| 0:36 | Intro. What is a hummingbird economy? Fighting for resources that are commonly owned. Who is the provider? The tragedy of the commons occurs when there is such overuse that the resource will no longer replenish itself. Garrett Hardin, 1968 Science Magazine article, introduced the phrase. Infield of a baseball field, overgrazing to the point where the field becomes worthless, overfishing to the point where there are no longer enough to breed. Second tragedy: amount of energy and effort devoted to getting access to the resources, life-saving calories used up by hummingbirds. |
| 9:36 | Appears to be solvable with a simple institutional change, but it's not simple. Many schemes have been tried: seasons, setting limited time for harvesting fish, bigger boats, more crew is response. Always an adjustment that takes place, and still have tragedy of the commons. Expressway entrance at peak times; just get up earlier. Use up, waste resources in the process. Add another lane, more people come in, problem recurs. Pricing traffic by time in Singapore. Redistributional effects, some are made worse off even though others made better off with pricing solutions; pricing solutions fought. Distortion of incentives. Some fishing seasons are very short, Alaskan herring, 18 minutes long? What are some of the options--ocean, air, rivers, pastures--what ways have people used to improve on the common-access problem? True tragedies are infrequent (consumption to the point of destruction), though there have been a few situations. In Middle Ages, stints--a property right, each family received a certain number of stints, which allowed them to graze sheep on the common pasture. Who enforced it? Problem--couldn't trade them. A family with many children to feed couldn't trade stints with a family with few children to feed because the enforcement costs were too high. Biblical story, 12 people, one representing each tribe, had to help lifting heavy stone over water hole, helped enforce that no one was sneaking extra water. Switzerland today has some shared pastures with allocated rights. Enforced by social norms. These are some kind of property right arrangements. |
| 20:00 | Most dramatic way to aroid the tragedy is to privatize the commons. Not always feasible. Privately held farms are a way to avoid this tragedy. African ranch, visible from space, hexagon-shaped. Everything outside was common property, owner had incentive to take care of it. From space, green gem in the middle of an arid landscape. Egypt-Israeli border, brown on nomadic side, green on the Israeli side where the land is owned (some as parks). But it's costly to develop these institutions. Who will monitor, meter it? Two technologies: legal technology. Medici family, 15th century, wealth vs. bankruptcy, could only open up a new office when a child reached maturity. "Even my children will rob me." The will became a piece of technology that made enforcement possible. Transponders on dash of automobile allows billing for traveling certain hours of the day, lowers the cost. |
| 25:56 | What about where it's hard to assign property rights, like the ocean? air? Collective action and regulation--what are some options? Collective choice problem. Stations of property rights evolution. 1. start with nothing, commons and common access. 2. common property within a group or tribe, maybe by amounts of time or rules of sharing within a tribe. 3. Invention of government, public property, managed by the public, but new problem--the politicians themselves graze on the commons. Fleecing. "You can fleece a sheep many times but you can only skin him once." If you overuse the taxpayer he will become extinct--go underground. Two forks: Regulatory property rights: allowed to emit pollutants by permit, rationing, can't be sold. Private property rights: government steps aside or facilitates an auction, as with land in the U.S., transferring the asset to private citizens and then the individuals manage the resources. Rule of law protects neighbors from each other. Evolving, but it's slow. |
| 31:45 | Rivers, water pollution, Germany around 1890, Ruhr near Essen, too much discharge from waste from steel making entered the river; too little flow resulted in typhoid epidemic; city fathers got together and incorporated the river. What does it mean to own the river? Similar to owning your house in a situation where no one previously had ever owned the house he lived in. How do we declare our ownership? Invent a courthouse, write down the properties. Genossenschaften. Ruhr association. Spillover had to get dealt with. Had to make segment large enough. Developed something like a country club. You pay to use the water and if you put something in the water. The more you use up the higher will be your price. Everyone becomes a share-holder. It worked; they avoided the tragedy of the commons; King of Prussia decided to use this for all rivers in the region at the time. Competition ensued, which led to innovation in maintaining water quality. Some rivers had boulders added, which creates turbulence and oxygen. Similar thing occurred in U.S. along the Ohio river in 1930s-1940s, also iron- and steel-related, Pittsburgh polluted, Cincinnati received the waste. Outbreak of gastroenteritis, which go upstream, which finally caused Pittsburgh to have to bear enough of the cost to get involved with a solution. Multi-state compact (requires Congressional approval by the Constitution) incorporated a major stretch of the Ohio River. Ohio River Sanitation Commission, legislation says treatment of waste will be based on benefits and costs and will not be uniform. By contrast, the EPA required one size fits all. Important distinction. Goal is in terms of specified 30% reduction in pollution. 1972 Federal Water Pollution Control Act goes further and specifies methods and technologies to be used. Could alternatively look only at results. Could have zones. Performance standard. Robot monitors in 1949 in Cincinnati, outcome-based regulatory approach. "Level playing field" sounds good but leads to cartelization, restricts entry. |
| 49:05 | Role of common law. Before 1970, Clean Air Act, popular perception is that it was dog-eat-dog, air and water would never have gotten clean without the Federal government stepping in. But there was a decentralized mechanism that restrained people. More nuanced. U.S. enjoys a pretty clean environment, and it has become more clean. Prior to 1970, environmental managers included state law and city ordinances--rules that dealt with air pollution, some going way, way back. People want their property to become more valuable, not less valuable, and don't form a national government to do that, though if there is a national government they will turn to it. Crazy-quilt of rules, no uniformity, but when the problem is severe people will take action, driven by income--when income low people will live with the problem longer. Common law is made by judges on a case by case basis and apply to the parties to the controversy. Rules may become precedent and may be read and called on by other judges in settling other cases. Common law comes out of the community. In 1611 in England there were cases that are read by judges today. No one has the right to impose costs on his neighbor against his neighbor's will. Results are contracts, market process. If you want to build a paper mill and operate on a river and want to discharge your waste, which will deteriorate the water that passes the land belonging to others. You could buy the land; or you could pay something annually to the owners of the land to accept the deterioration in water quality. Paper mills in Wisconsin did that. Non-economists have perspective that you are still polluting. But 0 pollution means living in caves, no fire because that pollutes. The issue is weighing the costs and benefits. Economic pollution and biological pollution. Common law in the U.S. is at the level of states, so there are 50 versions. Statutes take precedence over common law. In New York, case of a farmer with one cow that got sick when crossing land polluted by a paper mill. Farmer brought suit against the paper mill and won: business had to choose between shutting down or cleaning up. Boudreaux podcast on law and legislation. |
| 1:03:49 | Evidence. History interesting, Boudreaux podcast on law and legislation. Could sue someone who killed your cow, but not everyone has access to the legal system or the time, so this more severe form is better. Let's not try to be flexible, let's just get the air and the water clean. Look at the evidence. The air and water have gotten cleaner, so the Federal law did that. But did the common law system work? Neither system has worked perfectly, but people have attempted to measure it before and after 1970. Federal Statute did away with common law rights with respect to inter-state disputes. Chicago can no longer deal directly with Milwaukee in court to determine compensation if two states are involved. Now the common law cannot be used, have to go to Federal government. Why did we remove common law rights? Even granting that EPA does wonderful stuff, why take away the common law rights? Ideal is to try to pick the best features of solutions. Could be environmental courts with specialized judges. Maybe public defenders to address the costs for individuals. Giving people at the ground level access to remedies and approaches. Peculiarity of organic law: beasts of the field are "the property of the nation." Sharp change from England and English part of Canada--people who owned land owned the fish and animals that passed their land, so suits can be brought if those animals are harmed by pollution. Fishing clubs have improved water quality in England because of a property rights distinction. We can't do this in the United States because we declared these animals to be a commons. |
| 1:13:25 | Human beings do things about problems unless there is a barrier. Maybe common law solution wasn't making fast-enough progress, so we turned to the Federal government. The EPA was created because we just had to get the environment cleaner. Is that accurate? Makes a statement about what happened. EPA is powerful and effective, but we can instruct it how to operate. Maybe it would do better to use outcomes instead of inputs, take a river-basin approach, require outcome at least as good, include contracts and common law. We are losing ground. Harbors on the ocean. Time to go back and look at the fine print, evolve. |
| 1:18:05 | Postscript on Ayres podcast. It's easy to convince oneself that the results that confirm your priors are the right ones. Charles Peirce, William James, Descartes, Cartesian thought, worship of rationality can lead to deluding yourself. Richard Smyth: Your grandmother's right. She might say that's the way it's always been done. You feel superior because you only do things that are rational, scorn people who can't justify their arguments with reason. But norms of behavior that survive do so because they are effective. Hayek, evolutionary nature of norms, don't always have to understand why they are the right thing, they survive the test of time. Pragmatists argue that examining the planks of your ship at sea and throwing them out if they look unseaworthy. Benjamin Franklin, "When fortresses and virgins get to talking, the end is in sight." Once you start negotiating it's easy to talk yourself into giving in. Shouldn't pretend to be doing science if it only has the veneer of science. Just say you don't know. (Not a critique of Ayres or Lott.) Facts can be decisive, but in economics that seems to be the rarity. Sophisticated statistical work: examples of it having changed the world? |
READER COMMENTS
Schepp
Oct 29 2007 at 8:16am
Here is an example that shows what happens when you don’t price all emissions. The reference below shows that transit only producing 3/4 of the emissions as compared to car drivers per passenger mile. Note also if you have 2 people in your car according the carbon emission values in the referenced paper you and your passenger would be producing less carbon emissions than your transit using conterparts.
http://www.apta.com/research/info/online/documents/climate_change.pdf
Chris
Oct 29 2007 at 2:33pm
Is there any reference to this “minutes long” Alaskan Herring fishing season? It sounds interesting, but I can’t find anything of the sort.
Tim M
Oct 29 2007 at 3:54pm
Here is a link to a NYT article on the herring season. It talks about a 4 hour, 10 minute season.
Brief Alaska Fishing Period Brings Big Profits
SPECIAL TO THE NEW YORK TIMES
Published: April 5, 1987
LEAD: It was not exactly a crap shoot, only something like one, but everyone hoped there would be no losers. Fifty-two fishing boats and their crews were poised to go after 3,600 tons of herring that would take about four hours to net and bring the fishermen perhaps $4 million.
Russ Roberts
Oct 29 2007 at 4:24pm
In “The Marine Environment: Fencing the Last Frontier” by Martin Smith and James Wilen in the Review of Agricultural Economics, there’s a quote that in the 1970s, roe herring seasons were 20 minutes long. But I don’t have a public link to the paper. I’ll see what else I can find out.
Charlie
Oct 29 2007 at 6:54pm
“Russ Roberts: And what was [Monetary History of the United States. Published in 1963] impact in affecting the way the profession, at least in the short run, looked at the role of money?
Milton Friedman: I find that a very hard question to answer. Obviously, many things were going on in the world. Bretton Woods was on. The 1960s were a period of pretty good prosperity. On the whole, during the ’50s and the ’60s, it looked as if the Keynesian interpretation was right. After all, during that period, we had relatively prosperous countries, relatively stable prices, and relatively low interest rates.
It was a golden era, as it were, and everybody was said to be operating on Keynesian lines. What really changed the public perception and also the professional perception was the experience of the 1970s. During the 1970s, you had a combination that under Keynesian analysis could not exist. You had high inflation and high unemployment at the same time—named stagflation—and that combination was really ruled out by the simple kind of Keynesian analysis that was in vogue. But it was that experience which more than anything else led to a basic change in public and intellectual attitudes toward money.”
To me, Milton is saying that his empirical evidence didn’t convince much of anybody. He had a supported theory that was bourne out by evidence out of sample. His theory passed the test of prediction. It seems holding this up as a Landmark study that convinced everyone is a straw man.
I think the reality is that empiricism just works that way. Let’s say a particular empiricist has a particular theory, by which he operates, presumably it is backed up by strong priors that are somewhat empirically determined. Does it really make sense very often to throw out the theory based on one study? It seems the more rational response would be to downgrade your confidence in your theory, and adjust it overtime as new data and studies came out. Over time evidence piles up on one side or the other. Friedman changed the minds of some of his contemporaries, but I think more important is that he changed the minds of the next generation of economists that had less of a stake in current theories. I don’t think whether Ayers can convince Lott is a good metric for the utility of empirical work. A better metric is the direction it moves the field over time.
Russ Roberts
Oct 29 2007 at 9:14pm
More herring excitement…
The 1998 season in Prince William Sound was 30 minutes.
Russ Roberts
Oct 29 2007 at 9:25pm
Charlie,
I know that’s what Milton said, but it’s hard to know whether he was just being modest. Even if he was being totally honest, I think that his work still played a decisive role. While his work may not have been sufficient on its own to change professional perception, I doubt that perception would have changed had his theoretical and empirical work not been available for people to combine with their experience. It would make an interesting study to look at how his work was treated in the journals before and after the stagflation experience.
In general, you’re right–people don’t change their mind based on a single study but rather on the accumulation of evidence, observations from experience and intuition. All play a role.
I’ve just ordered a collection of Schumpeter’s essays. One of them is his 1948 (or ’49) AEA address where, according to McCraw’s account, he berates the profession for accepting Keynes’s General Theory because it gave them a hammer to make the case for bigger government. Should make for interesting reading.
Unit
Oct 29 2007 at 10:44pm
I laughed at the analogy between taxes and crops: I develop this theme over at my place.
Eliza
Oct 30 2007 at 3:46am
Hey Russ
I’ve been listening to your podcasts during work for the past 3 months. I got a D while I was studying Economics but have always been interested by the subject. Am very grateful for the effort you take to do these interviews!
Just a note though on this podcast. Yandle mentioned Singapore’s road pricing system. I’ve been living here my whole life and am sure that there’s no $40 increase in cab fare if driving during peak periods, anywhere in Singapore. It’s more likely to increase by $1 to $4.
Yup. That’s it. Once again, thanks Russ for the hard work. I enjoy your podcast immensely. 🙂
Eliza
Oct 30 2007 at 11:53am
Here’s the link to prove my point.
http://www.onemotoring.com.sg/publish/onemotoring/en/on_the_roads/erp_rates0.html
By the way, it’s not illegal to chew gum in Singapore (as commonly thought worldwide). It’s just illegal to sell it. 🙂
Russ Wood
Oct 30 2007 at 7:02pm
The greatest example of the triumph of property rights over the commons involves the exploration of oil. Relative to many other places, the U.S. has only modest oil reserves. However, the vast majority of exploration sites are located in the U.S. This is because private citizens own the subterranean rights on their property. Mexico likely has many times more oil than the U.S. but the citizens lack subterranean property rights, so there is no incentive to explore when the common (government) will be the benefactor.
It was no accident that oil was discovered in Pennsylvania and not Saudi Arabia.
Floccina
Oct 31 2007 at 8:46am
Great Pod cast
When talking about fisheries we used to use the phrase “maximum sustainable yield”.
I assume that in common law the rights holder would have to show damages before he could receive compensation is this correct?
Lots of other questions perhaps you could revisit this subject.
Floccina
Oct 31 2007 at 8:47am
PS One of the other questions would be what about hold outs?
Jeff Henderson
Nov 1 2007 at 12:47am
Floccina,
Yes, like any other crime, in order to receive compensation the plaintiff would have to prove that the damages were caused by the defendant.
Murray Rothbard has an EXCELLENT chapter on this in “For a New Liberty”. It’s available online here and here in audio format.
Heck, you need to read that whole book.
Bruce Boston
Nov 4 2007 at 2:00am
Hi Russ!
Love this podcast, by far the best economic podcast on the net!
Just wanted to comment on the thought of “Your Grandmother was right”. I like the simplicity, and I like the thought that things that have past the test of time, are true as a result.
That said, being a supercruncher,and doing so for a living, I’m amazed everyday how many items of conventional wisdom don’t pass the test of simple math.
There are very few if any fields that pass the John Henry math test of human wisdom vs the machine wisdom. And, by machine wisdom, I’m talking about something as simple as a graph or simple table that is generated by aggregating data from a few simple sources.
For examples of where even experts in conventional wisdom fail, books from ‘the wisdom of crowds’ to ‘the world is flat’ to ‘freakonomics’ to now ‘supercrunchers’ all have dozens of examples where ‘experts’ are taking the John Henry math test and failing. Simple internet sites like Zillow, which does nothing more than aggregate public data and run a few calculations, to google, which does little more than count the number of links to a website and rank them, as well as thousands of other examples, are thousands of times more accurate at making predictions than my grandmother, and the final scores on the test aren’t even close.
However, I have a bigger concern. Mainly, that as someone that enjoys economics, and as someone that regularly crunches numbers, when conventional wisdom doesn’t hold up, too often I see it get blamed on ‘market failures’ and used as reason to ‘right the wrongs of the market’. Free markets provide the right answer to most problems more often than any other method, but without crunching the numbers, when this answer doesn’t live up to the expectations set by conventional wisdom, people often cry ‘market failure’.
Just to add my own mathematically derived prediction, I think the ‘grandmother’ of all falsely accused market failures is going to be seen as ‘the rising costs of raising a family’. My grandmother’s economics predicted that increases in productivity would both increase the standard of living for the family, as well as decrease that cost.
I think the supercruncher answer is that the Earth has a theoretical limit as to how many people it can support. Thus, the closer that we get to that point of saturation, the stronger market forces will be to encourage the population growth rate to go to zero. IE, despite huge increases in productivity, we will continue to see even larger increases in the costs to raise a family, until the population growth rate goes to zero. Not something that I think my grandmother would predict.
The difference between believing in conventional wisdom and believing in supercrunched predictions is going to be the difference between believing that these increases in the costs of raising a traditional family are due to market successes or market failures.
-bruce
Neil West
Nov 11 2007 at 9:05pm
Russ,
Great podcast. I think that peoples misinterpretation about your postscript just reinforces your point. People who misinterpreted your postscript take subsequent clarifications as support for their misinterpretation. In other words, people generate an opinion without adequate data to support it and then interpret future data as supporting their thesis even if it does not.
Keep up the good work.
paul
Nov 14 2007 at 1:38pm
I thought the issue of pollution was especially interesting. As I understood the argument, with strong property rights, no person can impose costs on another person against that person’s will. I see how that can address many problems of negative externalities.
How should/can we deal with externalities with negative consequences for people in the future? I’m generalizing the pollution argument because this more general argument seems to be at the heart of the environmental movement. Future generations aren’t around now to defend themselves, so their interests arn’t adequately represented by anyone.
I think I recall a Cafe Hayek email arguing that the cost of slowing or stopping global warming could decrease the standard of living significantly for future generations. Those future people would be better off with a higher standard of living, even if it meant living with the consequences of global warming. I understand that argument, and without knowing enough to evaluate its merits, I can see how it could be true. For the sake of discussion though, let’s imagine a world where that’s not the case (it’s not so costly to avoid environmental damage and it is “worth it” to make the sacrifice).
Do we have an obligation to make decisions and impose costs on ourselves based on what we think future generations will want? From a practical perspective, how can we trust anyone, let alone the political process and special interests, to evaluate the magnitudes of current benefit vs. future cost tradeoffs and represent future generations? What standards should we use to decide what’s “worth it”?
Andy
Nov 24 2007 at 10:15pm
Russ, I was surprised that you didn’t go after Yandle for his quote at around minute 56 that “You don’t have the right to have pigs in your backyard if the pigsty is reducing the happiness of your neighbors.” After all — if we let people collect damages from each other on the basis of whether they are making each other unhappy — I’m sure I don’t need to provide examples of how this can go wrong…
neil
Dec 2 2007 at 5:13pm
A good reading before any other on the tragedy of the commons is Leone Levi’s:
On the Economic Condition of the Highlands and Islands of Scotland
http://www.jstor.org/view/09595341/di992559/99p0198a/0
It presents a rather more reasoned view of multiple tragedies. The tragedy of limited beneficial use for the few. The tragedy of poorly managed private resources by commoners (hardin’s real beef). The tragedy of tradeoffs between cashing out future productive value in the face of poor labor conditions–the Tragedy of “rents” vs food.
In Leone’s realworld hundreds of thousands of sheep die when densities are too great. Contrast this with Hardin’s farcical world where competitive markets exist for skinny mangy sheep.
The problem with the tragedy parable is that is it most certainly wrong. I am certain that I will be cited free hard disks supplied and subsidized by you campus on a subsidized network, on free (to you) software, where the technology services people are providing free backups as an analog to the Hardin commons.
Furthermore the herring fishery is highly subsidized.
http://www.dced.state.ak.us/investments/comfish.cfml
I low interest loans with free technical assistance $400,000 is hardly Hardinian.
Perhaps the best example of a real tragedy of the commons is where the trade association all keep adding lobbyists to the the Washington tax revenues pasture until productivity is dissipated. That aside, it was good of Prof. Yandle to clarify that open access commons are pretty rare.
Great podcast.
Chris
Jan 25 2008 at 7:07am
This is my favorite podcast of yours yet (I’ve heard maybe 30). I hope EconTalk will delve much more into economic institutions as you did with Bruce Yandle. I hope you are not seriously supporting the view that the prevalent view is the correct one (which I don’t believe you are, but sounded like you were in the post-audio). Of course certain beliefs survive because of vested interests, irrationality (people do not abduct in experiments), biases, and pervasive lack of information. Just like viruses, harmful memes can propagate. Also, the point of your podcast is to use logic and evidence to persuade people to change their views (right?) – so arguing for conventional wisdom here seems self-defeating.
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