, economists must extend our models of preferences and gather
field and experimental evidence on the nature of these preferences.

Economists
who have become addicted to skyhooks, who think that they are doing
deep theory but are really just assuming their conclusions, find it
hard to even understand what it would mean to make the rules that
humans follow the object of scientific inquiry. If we fail to explore
rules in greater depth, economists will have little to say about the
most pressing issues facing humans today – how to improve the quality
of bad rules that cause needless waste, harm, and suffering.

Cheers
to the Nobel committee for recognizing work on one of the deepest
issues in economics. Bravo to the political scientist who showed that
she was a better economist than the economic imperialists who can’t
tell the difference between assuming and understanding.

Lynne Kiesling, Knowledge Problem, October 12:

Both Ostrom’s work on governance institutions and common-pool resources
and Williamson’s work on governance institutions and the transactional
boundary of the firm contribute meaningfully to our understanding of
how individuals coordinate their plans and actions in decentralized,
complex systems. …

Ostrom’s work highlights the ability of communities of
individuals, using their local knowledge and taking into account their
individual preferences and constraints, to develop governance
institutions that enable beneficial outcomes to emerge. As I put it in my book on institutional design in electricity,

Given the pervasiveness of incomplete property rights,
even in commercial transactions, how are we able to engage in so much
mutually beneficial exchange? We achieve it through the design of
institutions to govern the commons (Ostrom 1990, 2005). These
institutions can specify use rights, means for enforcing those use
rights, and penalties for violating those rights. Again, defining and
enforcing use rights is costly, but institutional design to do so
happens when its benefits are high enough
, and the institutional form
varies depending on the environment and context.

The Ostrom works cited therein, Governing the Commons and Understanding Institutional Diversity,
are full of rich insights that can be applied to environmental policy,
regulation, economic development, and many other areas of economics and
political science.

David R. Henderson, WSJ, October 12:

… I think it’s a great choice. The reason is that mainstream economics
has become highly mathematical and increasingly independent from
reality. Many economists sit in their offices and derive proofs. Few go
out and do the time-consuming work of examining the institutional
structures that humans build to solve their own real-world problems.
Among those few are Ms. Ostrom and Mr. Williamson.

Both draw on rich data from outside the field of economics. Ms.
Ostrom draws much of hers from case studies of common-property
resources and Mr. Williamson from business historians such as the late
Alfred Chandler. Some have summarized their work by saying that
institutions other than free markets often work well. But that
statement can mislead you to conclude that government solutions are the
answer. Free markets are only a subset of free institutions. A better
way to sum up their work is that what Ms. Ostrom and Mr. Willamson
really show is that voluntary associations work.

Most economists are familiar with the late Garrett Hardin‘s classic
article, “The Tragedy of the Commons.” His idea was that when no one
owns a resource, it is overused because no one can control its usage
and each person has an incentive to use it before others do. This
insight has helped us understand much human behavior and has led people
to advocate either having the resource privately owned or having it
controlled by government.

Not so fast, said Ms. Ostrom.
Examining dozens of case studies, she found cases of communal ownership
that worked—that is, that didn’t lead to the tragic outcomes envisioned
by Hardin—as well as ones that didn’t.
Were there systematic
differences? Yes, and interestingly the ones that worked did have a
kind of property rights system, just not private ownership.

Based on her work, Ms. Ostrom proposed
several rules for managing common-pool resources, which the Nobel
committee highlights. Among them are that rules should clearly define
who gets what, good conflict resolution methods should be in place,
people’s duty to maintain the resource should be proportional to their
benefits, monitoring and punishing is done by the users or someone
accountable to the users, and users are allowed to participate in
setting and modifying the rules. Notice the absence of top-down
government solutions.
In her work on development economics, Ms. Ostrom
concludes that top-down solutions don’t help poor countries. Are you
listening, World Bank?

In a 2006 article with Harini Nagendra, Ms. Ostrom wrote: “We
conclude that simple formulas focusing on formal ownership,
particularly one based solely on public [government] ownership of
forest lands, will not solve the problem of resource use.” …

Economists talking about real humans and not mathematical
abstractions and winning the Nobel prize for it? Good on ya, Nobel
committee.

John V.C. Nye, Forbes, October 12:

Oliver Williamson and Elinor Ostrom are both leaders in the growing
field of the New Institutional Economics. Both can be seen as pioneers
in understanding how markets work in the real world where transactions
costs are high, establishing smoothly functioning markets is costly,
information is incomplete, and hiring and production options are
limited. They show how firms, communities and organizations come to
solve these problems absent government regulation and how the choices
they make can be disrupted or worsened by bad state policy or sustained
by good rules that promote stable property rights and reliable contracts. …

Elinor operationalized the core insight of Ronald Coase that
creating and accessing markets is often quite costly and hence
organization, hierarchy and collective agreement can, under the right
conditions, serve as viable or even superior alternatives to market
competition.
While the lack of private property often leads to the
tragedy of the commons, it is surprising how often tragedy has been
avoided throughout the world. The answer is that small groups with
tight social structures can substitute community monitoring and peer
controls for a market that is non-existent and private property that is
neither well-defined nor reliably enforced. Of course, such local
enforcement tied to community norms, moral suasion, and restricted
geographical domains does not scale well to the modern world of
extensive impersonal exchange.
But she has studied areas as diverse as
police departments in Indiana to irrigation in Nepal.

But as
Elinor has demonstrated, ham-fisted reforms that attempt to bring the
illusion of modernity to the developing world by a naive adoption of
Western best-practice laws without the structures that support and
enforce those rules often leads to a destruction of indigenous practice
that works reasonably well without substituting a functioning and
reliable market of impersonal exchange.
Much of the disaster that is
foreign aid can be tied to the blunt importation of best-practice rules
without understanding how their implementation interacts with existing
practice.

Her work centers on a variety of case studies of
private associations throughout the world but is tied to the mainstream
methodologies in the social sciences through her use of game theory
and related analysis. She also tests her hypotheses in various
laboratory experiments designed to isolate the core behavioral
assumptions and in so doing continues in the tradition begun by
Nobelist Vernon Smith. Moreover, her work on real-world institutions
and the rules that sustain efficient outcomes is a natural complement
to the work of laureate Douglass North who also draws upon the ideas of
Coase and Williamson in understanding how political and social
institutions promote or retard growth.

Greg Ranson, Taking Hayek Seriously, October 13:

Peter Boettke, Lynne Kiesling, Peter Klein, Vernon Smith, David Henderson, Don Boudreaux,
and other Hayekian economists are all applauding the award of the Nobel
Prize in Economics to Lin Ostrom and Oliver Williamson. …

In many ways Ostrom & Williamson are very much contributing to an
intellectual tradition championed by Hayek and other leading
“Hayekians” like James Buchanan and Douglass North.

Henry Farrell, Crooked Timber, October 12:

[T]his is also a very interesting statement of what the Nobel committee see as important in economics.

Lin’s work focuses on the empirical analysis of collective goods problems –
how it is that people can come up with their own solutions to problems
of the commons if they are given enough room to do so. Her landmark
book, Governing the Commons, provides an empirical rejoinder
to the pessimism of Garret Hardin and others about the tragedy of the
commons – it documents how people can and do solve these problems in
e.g the management of water resources, forestry, pasturage and fishing
rights.
She and her colleagues gather large sets of data on the
conditions under which people are or are not able to solve these
problems, and the kinds of rules that they come up with in order to
solve them.

This is … a vote in favor of detailed, working-from-the-ground-up, empirical work, which doesn’t rely on
sharply contoured theoretical simplifications and flashy statistical
techniques so much as the accumulation of good data, which reflects the
messiness of the real social institutions from which it is gathered.
Quoting from Governing the Commons:

“An important challenge facing policy scientists is to develop theories of
human organization based on realistic assessment of human capabilities
and limitations in dealing with a variety of situations that initially
share some or all aspects of a tragedy of the commons. … Theoretical
inquiry involves a search for regularities … As a theorist, and at
times a modeler, I see these efforts [as being] at the core of a policy
science. One can, however, get trapped in one’s own intellectual web.
When years have been spent in the development of a theory with
considerable power and elegance, analysts obviously will want to apply
this tool to as many situations as possible. The power of a theory is
exactly proportionate to the diversity of situations it can explain.
All theories, however, have limits. Models of a theory are limited
still further because many parameters must be fixed in a model, rather
than allowed to vary. Confusing a model – such as that of a perfectly
competitive market – with the theory of which it is one representation
can limit applicability still further. (pp.24-25)”

One plausible characterization of her life’s work is that it is about
demonstrating the empirical weaknesses of a ‘cute’ economic model (the
Tragedy of the Commons) that assumed a role in policy discussions far
out of proportion to its actual explanatory power, and replacing it
with a set of explanations that are nowhere near as neat, but are far
more true to the real world. …

It is also a vote in favor of supplementing quantitative work with
qualitative understanding – Lin spends a lot of time (albeit less than
she used to) in the field, soaking up practical knowledge which informs
her work in striking ways. She is hands-on in a way that very few
economists, political scientists or sociologists are. It is also
interesting to note that the Nobel committee pays specific attention to the political implications of her work.

“Elinor Ostrom has challenged the conventional wisdom that common property is
poorly managed and should be either regulated by central authorities or
privatized.
Based on numerous studies of user-managed fish stocks,
pastures, woods, lakes, and groundwater basins, Ostrom concludes that
the outcomes are, more often than not, better than predicted by
standard theories.”

This reflects what she and her husband Vincent refer to as “polycentricity,” a normative approach to
governance which stresses the degree to which higher levels of
government should not crowd out self-organization at lower levels. Her
work implies that both pure marketization and top-down government
control can have badly adverse consequences for resource management,
because they rob individuals of the capacity to govern themselves, and
because they both lead to the depletion of important forms of local
collective knowledge.
… Ostrom stresses repeatedly that even the best
functioning markets are undergirded by an array of collective
institutions which order people’s market interactions
, and that in the
absence of such rules, self interested behaviour will have highly
adverse consequences.

Greg Ransom, Taking Hayek Seriously, October 14:

Elinor Ostrom Endorses Hayek’s Model of Economic Science

See Elinor Ostrom & Charlotte Hess, “Ideas, Artifacts, and Facilities: Information as a Common-Pool Resource”.

Ostrom also frequently cites Hayek’s work on social rules and local knowledge in many of her books & book articles and in her journal publications.

Most frequently Ostrom cites Hayek’s Law, Legislation and Liberty and Hayek’s “The Use of Knowledge in Society”.

As economist Art Carden says, “Ostrom’s win can be considered a win for the Hayekian worldview as opposed to the Samuelsonian worldview.”

"Clear-sighted" panic; the role of the corporation in the tragedy of the commons

August 30th, 2009 No comments

This is my fourth follow-up post to “Grist and the tragedy of the panicked enviro“, where I try to clarify the institutional frameworks for understanding and addressing resource problems, in response to confusion in comments by others.

Here is my most recent comment:

Cyberfarer, thank you for your response [here], which is well-intentioned, but both perceptive and blind.

First, I see you’ve adopted a page from the climate “skeptics” playbook, by
applying the self-deceptive ad hominem device of labelling those you
disagree with as “true believers” in something.  This is a partisan
tactic that lets you treat others as enemies, and spares you from the
trouble of listening to them, trying to figure out what they’re saying
and responding the them, as opposed to a black and white strawman that you’ve conjured
up.  Congratulations on mirroring those whom you dislike most.

Second, with all of your clear thinking, like Mr. Sacks, you offer us no
practical advice, just reasons for despair.  Lezlie, who follows you,
at least provides an agenda.

Third, of course, you’ve got me all wrong; I’m not an ideologue, a “true believer” or even an apologist of
any kind the status quo; I’m a concerned human being, a fellow
traveller on Planet Earth and a pragmatist. You’ve been misreading me,
and certainly have not troubled yourself to consider the very pragmatic
analytical tools that I’ve offered to help you figure how to diagnose
and attack the problems that you perceive.

And what have I offered? Nothing more or less than the rather obvious observations that
resources that are not owned and managed – whether privately or by
groups (including, obviously, by communities and native peoples) tend
to be trashed, and that similar problems are experienced where
resources are formally “owned” by governments but essentially used by
elites for their own benefit. I have NOT argued that private property
is the cure-all, nor have I condoned theft nor the manipulation of
governments by elites. In fact, I have rather clearly pointed out that
both theft and misuse of government have been and remain very much a
part of the problem.

Fourth, you continue to misunderstand the nature of our problems, and want to lay everything at the foot of
“capitalism” and “markets”, when the real problem is either the lack of
ownership of resources or government fiat/theft.  Western capitalism is
not responsible for extinctions and environmental devastation that
preceded capitalism and markets, or that has taken place under
state-directed economies. This gets old, but look at the prior
extinctions, messes of the former USSR (and at the Aral Sea today),
Hanford and Rocky Flats, Haiti, and China.

Sure, the consumer and industrial supply demands of markets (not merely in the West) continue
to pull chains of destruction elsewhere in the world, but destruction
only occurs with respect to resources that are not owned and protected
(or where theft by those more powerful occurs). Tofu and meat eaters
alike are indirectly responsible for rainforest destruction, mainly
because governments “own” most the rain forests and don’t prefer to
protect native title where it is recognized, so the conversion of such
land into soybeans (or palm oil to feed government-mandated demands for
biofuels) continues.

In any case, is it more effective to wail about the evilness of corporations that compete to provide us ever more
cheaply things that we choose to buy, or to demand better property
rights protection abroad, pay closer attention to where our food comes
from and end domestic mandates that drive destruction? You’re welcome
to your rants against true believers like me, but I’m personally more
disposed towards trying to be practically effective.

Fifth, you are very right to criticize corporations; Mr. Sacks has had a history
of doing that. Not only do I agree with much of his analysis (which he has not provided here), but I’ve devoted a fair amount of time to examining the entanglement of corporations and government:
http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited

Our state governments were wrong to get into competition with each other to
grant corporate status to investor-owned enterprises, in exchange for
fees and later taxes. Corporate status freed investors from down-side
risk, by limiting liability to the amount of capital contributed. This
incentivized: investors to encourage corporations to embark on risky
activities that shifted costs to innocent third parties; the
concentration of wealth in corporations; the corruption of the court
system that once protected third parties from damages caused by others
(by replacing strict liability with balancing tests); and the ensuing
battle – that you noted – over legislatures to regulate corporations
(and courts to enforce regulations). Is there a takeaway on this. other
than continuing to fight political battles to block legislative sweet
deals and theft, including working to revise our corporate order?

Anyway, I wish you well in your tirades.