What do economists say about this? Specifically ocean fishing. Where I live (New England) the local fishermen areall pissed off, because the Federal Government has imposed fishing limits. This has to be done, because overfishing is destroying this resource. The fisherman claim tht they cannot make a living with the limits, the fish biologists say that if unregulated fishing continues, nothing will be left for anybody.
So how do you regulate a “free” resource like this? Baically, the ocean is there-if you buy a boat and nets, and hire a crew, you can catch fish. Every fisherman wants to make as much money as possible-and feels that if he doen’t take, others will-so we have the problem of overfishing, which will lead to a collapse of the resource (this has happened in Canada-the once great Grand Banks cod fishery has completely collapsed).
How do you protect greedy people from their own bad actions?
Or is this a wake up call-that we ought to be farming fish and not taking wild stocks to extinction?
Make it unfree, by assigning property rights. In places where fishing grounds are sold (and this ownership is enforced), fish stocks are not nearly as depleted. Yes there is still the problem of your neighbor’s overfishing influencing your own catch, but at least you know who your neighbors are and voluntary, mutually beneficial agreements can be reached. Without the worry of some stranger coming in and reaping the fruits of your mutual abstention.
Like Athelas says, you internalise the negative externality, by having the government charge users an amount that approximates the cost of the damage their use causes. I would have used the example of fishing licences with bag limits, but the goal is the same.
I have little hope for this free market approach. A company that operates on the basis of maximizing long term fish stocks will under perform a company that is raping the food chain. This means that the executives of the former company have a fiduciary responsibility to their stockholders to adopt the tactics of the latter company.
Lobstermen in New England got together to save the lobster industry, but it was enforced by threats of physical violence and damage to equipment of those who did not follow the rules. That is just a form of “coercion” by the private sector rather than the govt.
In Iceland they went to a permit system. Only so many fish could be caught each year and the permits could be bought and sold. The fish population recovered and the more efficient fishermen did better and bought the permits of the less efficient. The system did so well that the island was flush with cash and decided to become a banking haven. They are now going back to fishing.
There are other examples of successful regulation of the commons.
Except this approach has worked many times before. In fact, it only appears to fail when the changes come so quickly that groups can’t adequately plan around their changes.
But this is not the case currently. Moreover, you really don’t seem to know much about how a modern corporation works. There are numerous financiers, accountants, and investors trying to caluculate returns. They know for a fact that while money has a time-value, an infinitely-long investment usually carries a better long-term reward. And they tend to invest for the long term.
Inf act, the big risk is note your farcical application of the idea of “fiduciary responsibility”, but rather that corporate governers (the Board as well as the CEO and other officers) don’t realize they are causing damage to their resources. Given an adequate notice, which certainly has happened, they will unsurprisingly make the choice which saves their jobs and fortunes.
This is not guaranteed. There are several things that can cause a corporation (or even a private fisherman) to act in a way that will destroy their long term interests. Much of the financial crisis was caused by actors maximizing short term gain at the cost of long term stability. Consider this scenario:
10 outfits currently fish for the Great Blue Smacker and each year at full production they can pull up a combined total of 1 million fish. Ten years ago there where 20 outfits and 3 million fish. Everyone knows that fish population is dwindling and it is figured the haul needs to be reduced to 500k per year for the next ten years to let the fish recover. With no outside interference, who cuts back? If they all cut back equally, the feel equal pain, the price goes up to reduce that pain somewhat, but chances are some of them are going out of business. If only one or two cut back, the price increase will be less (or nothing if other outfits start pulling more fish as they cut back), and they are almost sure to go out of business. They all know that they are doomed in 10 years unless they work together, but anybody who cuts back without all the others is doomed sooner. If 9 out 10 cut back, the fish will probably still be restored, but one outfit will make a lot more money than all the others in the mean time. This is a classic prisoners dilemma. Your best outcome is if everyone else does the right thing and you screw them over. Your worst is if you do the right thing and other screw you over.
This was what was facing the California Salmon fishers last year. That is why the requested a moratorium on salmon fishing. If the government forces everyone to play fair they will all be better off in the long run.
Jonathan
Fishing in Alaskan waters is highly regulated, and most fisheries are now sustainably managed. The notion that fish are free is outmoded.
Deckle Edge was on NPR’s Marketplace yesterday talking about a corollary to this. He was saying the one thing worse then free is low cost. Basically, when things are freely shared there is no monetary pressure to prevent overuse, but there is a social pressure. However, if you put a price on the resource it removes the social pressure so you need to insure the price is high enough or it can increase overuse rather than decreasing it. The example he used was a plate of cookies brought in to the office. If they are free most people will only take one or two. If they are a dollar, they would also only take a few as that is a normal value point for a cookie. But if you price them at 5 cents, most people would throw in a quarter and take five. Once there is a price on a resource people stop worrying about about others and think only about themselves.
Jonathan
That made me laugh.
It works for farms on land.
Agriculture is heavily regulated and receives large subsidies.
In the EU, yes, but not everywhere.
In the US, as well. Our ag subsidies are legendary, internally, at least. Jokes are made about them. They have featured as weeks-long storylines in politically aware comic strips like Doonesbury. We are the ag subsidy emperors. At least in part, one of the things that has kept our food stamp programs alive has been the ag sector, as some subsidies are tied to these programs (the federal food stamp program (which is administered to individuals by separate state agencies) is actually under the aegis of the Department of Agriculture).
But ag subsidies (at least in the U.S.) are supposed to – in theory – maintain a rough balance between demand and production. There’s a maze of floor prices, phase-outs and conservation subsidies that interact with the interntion of making sure producers stay in business, but not to pay so much that food prices get too high.
Granted the system crashes more than a virus-infested PC, but one of the goals is to eliminate overproduction for the sake of short-term profit.
And yet that was largely because they did not realize this was the case. They didn’t deliberately set out to choose the short-term value, but rather did not or in many cases could not foresee a long-term problem.
Moreover, your full theoretical case requires a certain balance of numbers which is unlikely, and even then, relies on nobody choosing an alternate position. All it would take is for some fisheries to chosoe a long-term position in order to preserve the long-term option. They will inevitably tend to win over the long term because that’s the game they’re playing. Then the short-term ones will die out and you get what you want. Cheer: you really can’t lose.
Oh come on, the short term is the only game. CEOs get bonuses based on yearly and quarterly results. Stockholders no longer care about long term stability and dividends, they just want to see the price of the stock rise so they can cash in and move on to the next short term opportunity.