From: asylvain@felix.filenet.com (The Chipmunk)
Newsgroups: ca.environment
Subject: Re: Private ownership of resources: not a panacea
Date: 4 Sep 92 05:54:35 GMT
Reply-To: asylvain@fritz.filenet.com (The Chipmunk)
Distribution: ca
Organization: Foundation for the Increased Wealth of Chipmunks

Written in article <JESPERSE.92Aug28110542@rft28.nas.nasa.gov>
 by jesperse@nas.nasa.gov (Dennis Jespersen):

: Some people claim private ownership of natural resources is a panacea
: for wasteful use of public resources.  I used to feel this way myself,
: but things are more complex.

Nothing is "panacea."  In truth, the private ownership is simply better
than the public ownership.  Not perfect, only better.

For one thing, private ownership involves the ownership of parcels, vs.
ownership of everything.  For every owner who utterly destroys his
parcel, there will generally be at least 10 who will not.

For every homeowner who let's his lawn rot and his paint peel (you've
seen 'em, we all have, the local eyesores), there will be 10 on the same 
block who perform all maintenance to keep the place looking spiffy.

Public ownership means that whatever mistakes are made, be they perfect-
ly honest mistakes or outright corruption, are applied to the entire
lot.  In cities where the "common areas" are supposed to be maintained
by the city, you will either see vast areas well-tended, or vast areas
growing man-sized weeds.  The nice areas will be in neighborhoods with 
higher-than-average political influence.

: Consider the following very simplified
: example.  Suppose you own some land which contains some trees.  These
: trees don't grow very fast, suppose you can sustainably harvest 2.5%
: of the standing timber each year and make $10000 profit.  I emphasize
: this is sustainable, so if you do this you can be guaranteed of $10000
: profit per year indefinitely.  However, if you cut down all the trees
: immediately you can make $400000 (10000 x 40) profit which you can
: then invest at (say), 5% interest, giving yourself $20000 per year
: income.  If you are the sole owner of this resource and are guided by
: only economic considerations, the rational course is to immediately
: cut down all the trees.

It's simple allright.  But remember, even if this scenario is 100%
related to reality, there's going to be a neighbor on one side who's
a member of the Nature Conservancy, and a neighbor on the other side who
can't afford to increase his employees 40-fold.  The NC side will likely 
never be cut, while the other will have to be cut at the normal 2.5% 
rate as specified.

In fact, the other side may even be cut less, because all his employees
are getting suckered over to the guy who's hiring so many.

: Obviously this example is tremendously simplified.  But can we learn
: anything from it?

Examples are simplified for very good reasons.  Complications may 
destroy the intended conclusion.  Such as the impact of inflation on 
that measely 5% yeild.

: Well, it suggests things might be a little bit more
: complicated than simply "The sole owner of a resource has
: a motive to preserve it."

Of course the owner's primary motivation for preservation is economic.
In building scenarios where it somehow becomes more economic to destroy a 
resource, naturally that resource will be destroyed, no two ways about it.

The question is this: IS it REALLY more economical to destroy resources?

I mean, in general?  Certainly you can find specific cases where someone 
decides more money can be made using land as a parking lot for a mall, 
or to dig a big hole for a landfill.  But aren't these the exceptions?

: In fact, the sole owner of a resource has a
: tendency to see it as capital which must return a sufficient yield to
: make its maintenance worthwhile.

Of course.  However, don't forget that much of this depends on the
intended use for the resource.  A hunting association which buys some
forest lands specifically for deer hunting will not simply allow it to
deteriorate, simply because it's expensive.  The Nature Conservancy 
won't let the habitats be destroyed.  And logging companies would like 
to stay in business, meaning that running out of trees isn't particu-
larly bright.

Consider: how close is your scenario to anything even remotely related 
to reality?

In order to cut down 40 times more forest, you need to hire 40 times 
more employees.  If everyone else decides to do the same thing, this 
increases the wages an employee can demand.  This eventually creates its 
own new balance point, where it's perhaps only economical to log the 
land at %5 or 10% per year.

Assume that rate is NOT sustainable ... can you afford to do this now, 
with paying your employees so much more in wages, knowing that your 
source of lumber will evaporate soon after your kids get out of college, 
and inflation will eat away at the interest on your savings?

If everyone else decides to go out of business because they can't afford 
the wages, then that's another 39 plots to go fallow.  If everyone goes 
out of business, including this fellow with the 40x cutting, because all 
these additional costs makes lumber too expensive to buy, and the
market therefore switches to re-cycled woods and plastic, then every-
thing goes fallow.

Perhaps some owners will believe it worth the risk.  You will always
find one idiot willing to nuke his entire parcel, and perhaps hope to
live on the interest.  I believe most will not ... with that critical 
difference being that it's THEIR resource, vs. a "free" (tax-supported) 
resource.

: For much more information on this subject, I heartily recommend Colin
: Clark's book "Mathematical Bioeconomics".  My example is essentially
: borrowed from the introduction to (the first edition of) that book.

No disrespect intended, but I'd be heartily suspect of any source which 
very likely has a political agenda and starts off with fantasy scenarios
to prove its points.

Fantasy scenarios can be invented to prove anything.  I love how folks
who are anti-property rights like to come up with "desert island"
scenarios, where ONE person owns EVERY damn thing, some poor sap washes 
up on this island, then must either be a slave or die, possibly both.  
Therefore, property rights should not exist.

: Dennis Jespersen

-- 
The Chipmunk.
Opinions are mine, void where prohibited, taxed, licensed or regulated.
Don't go around saying the world owes you a living.  The world owes you
nothing.  It was here first.  -- Mark Twain
Newsgroups: ca.environment