29 Mar 2008

Crushing the Galapagos

The Economist has an article on a paper by Ed Taylor, a professor in my Department. Taylor et al. describe the general equilibrium effects of tourism on the Galapagos economy, finding that economic growth has not been all of a good thing. The reason, to paraphrase Notorious BIG, is that more money has led to more problems: Tourists have increased incomes on the islands, which has attracted mainland Ecuadorians. Without controls on this migration, stress on the island ecology has increased -- leading to the conclusion that ecotourism is harming the environment.

This phenomenon is not unusual, and there are many examples of places too distant to attract tourists that remain in the natural state of beauty. (There are also examples of places where tourism could replace slash and burn harvesting of natural resources -- dynamiting reefs, clear cutting rainforest, shooting animals, etc -- so tourism per se is not a bad thing.)

My favorite example of this phenomenon is the DMZ between South and North Korea. Because it is filled with landmines and blocaded from two side by hostile armies, the flora and fauna thrive without experiencing the negative impact of human exploitation.

I explore another example in a paper on deforestation and tourism in Nepal. Because tourist-trekkers like wood fires (and lodges, apple pie, etc.) the locals cut more trees. The result is the same as in the Galapagos: More tourism, less nature.

Now most of you will know that the solution to this phenomenon is more and stronger property rights. If the government of Ecuador had a residency lottery, if fishermen had rights to certain areas, if water and land titles were secure, then most of the depredation would end. The owners of those rights would use their monopoly power to get as much value as possible, and that means bigger fish, cleaner water, etc. (The solution is the same in Nepal; because most forest is owned by "the people," it is over-exploited.)

Bottom Line: Finite resources need to be managed with appropriate institutions. Without owners who have clear property rights, they will be over-exploited.

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