The Rule of Capture and the Economic Dynamics of Natural Resource Use and Survival under Open Access Management Regimes

By reviewing the bioeconomic dynamics of natural resource harvest under open access/rule of capture management, this article demonstrates the falsity of the widely held contemporary view that market incentives lead to unsustainable natural resource use. The formal bioeconomic models teach that it is the relative speed of market versus natural dynamics that determines when and if open access harvest leads to resource collapse. If the rate at which harvesters exit from the harvest industry when harvests are low is rapid relative to the natural rate of growth in the harvested stock, the level of both the resource stock and harvest industry both cycle around interior (non-critical) levels. These very basic results from the bioeconomic literature carry fundamental lessons for resource management policies: given an open access, rule of capture regime, the best way to guarantee sustainable resource use is to encourage exit from resource intensive industries when stocks are low by subsidizing mobility, but to discourage specialization in the harvest of particular stocks or species and instead encourage generalized harvest technologies (technologies that have value in harvesting a variety of species or types of resource). Examination of the case of the Atlantic cod fishery collapse reveals that these normative recommendations are at odds with the revealed political economics of resource policy: the establishment of national property rights in coastal fisheries through the declaration of exclusive economic zones led not to rational policies, but to increased subsidies for resource-specific capital investments in harvest industries, the effect of which was not only to increase harvests dramatically, but to keep harvest levels high despite rapid declines in catches and stock levels. The article goes on to argue that a dynamic similar to the bioeconomics of natural resource harvest also applies to environmental pollution and to land development. When industrial polluters' productivity depends upon the level of ambient pollution (so such industries in a sense harvest clean resources), industrial migration may occur as a response to increasing levels of local pollution. Through such a dynamic, local levels of pollution may cycle around sub-maximal levels, just as do more conventionally harvested resource stocks. With pollution, American environmental policies better fit the theoretical recommendations: by setting pollution reduction standards that are nationally uniform within industrial categories, the federal environmental laws lessen the economic incentive for polluters to migrate in search of clean or unharvested resources. Whether similar salutary effects can be expected from policies designed to force land developers to internalize the external costs of lost open space (a reduction in a localized resource stock, the stock of undeveloped land) are, however, unclear: even in an unregulated market, because the existence of open space is captured in higher localized land values, development is generally unlikely to eliminate all exurban open space. Inasmuch as the loss of open space or sprawl problem involves socially undesirable fragmentation of development, optimal patterns have a path dependency which may make it impossible to find a policy response that is both ex post and ex ante efficient.