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Avatar, tragedy of the socialized commons and crashing salmon stocks; how the dirty hands of government destroy wild resources

February 17th, 2010 No comments

It’s a sad, sad story, now being played out practically wherever wild salmon stocks once were abundant. (This version refers to the Pacific Northwest, particularly to events in British Columbia).

First, national governments wrest control over salmon fisheries from native peoples, and eliminate low-level, community-based management systems.

With new socialized ownership, it becomes eternal “open season” on salmon and newcomers (whites or whatnot) go hog wild, resulting in the classic “tragedy of the commons” race to catch salmon before others do, without regard to others or to future harvests.

The state steps in to regulate take, banning nets at river mouths — smart fishermen take their nets to sea. Governments find themselves compelled to further regulate seasons and fishing gear, as fishermen who have no ownership stake in the resource look for ways to beat restrictions and to beat out competitors for unowned fish. Natives who don’t join in the race are left with ever slimmer takes.

As no one owns the salmon and has no legal rights that can be enforced against upstream users, governments build dams to benefit farmers (and nuclear bomb production sites and industry), and developers and loggers begin to trash streams and rivers. Reacting to howls from interested citizens, states begin to pass laws limiting the rights of property owners to use and manage their properties.

Governments get into the salmon hatchery business as salmon stocks start to plummet, and endangered species protection laws get passed. Loggers, developers, farmers and industries with cheap hydropower vent anger over “capitalism-hating” enviros and legislators, even as governments eager to please favored constituencies (farmers over natives, naturally) divert water in summer from dams to farmers, leading to large fish kills in lower and warmer rivers.

As fish stocks continue to fall, enterprising businesses get licenses from regional governments to “farm” salmon by raising them in pens (using ocean water flows, and catching and grinding up five pounds of other fish to raise one pound of salmon). Farms begin to proliferate – and begin to be seen by fishermen as externality-generating machines: farmed salmon become plagued with sea lice, which spreads to migrating wild populations, concentrations of salmon pollute neighboring waters, wild salmon populations begin to fall drastically, and other “feed stocks” of salmon are adversely affected.

Alarmed local people and adversely affected fishermen and natives organize, try to get consumers to stop buying farmed salmon, and go, hat in hand, to petition (1) governments to stop licensing new “farms” and (2) farms to adopt much more expensive methods that would seal of the farms from the wild environment. Salmon farming companies assert that they have rights to pollute, and no legal responsibility for damages suffered by others – that licensing regimes eliminated common-law rights to sue for nuisance, etc. Farmers tell governments to be “fair” and that governments should “co-invest” to subsidize any new farming methods.

Predictably, as wild salmon dwindle and temperatures rise, no one seems to wonder what things would be like if governments stopped trying to “manage” the salmon and playing the middleman, but found some way to recognize property/harvesting rights and to enforce basic common law rights against nuisance, and stepped out of the way.

I made some of these points in an email I sent today to some parties at interest:

Ladies/Gentlemen:
 
I sent the following note to WildSalmonCircle.com when I joined their mailing list; some of you might be interested:
  
Yes, one of your chief enemies are the salmon farmers, but the
real reason for the problem is that the government – and not the First
Nation or any other fishermen – owns the wild salmon.
 
As a result, the First Nations, commercial and sports fisherment
and other supporters of wild slmon and natural ecosystems have NO
direct rights to protect the wild salmon and are largely relegated to
feebly petitioning government (and the farming companies, whose
managers are obliged to care first and foremost for profits generated
for owners), and have little or no ability to directly sue the
salmon-farming interlopers whose pollution is damaging your livelihood
and the greater Northwest ecosystem.
 
This is exactly the problem we see with many other
government-owned/managed resources – in Canada, the US, China, the
Amazon, developing countries – and it’s why Elinor Ostrom was given the
2009 Nobel Prize in Economics
. Solutions regarding common resources lie
in resource users having recognized rights and an ability to bargain
with others in the community. Where governments own resources, then
they deny to those whose livelihoods and ways of life are at stake a
voice in their own present and future. (In the case of salmon, this has
deep, “Avatar”-like roots in the historical pushing aside of native
rights
and resource management practices in favor of new,
Western-dominated governments.)
 
So, to First Nations and fishermen, I say – sue the farmers
directly for nuisance pollution – assert your rights! Don’t leave them
simply as another interest group petitioning government.
But also start pushing for direct, recognized property rights
in the wild salmon, which would end the “tragedy of the
commons” resulting from a free-for-all ocean take. Ending ocean take
and replacing it with traditional river-mouth-based harvests will
better protect the wild resource and give you stronger rights to make
claims on those upstream who poison and damage habitat. And take a page
out of the book of Target US, and organize a CONSUMER BOYCOTT OF ALL
FARMED SALMON. And work to eliminate all legislative grants to insiders of immunity to lawsuits for activities that damage the economic interests of others (i.e., that produce “nuisances”).
Sincerely,
 
Tom
 

Save wild fisheries – buy your certified sustainable salmon from Walmart!

December 9th, 2008 No comments

I’ve blogged before on the “tragedy of the commons”/bureaucratic mismanagement problems that underlie the crashing of the West Coast salmon fisheries  and that imperil the giant Atlantic bluefin tuna ; a recent article by Fortune shows that there are glimmers of hope for ocean fisheries, when large-volume purchasers like Walmart lead the charge by insisting that the fish they purchase come from a fishery that is independently certified as sustainable

In my post on tuna, I suggested that hope might lie in having the Japanese, who consume most of the tuna, bring concentrated pressure to bear on fishermen; here’s to hope that they and that fishers of Atlantic bluefin (and their governments) can similarly get their acts in order before the resource is decimated beyond recovery.

Who knows – maybe ensuring sustainability and creating ownership rights in stocks may also be a way to for environmentalists and the Japanese and others to bury the hatchet and come to terms on minke and other non-threatened whale stocks

h/t to Lynne Kiesling, who at her blog Knowledge Problem points to the Marine Stewardship Council as the organization that has been leading the “bottom-up, voluntary, collaborative” effort with scientists, industry, consumers and environmental groups to develop sustainability criteria for various fisheries and to support sustainability by tying sustainable practices to market demands via a credible third-party eco-label.

Destroying the salmon; the socialized commons and climate change (Part II)

July 23rd, 2008 3 comments

I briefly commented previously on the perilous state of the West Coast salmon fishery, which is crashing due not only to climate change-related stresses in the ocean and in stream flows, but also to our government’s destruction of Indian-held private and community property rights to salmon and substitution by a classic tragedy of the commons, bureaucratized mismanagement and political favoritism.  I made related remarks in connection with an article by George Monbiot, who bemoaned the role that European governments were playing in subsidizing the destruction of regional and global fisheries.

I expanded further on this in a comment on the NYT’s “Dot Earth” blog run by Andy Revkin.  I copy below my remarks, including the portion of a comment by another to who I was responding (emphasis added):

#62 Mike Roddy:

” I lived in the Northwest for many years, where clearcut logging muddied rivers and destroyed salmon runs. This caused serious damage to drinking water and wildlife, and a major economic group was damaged: salmon fishermen.

Even with the combined effects of ecosystem damage and hardship in another sector, nothing changed. The timber industry did not pay for this damage due to their political clout, and continued to be handed subsidies in the form of roads and favorable tax rates. Destruction of salmon runs continued, and does to this day.”

Mike, you are spot on about subsidies and cost-shifting, but are missing the chief cause, as documented by the free market environmentalists at PERC and others – the state and federal governments essentially removed the salmon from ownership/management by Indians and substituted, first, and open-access commons, with the resulting tragedy of the commons, that the government then tried to manage bureaucratically (essentially socializing the ownership of salmon).

Because no one has any vested rights (other than the Indians to net a portion of the take left after catches at sea), no one has an incentive to invest in maintaining the resource, and no rights to stop those damaging it like loggers (or otherwise making deals with them).  Instead, we have a bureaucracy that thinks it knows better than everyone, substitutes its judgment for everyone’s and becomes the battleground for parties who have legitimate interests but are unable to conclude any deals. 

Government has consistently benefitted from this situation, while everyone else has been frustrated, though insiders of course also benefit – as when Cheney single-handedly killed tens of thousands of salmon in Oregon by ordering water diverted from federal dams to farmers (during a time of low streamflows).

Mismanagement and the destruction of the great salmon runs has what we’ve purchased.  We need to privatize the salmon, so their owners can protect habitats and returns on the respective rivers, and stop free-for-all ocean takes.

Destroying the salmon; the socialized commons and climate change

June 16th, 2008 No comments

 More later.  We need to go back to the past.

Categories: climate change, commons, fisheries, Salmon Tags:

Criticism of US IP imperialism (and shallow WSJ support) by Reuters and foreign Left-Keynesians

October 4th, 2010 No comments

Says lefty Australian economist John Quiggin (whom I have referred to earlier in other contexts), in a piece titled “How the Americans stole the Ugg boot” (emphasis added):

The world would be a lot better off without intellectual property, or at least with a return to the more reasonable rules of the 19th century (14 years copyright, limited patents restricted to actual inventions, trademarks to identify products rather than to stifle competition) and the attempts of the US government to defend IP monopoly rights are one of the many reasons American “soft power” is such a perishable commodity.

Quiggin refers to a great piece in Reuters by Felix Salomon (“How the WSJ magazine fails its readers“) that responds to a WSJ puff piece on Deckers Outdoor Corporation, which, according to Quiggin, is an “American trademark troll company that has stolen the name ‘Ugg boot’ then used ‘intellectual property’ laws to impose the absurd claim that the only genuine Uggs are those made in China.”

Australians have apparently been making “Ugg boots” for decades, but now find themselves unable to promote such boots abroad; such is the ‘Uggly’ stuff that is fuelling a growing re-think of IP laws.

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A few thoughts from Japan on unowned/common resources, governments and whale PR wars

July 23rd, 2010 8 comments

 I left this comment on a post at Andy Revkin’s Dot Earth/NYT blog about the January run-in between the Sea Shepherd organization and the Japanese whaling fleet (emphasis added):

TokyoTom
Tokyo
January 11th, 2010
3:50 pm
 
Andy, this dispute is in some ways very similar to the range wars between ranchers, shepherds and farmers, with all sides fighting over a resource that the federal government recognized no one as owning.

Laws re the high seas, whaling and trade in endangered species likewise prevent resource management by those interested, and encourage the use of violence, PR and politics to settle disputes.

The Sea Shepherd and others have just as much claim to protect whales as the whalers have to catch them. Too bad both sides are invested in this dispute, instead of focusing on the common goal of building sustainable fisheries worldwide.

One irony/compounding factor that many overlook is that here [in Japan] whaling fleet is involved. The private whalers have all left the business, which the Japanese government now owns and runs at a loss, cutting off its own nose to spite the enviros. Ego (and group pride)  [and political grandstanding] so often wins out over long-term interest!

 
I note that I’ve commented on whaling and fishery issues (including salmon and tuna) any number of times.
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Third-World land theft & the tragedy of the commons: Mother Jones ponders, "Conservation: Indigenous peoples’ enemy No. 1?"

November 26th, 2009 No comments

[Post note: Anybody see the movie Avatar? Well that’s how native people perceive conservation efforts – as helping governing elites to steal their lands.]

The Mother Jones magazine has been running a series of on-line articles which exemplify how some progressives are exploring the ways in which various parts of the environmental/conservation agenda in developing countries have been counterproductive, adversely affected indigenous peoples, favored Western companies and played into the hands of local elites.

The articles are worth reviewing, as they reveal that enviros are starting to realize that protecting nature in the developing world requires protecting the property rights of indigenous communities.

One such article, by Mark Dowie, appeared in Mother Jones` on-line edition on November  2. The headline reads, “Conservation: Indigenous people’s enemy No. 1?”, the sub-header states, “For centuries we’ve displaced people to save nature. A huge project in Africa offers a chance to turn that around.” Dowie, an award-winning investigative journalist, is an author of several books published by the MIT Press, including his most recent, Conservation Refugees – The Hundred-Year Conflict between Global Conservation and Native Peoples.

Dowie`s thesis is that, until recently, conservationists have typically taken the approach that the best way to preserve tropical forests and other wild ecosystems, the right approach was to establish pristine reserves from which people were excluded, and describes the change in strategy in the context of a new series of parks that the government in Gabon, central Africa. Dowie notes that the traditional approach – of establishing government-owned and -administered parks free of native residents – has a long, and long-forgotten history in the US (emphasis added):

But there was another, more historically significant opportunity
facing Gabon that day, one that Fay merely hinted at in his
presentation and Sanderson didn’t mention at all. It was the
opportunity their own industry, transnational conservation, had in
Gabon: to do right by the thousands of tribal people living inside
those emerald patches, by allowing them to remain in their homelands
and participate directly in the stewardship and management of the new
parks. They would then not be passive “stakeholders” relocated to the
margins of the park, the typical fate of indigenous peoples who find
themselves in conservation “hot spots,” but equal players in the
complex and challenging process of defending biological diversity.
The
goal of such a policy would be the concurrent preservation of nature
and culture; Gabon just might come to signify a happy ending of a
tense, century-long conflict between global environmentalism and native
people, millions of whom have been displaced from traditional homelands in the interest of conservation.

It’s a century-long story of violence and abuse that began in Yosemite Valley in the mid 19th century,
when the Ahwahneechee band of Miwoks were chased about, caught on, then
forcefully expelled from a landscape they had cultivated for about 200
generations.
Militias like the vicious Mariposa Battalion were sent
into Yosemite
to burn acorn caches and rout native people from remote reaches of the
Valley. After the militias came the nature romantics who mythologized
the vacated valley as the wilderness it never was, then lobbied state
and federal governments to create a national park. They got their wish
in 1890, and the remaining Indians were removed
from the area, with a
few allowed to remain temporarily, as menial laborers in a segregated
village of 20-by-20-foot shacks.

Yosemite’s Indian policy spread to Yellowstone, Grand Canyon, Mesa Verde,
Mount Ranier, Zion, Glacier, Everglades, and Olympic National Parks,
all of which expelled thousands of tribal people from their homes and
hunting grounds so the new parks could remain in an undisturbed “state
of nature.”
Three hundred Shoshone
Indians were killed in a single day during the expulsion from
Yellowstone. This was the birth of what would come to be known,
worldwide, as the Yosemite model of wildlife conservation. In Africa
it would be renamed “fortress conservation,” and like so many other
products from the North, the model would be exported with vigor to all
other continents. …

Teddy Roosevelt also proclaimed that “the rude, fierce settler who
drives the savage from the land lays all civilized mankind under a debt
to him… It is of incalculable importance that America,
Australia, and Siberia should pass out of the hands of their red,
black, and yellow aboriginal owners and become the heritage of the
dominant world races.”

Our own history of theft from natives aside (which I have addressed tangentially in the context of the near-extirpation of the bison herds and the ongoing gross mismanagement and destruction of the salmon), what indigenous peoples in their right minds would not be opposed to the complicity of conservationists in continuing the process of the older colonial theft of their lands, even if the purpose was to “save” the land?  I won`t explore this now, but the record of “development” is replete with many examples – old and new – of such kinds of theft, with local ownership replaced by government ownership and a resulting “tragedy of the commons”-type of race to plunder “government” lands for valuable resources – oil and gas, minerals and timber.

Dowie notes the natural rise of indigenous opposition to “conservation” projects:

One consequence of creating a few million conservation refugees
around the world has been the emergence of a vast and surprisingly
powerful movement of communities that have proven themselves stewards
of nature (otherwise conservationists would have no interest in their
land), but were turned by circumstance into self-described “enemies of
conservation.

In early 2004, a United Nations
meeting was convened for the ninth year in a row to push for passage of
a resolution protecting the territorial and human rights of indigenous
peoples. During the meeting, one indigenous delegate rose to state that
extractive industries, while still a serious threat to their welfare
and cultural integrity, were no longer the main antagonist of native
cultures. Their new and biggest enemy, she said, was “conservation.”
Later that spring, at a meeting in Vancouver, British Columbia,
of the International Forum on Indigenous Mapping, all 200 delegates
signed a declaration stating that “conservation has become the number
one threat to indigenous territories.”

Then in February 2008, representatives of the International
Indigenous Forum on Biodiversity (IIFB) walked out of a Convention on
Biological Diversity (CBD) annual meeting, condemning the convention
for ignoring their interests. “We found ourselves marginalized and
without opportunity to take the floor and express our views,” read
their statement. “None of our recommendations were included in [the
meeting’s report]. So we have decided to leave this process…”

These are all rhetorical jabs, of course, and perhaps not entirely
accurate or fair. But they are based on fact and driven by experience,
and have shaken the international conservation community. So have a
spate of critical studies and articles calling international
conservationists to task for their historical mistreatment of
indigenous peoples.

The Mother Jones article looks like an excerpt from Dowie`s new book, which MIT describes as follows:

Since 1900, more than 108,000 officially
protected conservation areas have been established worldwide, largely
at the urging of five international conservation organizations. About
half of these areas were occupied or regularly used by indigenous
peoples. Millions who had been living sustainably on their land for
generations were displaced in the interests of conservation. In Conservation Refugees, Mark Dowie tells this story.

This is a “good guy vs. good guy” story, Dowie writes; the indigenous
peoples’ movement and conservation organizations have a vital common
goal—to protect biological diversity—and could work effectively and
powerfully together to protect the planet and preserve species and
ecosystem diversity. Yet for more than a hundred years, these two
forces have been at odds. The result: thousands of unmanageable
protected areas and native peoples reduced to poaching and trespassing
on their ancestral lands or “assimilated” but permanently indentured on
the lowest rungs of the economy.

The punch line of the book summary?

When conservationists and native peoples
acknowledge the interdependence of biodiversity conservation and
cultural survival, Dowie writes, they can together create a new and
much more effective paradigm for conservation.

I am quite sympathetic with Dowie`s thinking, but it seems to me that he could make use of a little more intellectual framework, such as (i) the Austrian/libertarian awareness of the frequently negative role played by the state and of the usefulness of property rights (as I noted in this earlier post about the destruction of the Amazon), and (ii) Elinor Ostrom`s research into successful management of open-access, common-pool resources by communities, including natives.

I left the following comments for Dowie at Mother Jones:

Mark, great article. It`s good to hear
that the broader conservation community is waking up, but groups like
Survival International have always tried to protect indigenous
peoples`s rights.

I`m afraid the headline is a bit of a distraction, because of course
the broader development effort as a whole has been much more
destructive, by even more widely putting power into the hands on
central elites, who often behaved kleptocratically.

Regardless of the broader background, it`s surprising that you
didn’t see fit to link your topic to the whole problem of the “tragedy
of the commons”, which is often tied to the nationalization of
resources, which deprives users of any control over the resources they
depend on. Elinor Ostrom has extensively studied this problem in
developing countries and elsewhere, and was awarded the Nobel Prize in
economics precisely for pointing out how “government” is often the
problem and not the solution:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=ostrom

I commend this effort by Dowie, and note some other interesting articles at Mother Jones:

GM’s Rainforest Racket: People with some of the world’s smallest carbon footprints are being displaced—so their forests can become offsets(“There is another vexing question inherent in
preserving forests: What happens to the people who use the land?
Efforts to protect biodiversity in the dwindling wildlands of the world
have increasingly run into a discomfiting tension between the impulse
toward absolute preservation and the needs of people—many of them
indigenous—who have lived sustainably in forestlands for decades or
centuries. Such tensions are playing out in the new economics of carbon
offsets.”)
Better REDD Than Dead: The byzantine politics of paying countries to save trees: (“Indigenous people around the world, many of whom have been displaced
through preservation efforts, are demanding “free, prior, and informed
consent” before new restrictions move forward. Some also want tribes,
like the Guarani in Brazil, to be compensated for preserving forests
for centuries.”)

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.

Rot at the Core: John Quiggin says that to stop banks from engaging in risky activities we need to outlaw investment banking

October 10th, 2009 No comments

I commented last week on a blog post by leftist Aussie economist John Quiggin, who blamed the financial collapse on investment banks, and suggested that either:

(i) investment banking should be much more heavily regulated (“Properly
done, regulation of this kind would kill off investment banking of the
kind with which we are familiar.”), or

(ii) ultra-high Glass-Steagall-like barriers should be raised that prevent most transactions between investment banks and government-guaranteed banks.

Right; and the identical approach to outlawing drugs and tightening penalties for buying, selling, growing and producing has worked out great, hasn`t it?  (Well, it has, for our growing and ever-more invasive armies of regulators, police, prisons, and grug-related interventions abroad.)

Such proposed “solutions” left me head-scratching, since they entirely missed addressing the root of the problem, which Quiggin identifies here:

This is one instance of a more general point emerging from discussion of the financial crisis. As
Felix Salmon observes, the extraordinary profitability of investment
bank can most plausibly be explained by the hypothesis that risk is
being shifted, without compensation, to someone else
. Salmon focuses on the case of ignorant buyers, sold products they don’t understand. But, as
Arnold Kling observes, an equally important source of investment
banking profits is regulatory arbitrage at the expense of governments,
and, ultimately, the public at large
.

Why not observe that government efforts to make depositors “safe” by guaranteeing deposits has instead almost entirely blown up, at the expense of taxpayers, and engendered a system of spiralling risk-shifting and opacity that left even the largest and smartest investment banks unable to calculate their own exposures and scrambling for government protection? And wonder whether – instead of banning risk-taking and providing products used for risk-shifting and regulatory arbitrage – it`s time to introduce real discipline into the system by making depositors and investors, banks and investment banks, carry a little more of their own risks?

I left John the following comment (with typographical edit)

October 6th, 2009 at 20:48 | #27

John,
it seems to me that you`re missing an important part of the picture
(that Arnold Kling and others point to): namely, the “information
problem” that limits the ability of regulators to notice, much less
keep fingers in, all of the holes in the dike, along with the federal
interventions in banking that have provided the chief moral hazard
problems and the chief demand for the products that investment banks
sourced.

BIS and investment standards created for the purpose of limiting the
risk that the government put on taxpayers via deposit guarantees
instead fuelled demands for products that provided higher returns at
than other assets at the same risk-weightings, and for
“investment-grade” products – but where the sellers perversely
arranged/paid for the rating, instead of buyers. This nonsense is still
continuing; even as the FDIC is closing banks right and left, banks
about to fail can attract “brokered deposits” from investors chasing
higher interest rates than are available at the safer banks (as
deposits remain guaranteed), as management gambles for returns that
will keep them in office.

The unregulated buyers of CMOs and CDS should of course be left to
suffer the consequences of their own investments; the Fed`s
intervention in support of LTCM (and the investments by insured banks
and investment banks) simply contributed to the “too big to fail”
massive risk shifting that has come home to roost.

Federal regulators should be reconsidering their fundamental
preconceptions, and moving away from trying to micro-manage risks in a
futile whack-a-mole enterprise, toward one that places more
responsibility for risk analysis on depositors and investors.
Otherwise, we will see simply empty promises, and more risk shifted to
taxpayers.

http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited+liability

We`ll be better off if everyone has more of their own skin in the game.

 

Searching for common ground: In which I provide a partial defense of Ron Bailey`s "invisible hand of population control" thesis

June 22nd, 2009 No comments

Michael Tobis, a blogging climate scientist, kindly alerted me to his criticisms of Ron Bailey`s recent Reason post.

Here is my response to Michael:

Michael, thanks for the link and for twitting it to my attention.

I`m not sure you really want to get me started, but I won`t let that get in the way.

First,
of course, it`s regrettable that those on the left and right would both
rather fight than think seriously. There`s alot of middle ground, but
you can`t get there in war of words. I`ve criticized Ron for this,
but he deserves credit for accepting climate science and expressly
acknowledging and analyzing tragedy of the commons situations.

While
I think you have found an infelicitly stated portion of his piece,
clearly he`s trying to say that social collapse in the past might be
attributable to tragedy of the commons situation (where “proper
institutions for channeling individual striving into a process of
economic growth which ultimately promotes the public interest” were not
in place).

While there are other cause of collapse – wars,
climate shifts, disasters – do you really disagree with Ron`s point
that societies are vulnerable to collapse if they don`t establish
institutions that prevent ruinous exploitation of resources?

While
Ron focusses on economic freedom and rule of law (market institutions)
as checks on tragedies of the commons, he is familiar with (and
libertarians certainly accept) traditional, community-based property
rights systems can work just fine, though increasing demand (and use by
outsiders) might swamp them, or technology might make private property
more efficient.

I think that Ron is perfectly correct to note
that property rights and market institutions in free societies are
serving to check population growth.

The chief problem, of course
is that there are huge gaps outside individual Western countries: Where
are the property rights in the atmosphere, the oceans, the tropical
forests? As a result, we are steadily destroying whatever we can get
out hands on.

The related problem is that corrupt and/or inept
governments are often in the middle of these problems: e.g., the
Newfoundland cod fishery was destroyed under Canadian government
management, West coast salmon fisheries are similarly threatened, and
tropical forests are being converted to soybeans and oil palm because
governments don`t care to protect the rights of the natives who dwell
in them.

(The way governments fail libertarians are rather
attuned to; while it may grate to hear this after the gross
mismanagement of the Bush/neocon/Republicans, perhaps even liberals can
acknowledge that they have a point, even if they don`t want to listen
to fear of “socialism” from the right.)

Finding institutions to
end destructive exploitation and manage open-access commons is a real
struggle; Bailey points in the right direction for some solutions, but
he downplays the size of the task ahead and the need for those who care
to work at solutions.

More of my thoughts here:

Too Many or Too Few People? Does the market provide an answer?

Using the State to solve common resource problems?

Mises on fixing externalities: progress along the Kuznets curve is not magic, but the result of institution-building

Regards,

Tom