A Reply to Andy Sabl’s Post About Libertarian Lumberjacks

Andy posted a nice piece here.  Does private property protect natural capital?  He provided a sophisticated economic analysis (and I like that!).   Harvard’s Rob Stavins offers a concise account of how economists view these issues in this new paper.

In contrasting resources such as copper and trees, Stavins writes; “The irony is obvious: many nonrenewable natural resources, which are in finite supply, have not become more scarce over time, and  none  has been exhausted; but renewable natural resources, which have the capacity to regenerate themselves, have in many cases become more scarce, and in some cases have indeed been exhausted, that is, become extinct. This irony can be explained by the fact that while most nonrenewable natural resources are characterized by well-defined, enforceable property rights, manyrenewable resources are held as common property or open access.”

We economists are consistent thinkers!     There are 3 property rights regimes here;  1. private property, 2. common property with no government imposing barriers to entry and 3. government managing common property.  We know that #2 will yield an ugly Tragedy of the Commons unless Elinor Ostrom rules that area.  But, could #3 yield greener outcomes than #1?  We would need to know what is the objective of government and how patient it is.  We would need to know whether the government is able to monitor the workers in the field who actually implement the stated policies.  In Andy’s example, the issue arises concerning why doesn’t the impatient asset owner simply sell to a more patient asset holder?  This happens every day on Wall Street. 

To rigorously test Andy’s hypothesis, we would need to run a field experiment such that private property rights are exogenously tightened or weakened and see if we observe a significant change in the extraction rate.  An optimist would hope (in an Elinor Ostrom sense) that co-operation and social capital could be utilized to protect the commons (if the parcel of land has been randomly assigned from being private property to public property). 

Author: Matthew E. Kahn

Professor of Economics at UCLA.

17 thoughts on “A Reply to Andy Sabl’s Post About Libertarian Lumberjacks”

  1. Two separate issues here: common property v. private property (e.g., fisheries) and private property vs. public ownership. Andy’s point is that high-morale public management sometimes outperforms private management, for example by having a longer time horizon.

    One of the goals of the Grover Norquist/Tea Party crowd, in which “free market” ideologists and “rational choice” political scientists are more or less deliberate collaborators, is to deny that there is such a thing as honest and competent public management, or honest and competent political leadership. These claims are to some extent self-fulfilling; the less public servants are respected and the worse they are treated, the harder it will be to recruit top-flight talent.

  2. Two separate issues here: common property v. private property (e.g., fisheries) and private property vs. public ownership. Andy’s point is that high-morale public management sometimes outperforms private management, for example by having a longer time horizon.

    One of the goals of the Grover Norquist/Tea Party crowd, in which “free market” ideologists and “rational choice” political scientists are more or less deliberate collaborators, is to deny that there is such a thing as honest and competent public management, or honest and competent political leadership. These claims are to some extent self-fulfilling; the less public servants are respected and the worse they are treated, the harder it will be to recruit top-flight talent.

  3. And here I had thought that the big lesson of Ostrom’s work is that it’s stupid to keep thinking in binary, “public or private” terms; and simply adding the third category of unmanaged commons isn’t much of an improvement. The very Nobel lecture Kahn links to, after all, is titled “Beyond Markets and States: Polycentric Governance of Complex Economic Systems”!

    Why anyone would think that a single randomized field experiment would tell you more about whatever general mechanisms exist than would, say, immersing oneself in the results of the decades of work coming out of Ostrom’s Workshop … well, it saddens me, but then, so does much about economics as a discipline.

  4. How economists think, indeed. We have a factual statement (maybe) about nonrenewable vs renewable resources, followed by

    “This irony can be explained by the fact that”

    something to do with property rights. Well, perhaps it can, but there are lots of other differences between iron ore and (say) cod. It seems a bit of a self-assured leap to say that X, and X only, is
    the cause. Especially given the counterexample of trees, which as far as I know have pretty much always been something that was owned.

    Actually, I don’t know of many examples of extinction driven just by overharvesting
    (silphion comes to mind); what happens is that the organisms become rare–which is somewhat the same as, say, anthracite–no large deposits of that are left.

  5. With regard to copper, maybe it is “nonrenewable” in some sense, but it doesn’t need to be renewed. You cannot destroy copper by using it. If there’s less in the ground, there’s more at the scrap yard. That’s got nothing to do with private or public or commons; it is a physical law of nature.

  6. Brian Schmidt has an axe he borrowed from John Locke to hammer out what to do in these cases

    One way to move forward would be to just drop investment-backed expectations and replace it with an analysis of whether the aspect of the land being regulated and protected is something that was created/transformed through human labor versus something that was intrinsic to the land. That, however, isn’t going to happen anytime soon, as the law doesn’t like to lurch that much. What could happen though is to use the labor theory of property as a means for deciding whether the expectation was reasonable and to determine the moral weight to be placed upon the investment made by the owner.

    Environmental protection would generally, but not always, come out ahead under this analysis compared the kludge we have now for takings regulation. Soil and water quality are generally innate to the property and not created by the owner, so protecting them doesn’t impinge upon something the owner’s labor (or predecessor owner) created. Wetlands were generally there naturally, and similarly could be protected. Important to this is that “failing to harm” the land did not create the environmental values that were there originally. Many landowners who think their years of failing to harm the land gives them the subsequent right to harm it are just mistaken.

  7. (Kleiman): “One of the goals of the Grover Norquist/Tea Party crowd, in which ‘free market’ ideologists and ‘rational choice’ political scientists are more or less deliberate collaborators, is to deny that there is such a thing as honest and competent public management, or honest and competent political leadership. These claims are to some extent self-fulfilling; the less public servants are respected and the worse they are treated, the harder it will be to recruit top-flight talent.
    1. “Rational choice“? Don’t you mean the public choice theory of James Buchannan, Mancur Olsen, Gordon Tullock, and others? There’s “rational expectations”, which was the theory of Thomas Sargent and others, about how rational individuals adjust to public policy, but that’s not what you mean, right?
    2. Why call “to deny that there is such a thing as honest and competent public management” a “goal” vice “contention”, “assertion”, or “assumption”?
    “Goal” is a pretense to mind-reading, and an ascription of malign motives, seems to me.
    3. Does not “(t)hese claims are to some extent self-fulfilling; the less public servants are respected and the worse they are treated, the harder it will be to recruit top-flight talent” apply as well to elected advocates for free market policies? I mean, if public choice theorists’ attribution of corrupt self-dealing to politicians degrades political representation, why does not the same principle apply to the criticisms which socialist professors of Public Policy make of free marketeers?

  8. “many renewable resources are held as common property or open access.”

    wtf is he talking about? Trees are not held as common property. They’re either on private or government land, no different from coal.

  9. (Bloix): “wtf is he talking about? Trees are not held as common property.
    Fruit, mushrooms, deer, and pigs on public lands and lake, river, and pelagic fish, and migratory birds are common property. That is, they are government property until someone takes possession. I recommend Jack Hirschliefer, “Anarchy and it’s Breakdown”, __Journal of Political Economy__.

  10. “How economists think, indeed. We have a factual statement (maybe) about nonrenewable vs renewable resources, followed by

    “This irony can be explained by the fact that”

    something to do with property rights. Well, perhaps it can, but there are lots of other differences between iron ore and (say) cod.

    And the most obvious such difference is that it is obvious what it means to “destroy” cod. What does it mean to “destroy” iron?

    The claim “none has been exhausted” is meaningless — with enough energy you can extract the atoms you want from seawater, or make them de novo in nuclear reactors. Basically the claim is a tautology — it remain economical to extract the stuff that it remains economical to extract:
    We mine gold (at tremendous expense, 2 miles below the earth) because someone is willing to pay the cost of that mining. Conversely, we don’t use gallium here, there and everywhere (and we could — if the stuff were trivially available, there are very interesting energy storage technologies we could use, rather better than batteries, based on aluminum plus gallium) because, for all practical purposes, such concentrated gallium stores as ever existed have been used up.

  11. Kinda off topic, but people who work in the woods harvesting timber call themselves loggers. Call one a lumberjack and you’ll quickly have tobacco juice staining your shoes, if not your shirt.

  12. jm, I agree and I’ve attended several logger’s rodeos, but I think the point is that the difference will never be noticed by a libertarian.

  13. I’m not totally convinced by the basic interpretation of the stylized fact made by Stavins. I’d consider the full argument to be as follows, fisheries have been depleted, no mines have been depleted. The reason is that mine owners have well defined property rights so they consider ore (or oil) in the ground to be an asset and recognize that extraction is not production.

    The problem with straw Stavins’s argument is that many mines have been depleted. Owners have extracted and extracted until there is nothing left. No minerals have been completely depleted because new deposits are found and/or new and more costly means of extracting minerals have been developed.

    The fate of the Carolina Parakeet and the dodo seem to me not to result from the fact that they didn’t belong to anyone in particular, but from the fact that they are all very similar with similar habits and habitats.

    Here I think the point is that a dodo is one of a few things (male, or female, juvenile or adult) while copper is an element and can be found in many fundamentally different things (different minerals).

    I will now make a competing analogy — a species is like a type of deposit of a mineral. I’d go for a range and a phenotype (as in species). Metallic gold nuggets of an ounce or more are not to be found lying around on the surface of Europe. Noting the fact that Gold can be extracted using the cyanide process from minerals one mile under South Africa is like noting that, while the dodo is extinct, other birds still exist.

    To return to practical considerations, I don’t think that property rights are secure enough to prevent extractors of minerals from treating extraction as production. Certainly Kuwait’s approach of moving its wealth as fast as it can to bank accounts far from Iraq makes sense to me.

  14. Never mind the capitalist experiment. Central Maine has already done it. The trees were “harvested” as soon as the colonists could get past the pesky British protections of the trees reserved for mast timbers on their warships.

    One hundred years later, the area was cut again for railroads, building factories and housing. Fifty years later, the area was over cut a third time to provide lumber for the post WWII building boom. When I went through there in the late 1980s, all that were growing were trees that had clear and significant genetic defects and small trees that would die out as the vegetation shaded them out.

    Go north to the toll road across northern Maine. The timber is managed. The trees are cultured for the appropriate use.

    In less than 250 years, the diversity of the timber supplies in Maine has basically been destroyed.

  15. Mr. Waldman —

    To test your hypothesis, can you identify a species that was reduced to private ownership and used consumptively that has gone extinct? It’s hard to think of any. The last Dodo died in captivity, in a zoo, but it was not reduced to captivity until wild populations were on the verge of extinction. Populations of species that can be owned and that have use value tend to increase over time (albeit not always in the wild), and private ownership has certainly helped bring some species back from the verge of extinction (e.g. American alligator, bison).

    In the case of mineral resources, while they are not renewable, for many such resources differing extraction methods affect the total amount that is recoverable — and in this sense there are incentives to treat extraction as production. As a consequence, where resource deposits were unowned, they tended to be developed more rapidly and less efficiently than would be optimal. Where ownership regimes were in place, however, resource owners have tended to use slower, more efficient (more “sustainable”?) methods of extraction. Oil is the best example of this phenomenon, but it is not the only one. These incentives also lead to the development of more efficient extraction techniques that tend to increase to total amount recoverable — which is why many oil deposits end up producing far longer than was originally estimated.

    JHA

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