The Economics of Ecology and the Tragedy of the Commons

(10 am. – promoted by ek hornbeck)

  Elinor Ostrom, the only woman to ever win the Nobel Prize for Economics, died last month and we are all poorer because of it. She was a trailblazer in the field of economics, yet her findings have been largely ignored by politicians, policy makers, and the financial media. Few economists have ever even heard of her.

 Why is that? Because her conclusions don’t help the cause of large corporations, governments, the wealthy and powerful.

 She was Elinor Ostrom, a professor of political science at Indiana University, who devoted much of her career to combing the world looking for examples where people had developed ways of regulating their use of common resources without resort to either private property rights or government intervention.

 In these days of environmental destruction and economic distress caused by rapacious corporations, we need people like Elinor Ostrom shining a light on alternative economic theories more than ever.

The summer of 2002 was a drought year in the Klamath Basin.

An estimated 70,000 salmon died that year after the Bush administration “ignored its own federal biologists and divert more water from the Klamath River for farm irrigation”. According to documents, the decision was made because the farmers generally voted Republican. The Bush Administration then went on to order that water continue to be diverted for another eight years.

Only 24,000 fall chinook spawned naturally in the Klamath in 2004, followed by 27,000 last year.

   The analysis from the U.S. Fish and Wildlife Service identified low water flows as a prime culprit in a major salmon kill on the Klamath River in 2002.

  Because it takes several years for salmon to reach peak reproducing age, the effects of this huge fish-kill only started in 2005 when the National Marine Fisheries Service abbreviated the commercial salmon season. It cut the income of west coast fishermen “by 50 percent”.

California and Oregon indian tribes, that have depended on salmon fishing for thousands of years, also had their fishing quotas cut back by as much as half.

It’s easy to look at this example as an exception based on petty politics, but that would require you to overlook five centuries of political and economic policy.

When you look around the global environment today you will see nearly every animal species, large and small, in trouble. It doesn’t matter if they live on land, water, or air.

When you look around the global economy today you will see small, independent businessmen that rely on the Earth’s bounty, such as fishermen and farmers, in trouble.

When you look around the environmental movement you will see countless, tiny groups, each one dedicated to a specific niche, such as a region, a species, or a habitat.

What we have is hundreds of millions of people, dozens of occupations, and thousands of mostly non-profit groups, all working independently toward a roughly similar goal. A goal that is absolutely necessary for mankind to achieve.

Yet they are all losing the battle.

The reason why they are losing the battle has nothing to do with their tactics or dedication. They are losing the battle because they are operating according to a set of archaic economic rules that works directly against them.

The dollar value of nature

“After the last tree is felled, Christ will come back.”

 – James G. Watt, 1983

Starting with the Sagebrush Rebellion, continuing with Reagan’s Interior Secretary, James Watt, and the Wise Use Movement of the late 80’s and early 90’s, and finally with the rise of the “free market environmentalism” the Republican base keeps coming and coming for undeveloped land, and they will never stop.

The pro-privatization crowd is very open with their reasoning and logic:

Some object to privatization because they believe that our national “crown jewels” (however defined) are sacred natural treasures and that no price tag can or should be attached to them. Well, one is welcome to one’s beliefs, but value is subjective. Land is worth only what people will pay for it.

   […]

If there is more money to be made by turning the Grand Canyon over to the Walt Disney Co. rather than to an eco-sensitive tourism cooperative, it simply means that the public demand for Disney’s services at the Grand Canyon is greater than the public’s demand for Deep Green Trail Services Inc.

This is a philosophy that sees absolutely no value in anything that can’t be turned into a buck. The debate is framed so that the environmental movement is forced to argue from a moral high ground of beauty and legacy, while the opponents argue from an economically “practical” background.

This framing is false for several reasons.

#1.  The National Parks Conservation Assoc. contracted a study in 2006 that measured the economic effect of the national park system. The results disproved the argument that extracted and exploiting the natural resources of the lands was economically “practical”.

It generates more than four dollars in value to the public for every tax dollar invested by the Federal Government. In addition to that, National Parks support $13.3 billion of local private-sector economic activity and 267,000 private-sector jobs. National parks attract businesses and individuals to the local area, resulting in economic growth in areas near parks that is an average of one percent per year greater than statewide rates over the past three decades.

I don’t know of many private enterprises that can generate four dollars of return on one dollar of investment. So the fact that we are even debating this indicates there is about a larger issue at work.

#2.  The debate here is larger than just the National Parks versus private enterprise. It is about the value of nature itself.

Last year the U.N. conducted a study concerning the economic benefit that nature provides us.

Mangroves in Vietnam, it turns out, save annual expenditures on dike maintenance of more than $7 million. And in another example: it would cost $200 million to replicate the services provided by natural springs in New Zealand.

Researchers found that every hectare of coral reef-a modest area of land equal to just under two and a half acres-is worth more than $1 million annually….But what struck Sukhdev and fellow researchers were the high ratios of return when conservation projects were undertaken. With agriculture alone, addressing problems with soil consistency or water contamination would pay substantial dividends, they found-an average global rate of return of $60 for every $1 invested.

Sixty to One. Let that sink in for a moment. There is simply no comparison to returns like that in the private investment world.

It doesn’t stop there. Honeybees, simply by doing what comes naturally, contributes $57 Billion annually to the economy. The dung beetle contributes $380 million annually by getting rid of manure that would otherwise attract parasites.

In fact, if you add it all up, the dollar value of nature’s contributions is immense.

For the entire biosphere, the value (most of which is outside the market) is estimated to be in the range of US$16-54 trillion (1012) per year, with an average of US$33 trillion per year. Because of the nature of the uncertainties, this must be considered a minimum estimate. Global gross national product total is around US$18 trillion per year.

So a general estimate is that the dollar value of nature’s services is twice the value of everything man produces, combined.

Given these facts, why does the corporate world still insist that natural resources must be privatized? For several reasons, all of which involve greed.

For starters, most of the economic benefits listed above are measured by what it would take for private industry to do the same job. Or to put it another way, many of those economic benefits don’t immediately translate into dollars in anyone’s pockets, which is the only way that the corporate world measures anything.

Second, and more importantly, the corporate world is already using and abusing the benefits that nature is giving them and there is no cost associated with it. If the world’s biggest companies were held accountable for their cost of polluting and other damage to the environment, more than one-third of their profits would vanish.

The study, conducted by London-based consultancy Trucost  and due to be published this summer, found the estimated combined damage was worth US$2.2 trillion (£1.4tn) in 2008 – a figure bigger than the national economies of all but seven countries in the world that year.

“What we’re talking about is a completely new paradigm,” said Richard Mattison, Trucost’s chief operating officer and leader of the report team. “Externalities of this scale and nature pose a major risk to the global economy and markets are not fully aware of these risks, nor do they know how to deal with them.”

A new paradigm is exactly what we should all be talking about.

The salmon in the Klamath Basin. The fishermen of the Gulf. Small farmers in Mexico. The various environmental groups defending whales, birds, wetlands, and tropical forests. Global Warming. The Cochabamba protests of 2000.

All of these things and much more have one thing in common that almost never gets discussed anymore. It’s a subject that is at least five centuries old, but still relevant today. In fact, addressing this subject is the most pressing issue that the environment movement has to confront.

The subject I am talking about is The Commons.

The Tragedy of the Commons and other false paradigms

They hang the man and flog the woman

That steal the goose from off the common,

But let the greater villain loose

That steals the common from the goose.

– English folk poem, ca. 1764

In 1968, Garrett Hardin, a Malthusian economist, wrote an extremely interesting but flawed essay called The Tragedy of the Commons. It’s been used by pro-privatization groups ever since.

The part of the essay they like to quote is this:

Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. This utility has one negative and one positive component.

The positive component is that the herdsman gets to graze more cattle at almost no cost to himself. The negative component is that the cost of overgrazing the commons is born by the entire community.

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another…. But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit — in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

In a general way, Hardin’s case has a great deal of truth to it.

Hardin rightly goes on to point out that the air and seas also should be considered The Commons because we can’t put a fence around them. Thus they are abused for the very reasons he lists above.

The rational man finds that his share of the cost of the wastes he discharges into the commons is less than the cost of purifying his wastes before releasing them. Since this is true for everyone, we are locked into a system of “fouling our own nest,” so long as we behave only as independent, rational, free enterprisers.

Furthermore, Hardin points out that trying to guilt and shame people and companies into behaving properly is a doomed effort if economic incentives encourage different behavior (something environmental groups should realize).

All of what Hardin says up to this point is mostly true. He even points out that all reform ideas are shot down because of the irrationally high standard of perfection that opponents to changes in the status quo demand.

Then he makes three mistakes.

#1.  Hardin uses his logic to endorse the “injustice” of the current private property system as opposed to the “total ruin” of The Commons, without defending the assertion.

 From the neolithic period up to the 16th Century, The Commons was the primary mode of economic society. It worked. Hardin uses a Malthusian argument to say that it can no longer work because there are too many people now. He puts his statement out there as if we should just accept it without trying to prove it.

#2.  Hardin defends the infringement on our rights by new enclosures of the commons (aka privatization), without acknowledging the abuse and destruction this has led to in the past. The best example of this involved one of history’s villains – Henry VIII.

Historical interlude…

By the 1530’s, Henry VIII had turned a flush treasury into a bankrupt one through wars and lavish personal spending. So Henry went in search of more funds to steal.

In 1536 the Dissolution of the Monasteries became law, as their property was confiscated. Abbots who resisted were executed. Around 800 of these institutions were seized. Henry didn’t get as much revenue from seizing the assets of the monasteries as he thought he would, so he turned around and sold the land to the wealthy Tudor gentry at bargain basement prices.

[note: Every instance of privatizing public assets that I have ever read about, led to those assets being sold at pennies on the dollar to the politically connected wealthy. It’s a good bet that this will happen every single time.]

The abbeys were one of the primary sources of charity and medical care in the country, thus gutting the weak safety net that was in place.

Six years later Henry VIII had burnt through those funds by his wars of conquest against the people of Ireland and Scotland. He needed more cash.

Known simply as The Great Debasement, Henry did what is the modern equivalent of adding zeros to today’s fiat currency. In 1542 One Pound contained 6.4 ounces of silver. By 1551 One Pound contained less than an ounce of silver.

For King Henry it created a temporary increase in the amount of cash on hand to fund his destruction and occupation of southern Scotland.  For the poor, all they saw was rapidly increasing prices without a similar increase in wages. And for the wealthy landlords they saw a decrease in the value of the rents they charge.

But the wealthy gentry had a way out. For more than a century the price of sheep’s wool had been increasing because of strong demand on the continent (i.e. turning exports into hard currency). What stood in the way of this solution for the wealthy landlords was thousands of subsistence farmers on their lands.

But that was easy enough to fix – the farmers were evicted, the former farming lands were enclosed with ditches and hedges, and then the fields were turned to pasture for the sheep.

What’s more, the wealthy were no longer satisfied with simply enclosing their own common land, but started enclosing land that didn’t belong to them – common fens and marshes, moors and other “wastes”. These were areas not owned by anyone, but that tenant farmers used for their animals to graze (along with the stubble of an open field after a harvest).

In other words this was outright theft by the powerful and wealthy of community owned land, land in which they had the right to use under the Charter of the Forest. These enclosures turned common land into owned land, whereas field enclosures only segregated land that was already owned. Access to these lands were critical to the marginal farmer.

Between 1570 and 1620 nearly 1/3 of all the land in England changed hands – from the poor and commons to the wealthy. By some accounts, 3/4ths to 9/10ths of the tenant farmers on some estates were evicted in the late medieval period.

All this enclosing of common land led to the complete depopulation of hundreds of villages and hamlets. In all, about 1,000 towns and villages ceased to exist during this period. With Scotland and Ireland coming under the thumb of the English crown, they too suffered from the same trend. Families gave up their children because they couldn’t afford to feed them. People sold themselves into indentured servitude. So many thousands of families were being made homeless and destitute, with no means to support themselves, it led to skyrocketing crime rates.

The government responded to the rising crime rates with increasingly severe punishment for vagrancy, including whipping, forced labor, and eventually, deportation.

…back to the present

#3.  Most importantly, Hardin fails to return to the point that air and oceans cannot be anything but The Commons, and thus the solution for the two most important elements of the Earth can not be solved by privatization.

To put it another way, privatization and the free market have no solution to the environmental tragedy occurring in our atmosphere and oceans, and never will.

Private enterprise cannot make a profit on something until there is scarcity. So as long as clean air is available to all, then the free market has no interest in doing anything but polluting it. The reason is because the current free market, capitalist, economic model exists to commodify natural resources and turn it into consumer goods, while externalizing expenses by doing things like trashing the planet.

However, once the atmosphere is polluted to the point that people with money can’t breath, then the free market will create a solution – but only for those it can make a profit from. The poor die slowly.

We are already seeing this scenario played out with water.

Even when it comes to land, privatization is no solution. For instance, privatization of wetland areas usually means the owner will drain the wetlands for economic reasons. The community will be denied a thriving habitat for wildlife.

No solutions are actually found by the capitalist system in regards to The Commons. It only creates problems that it can then profit from.

Those problems will be the destruction of the entire ecosystem.

To put it another way, the capitalist free market, as it is practiced today, will inevitably destroy the planet’s ecosystem because it cannot privatize the oceans and the atmosphere.

The small fishermen and farmers, every environmentalist group in the world, and everyone who isn’t in the top 1% of society needs to recognize the inescapable conclusion that the only way the global ecosystem can be saved is if we reject the current free market, capitalist, economic model for commonly shared natural resources.

This is one of those inconvenient truth moments that, unfortunately, Prius-driving, middle-class America is not ready to accept. While Glen Beck-watching, truck-driving America will actively fight this conclusion.

However, willful denial or giving up will get us nowhere, and eventually we will find ourselves right back at this very spot again.

That’s not to say that there aren’t more modest intermediate steps that can be taken in the meantime, such as abolishing government subsidies for deep-water fisheries.

Some success has been made from Individual Fishing Quotas. However, this does nothing to solve the problem of pollution.

Who is ruining the commons?

 Author Raj Patel, in his book The Value of Nothing also has a few choice words for Hardin’s Tragedy of the Commons theory.

 Scratch the surface, though, and Hardin’s arguments blame the victim…

  The reason people go hungry today has nothing at all to do with a gap between the amount of food in the world and the number of people who are hungry…The reason people go hungry is because of the way we distribute food through the market, as private property, and the people who starve are simply too poor to be able to afford it. If there were fewer people in the world but the way we distributed food remained the same, the poor would still go hungry.

 Patel then goes on to describe the condition of the fisheries on the coast of Pakistan. After centuries of successfully being fished, the fisheries are in collapse.

  Is it because local fishermen have suddenly depleted the fisheries? No. It’s because Pakistan’s military government, eager to expand its exports, opened up its coastline to foreign-owned industrial trawlers that scoop up everything in their paths.

 The lesson here is clear: the people that Hardin describe who rape the commons and ruin it for everyone do exist, but they are called corporations.

 Corporations are only interested in short-term profits. They have no interest in the community or even mankind’s future. Corporations, if clinically diagnosed, would be considered psychopaths. So as long as we allow corporations to privatize the commons, things will get worse for the environment.

The Solution

So if we reject the current free market, capitalist economic model for natural resources, what does that leave us? Communism?

No.

What it leaves us is a concept that dates back to England’s Magna Carta and the Roman Emperor Justinian – Public Trust Doctrine.

“By the law of nature these things are common to all mankind, the air, running water, the sea and consequently the shores of the sea.”

 – Codex Justinianus, 529 A.D.

The idea is that natural resources are held by the state in trust for the benefit of everyone.

To a limited extent, the Public Trust Doctrine is already part of American law, through our English Common Law roots. It is most widely used in regards to navigable waters, but it has also been cited in court rulings in regards to protection of natural wildlife. More recently it was cited in the 1983 Mono Lake case-Audubon Society v. the Los Angeles Department of Water and Power. It exists now in some state Constitutions, such as Pennsylvania’s.

What is required is that the Public Trust Doctrine expands to fulfill its original purpose and meaning in international law.

To give a historical comparison, consider the case of the 14th Amendment to the Constitution. The Equal Protection clause was supposed to apply the Bill of Rights to the States and stop the discrimination of blacks. Yet the Supreme Court upheld the “separate but equal” condition for half a century, until it found that the segregated facilities provided by the states were almost never equal.

The Public Trust Doctrine has not yet been recognized for its full potential to regulate and protect our natural resources.

If, for instance, the IMF and WTO enforced this Doctrine with the same enthusiasm that they enforce trade and private property laws, we could stop the global environmental destruction in no time. The reason being is that the IMF and WTO could coerce the various debtor nations into respecting international standards for pollution and resource exploitation.

Of course getting the WTO and IMF on board would require a complete tear down and reconstruction of their mandates and composition.

Taking the Public Trust Doctrine to its logical conclusion would also mean the rejection of patenting the DNA of plants, animals, and people.

Hardin’s Tragedy is actually the laissez-faire marketplace in an open access regime, much like what we have today, rather than the community protected and regulated Commons that we would see under the Doctrine.

What is required for the ecology of this planet and our species to survive, is to respect our Commons – the oceans, the air, and the land we all share. It’s an entirely different attitude from the rape and pillage of the shared resources of the Earth that has marked human history since the time of Henry VIII.

Basically what is required is that humans must evolve, for our own sake. We must grow up, and this is the place where it starts. The first baby-step of man’s transition from short-sighted greed and selfishness to a responsible, mature species must begin with a rejection of the 16th Century aristocratic doctrine of Enclosure to the Public Trust Doctrine of enlightened civilization.