Bioeconomics 1.5768943212169.......
If an animal population is owned by a private entrepreneur who harvests the
population to maximise discounted profits and, if price per animal is
constant and harvest costs can be ignored, then optimal management involves
sustained use of the resource provided its proportional natural growth rate
exceeds the discount rate of the owner.
If the animal population is 'common property' (meaning, owned by all -- a
'free' good) there is no such assurance. Usage even at a fixed price can
involve extinction since selfish individuals who are persuaded to practise
conservation convey benefits mainly to others.
If the value of a species increases with its rarity then conclusions tend
to be reinforced and more polar. As the species gets rarer under private
ownership there is reduced pressure to wipe it out. Under common property
the species may face a bleak future -- conservation by a selfish individual
is very expensive (big gains will accrue to others) and extinction is more
likely.
This theory is in C. Clark. Mathematical Bioeconomics. Wiley 1976. The guts
of it is that wildlife populations should generally benefit from being
privatised since owners have the self-interest to preserve the species.
(Colin Clark was hammered by rabid conservationists such as the
Ehrlich/Ehrlich duo but the book is essential reading for those who seek
understanding. C.C., incidentally, I am told, is a keen birdwatcher).
While the theory is simple why does it almost never work? Why does
exploitation for profit often lead to bad outcomes? The answer is that the
theory is almost never applicable. Almost never and perhaps never!
As a practical issue one can never impose property rights on waders who
take a hop-step-jump from Siberia to Australia each year? Imposing property
rights on migratory species is impossibly complex and protection must occur
through social agreement and law. Ditto for whales and fish populations.
Ditto for migratory local species or for vagrant species that take
different winter vacations each year.
Most importantly, assuming you can clearly define the idea of biodiversity
(roughly, I suppose, genetic differences between animals at species and/or
subspecies levels) this is highly non-marketable. Markets invariably fail
to protect diversity because 'transactions costs' limit the ability to
price the 'little bits'. Government laws and regulations are essential.
For example attaching property rights to beef cattle helps conserve beef
cattle but not native animals/plants who compete with cattle for whom their
are no property rights. Imposing property rights only works if this
includes all relevant species and this is often impossible for 'transaction
cost' reasons - it is too expensive to price.
As a final remark, privatisation of an animal species (in fact of anything)
that was originally conserved successfully as common property makes society
worse-off. There are "efficiency gains" in a productive sense (profits get
earned) but losses which accrue to consumers who previously enjoyed the
asset for free exceed these gains.
This was one of the earliest results on this topic and was proven by P.
Samuelson, "Is the Rent Collector Worthy of his Full Hire" Eastern Economic
Journal, 1974, pages 7-10.
What it tells us is that if we can protect species successfully without
pricing them this is better than pricing them even if the latter works
better at conserving them.
Whew.....
Harry Clarke.
Harry Clarke
School of Business
Faculty of Law and Management
Room 433, Donald Whitehead Building
La Trobe University, Bundoora, 3083. Australia.
Phone: 03-9479-1732
Fax: 03-9479-1654
E-mail
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