Property rights and the environment

Since there is no social optimum and any decision about common resources will be the result of political pressure (such as the protests) or parliamentary servility to certain special interests (such as the changes in the law), we can conclude that public ownership of resources has a fundamental problem.

When they are kept awake at night by the roar of passing planes (authorized by the state and perhaps owned by state-owned airlines), when they cannot think (or rest) during the day because of the noise and vibrations of passing trains (authorized by the state and perhaps owned by state-owned railways), when they find it difficult to breathe because of the smells of a sewage-fertilized farm (authorized by the state and perhaps owned by the state), when they cannot escape because their houses are blocked by roadworks (no doubt planned by the state), their nerves stretched to the limit and their mental balance disturbed, they proceed by declaring the shortcomings of private initiative and the need for state regulation.

Ronald Coase, Nobel Prize in Economics 1991. [1]

Скорошният сблъсък на законодатели и еколози е красноречив пример за проблемите, до които води публичната собственост върху ограничените ресурси. Австрийската икономическа школа отдавна е посочила, че достигането на „социално оптимално” ползване на тези ресурси е невъзможно, защото, за да се случи, е нужно агрегирането на предпочитанията на огромен брой заинтересовани страни.

In simple terms, I may appreciate peaceful walks in the mountain forests, while others may be fans of fast ski slaloms. Since these assessments of the utility of the forest resource are subjective and inherent to each individual, the legislator faces an insurmountable “problem of knowledge” (Hayek, 1945). He does not have access to the dispersed, subjective and specific to a certain place and time preferences of all individuals – i.e. he cannot reach a true social optimum.

To the problem of the lack of a social optimum we must add the tragedy of the commons, brilliantly explained in Garrett Hardin's 1968 essay. Hardin describes the fate of an ownerless common pasture that is used by all. In such a situation, the interest of the individual herder is to maximize the use of the common resource, thereby harming the community. If an additional animal starts grazing, all the benefit goes to the herder, but the negatives (in the form of less resource for the others) are distributed among all members of the community.

Here we come to the political process and the latest events in Bulgaria as its manifestation. Just like the shepherd, each lobby group has nothing against extracting additional benefits from the common property, regardless of whether the public will pay the bill. For investors it does not matter whether they will cut down a lot of forest on state lands, and for environmentalists - whether the people in the mountains will have a livelihood. Both sides are trying to influence (lobby before) the legislator and achieve their own, while at the same time transferring the entire cost to other groups in society.

This is why neither side is “right.” Since there is no social optimum and any decision about common resources will be the result of political pressure (such as the protests) or parliamentary servility to certain special interests (such as the changes in the law), we can conclude that public ownership of resources has a fundamental problem.

How do property rights help?

Private ownership solves the problems described in the article so far. In this case, the optimal use of the resource depends on the owner and the consequences of any short-sighted decision will be borne by him personally. Thus, incentives change when positive and negative consequences have the same addressee. At the same time, private ownership provides excellent opportunities for the conservation of pristine nature without the need for protests and confrontation with ski tourism lobbyists. Here are three examples of how the free market and private ownership can help the environment:

• Saving endangered species - It turns out that three species of endangered African antelopes were saved by farmers in the state of Texas. Between 2004 and 2010, their population quadrupled to 17,000 animals. The reason is the permission in the United States since 2005 to breed and hunt rare species of antelopes, which are extremely expensive trophies, reaching prices of about $ 10,000. To meet the demand, entrepreneurs are incentivized to breed rare species and, by profiting from the hunting sport, contribute to saving the species. [2]

• Nature Conservation - The United States is a great example of how successful private nature reserves can be, and they exist all over the country. The movement began in the 19th century with the so-called Aubudon Societies, which bought up forest land to protect birds that were hunted for their feathers. Today, dozens of successors to the idea exist, and while they often try to push their cause through lobbying, they also follow the original model of working by purchasing land for private reserves. I will give another example - the American Prairie Foundation. Its goal is to acquire 2,000 square kilometers of land in the state of Montana and include it in the territory of the American Prairie Reserve. [3] [4] In Ohio, there is the Western Reserve Land Conservancy - an organization that helps landowners preserve natural resources without losing their property. [5]

• Conservation of fish resources - A study of 11,000 fisheries conducted by the journal Science shows that the use of management strategies based on property rights (called catch shares or ITQs) prevents the loss of fish in these areas. [6]

With the introduction of property rights, the interests of hunters and the ecosystem itself become the same. When you are an owner, you will make sure that next season you have suitable fishing conditions, for the owner-fishermen it will be important to have more fish next year than this one. In this sense, the process of using the resource turns from a competition to see who can get to the fish faster to who can maintain the largest and healthiest population.

It is worth looking beyond the clash of two lobbying interests (of environmentalists and investors) over the fate of the public resource and realizing that there is no socially optimal solution for it. Solutions must be sought elsewhere.

Did you like it? Take a minute to support the EKIP on Patreon!