21 July 2009

Endangered Species for Sale?

NW asks
With so many endangered species losing their natural habitats, would the usual prescription of allocating private property rights be suitable for dealing with this crisis?

On the one hand, centrally planned economies that had no or little private property are among the most environmentally damaged countries. On the other hand, I can't imagine private property rights being a good idea for saving natural habitats that are shrinking, especially if they're allocated in some form of a market to a developer, oil/gas company, or mining company that wants to destroy the ecosystem for the land's natural resources. Plus, once a natural habitat is damaged, I can't see the usual "market forces" working to punish these companies by reducing their profits for what they've done.

Thus, based on what we know from economics, how should we manage the natural habitats of endangered species?
NW makes a few standard observations here (government has screwed up; can't trust companies) but fails to consider the economics of conservation.

Why conserve? Because the "item" is more valuable alive (vs dead) or intact (vs desecrated).

Now notice how we take care of our houses, our cars, ourselves, our pets, etc.

Why? Because those items our OUR property, and we benefit from their wise use.

Endangered species, OTOH, are often in trouble because they have NO owners. As the Soviets found, "what belongs to all of us, belongs to none of us, so let's exploit it!"

That's why blue whales are endangered -- because nobody own them.

That's why the Brazilian rainforest is disappearing -- because government policy makes it easier to slash and burn and move on than to conserve the greenery.

The way to protect the rainforest, the whales, etc. is with stronger property rights, and individuals and companies (e.g., the Nature Conservancy) are set up to provide that protection. (To learn more about this kind of free market environmentalism, visit the Property and Environment Research Center.)

What about oil companies buying up land and then destroying the environment while they exploit the resource? That will happen if a clean environment has no value and/or there's no way of enforcing environmental quality. Thus, someone has to be willing to pay for the clean environment, and that payment needs to be linked to results. If the Nigerian government gave property rights for "clean environment" to the people in the Niger Delta and was NOT corrupt, then Shell Oil would have run cleaner operations and avoided the current conflict in the region.

Bottom Line: The difference between abundant chickens and endangered tigers is property rights. Chickens are owned by individuals who protect them from others; tigers are owned by "us" and protected by nobody. If you want to save the tigers, sell them.

6 comments:

  1. Interesting topic.
    The European Union is promoting a study on The Economics of Ecosystems and Biodiversity (google TEEB). It is built in the same way as the Stern Report on Climate Change, and follows the same lines and criteria on an intentional basis. The preliminary report is available for download.

    It identifies four different sources of biodiversity and ecosystems loss: lack of defined/enforced property rights; policy failure (perverse incentives); market failures (public goods/free riding); and information failure.

    Properly defined and enforced property rights would surely go a long way into helping solve the problem, but they are only one of the institutions that need developing. Markets for the payment of ecosystem services need to be created where lacking and developing elsewhere, perverse incentives should be removed and knowledge and information sharing on the value (economic and otherwise) promoted.

    In short, it's a long story.

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  2. With all due respect, it is ludicrous to boil it down to the difference of abundant chickens and scarce tigers being due to ownership. This may be true, but chickens allow themselves to be owned (domesticated) and provide loads of fairly cheap protein in exchange. Tigers are not willing to enter into any such bargain with us. So, yah, private property is fine, if you have already made the pristine wilderness or the tiger valued enough to enough people. This doesn't seem to be such a straight forward thing to me. I also don't see that the owners of land or resources these days necessarily do anything to protect interests past a generation anyway. Some farmers own their own lands and will pass it down to children and still spray it lifeless. Owners may protect their resources long enough to make a buck, but it does not yet seem obvious to me that this protection has proven adequate in this world.

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  3. @ Michelle,

    I understand the frustration of reading through the idea that something you believe has an intrinsic value, and should (must!) be protected at all costs being discussed in a context of cost and benefit.
    But the fact is biodiversity and ecosystem conservation is not a chicken-or-tiger, black-and-white issue. Biodiversity mostly gets destroyed because a tree is worth more felled and the terrain used for agriculture than standing; and it's not evil-inclined people that perform such actions, it is mostly the poorest people, the ones whose survival means scraping for a living that do it.
    Private property rights mean we, the ones that are better off and care, can engage in payment for ecosystem services, that we can pay for the maintenance of biodiversity in other countries.

    Many people object, of course, but the moral and ethical arguments have not, so far, succeeded in stemming the loss of biodiversity. Maybe it's time to try other ways.

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  4. For far too long our society has failed to capture and account for all the real costs of economic activities like mining, drilling and housing development.

    We subsidize new sprawl housing subdivisions with taxpayer funded freeways, and ignore the long term costs of replacing and restoring the envirommental damage caused by these activities.

    If we had reliable economic models that truly captured all these direct costs, subsidies and externality costs, we would be directing our efforts into more sane avenues.

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  5. I guess what I need you economists to do is give me a concrete example of how you would have a tiger or ecosystem be owned privately in a way that would protect it. By waving your hands and saying that all externalities etc need to be taken into account, we are back in the world of making people believe things are good and worth saving. Otherwise I just see the owners of the tigers or ecosystems eventually selling out to the oil companies or developers to make a buck. My understanding of the Nature Conservatory is that by purchasing important land, they create a demand for development near that land that may negate the good (all those rich, kind-hearted people that want to live near the pristine ecosystems). Of course, this is an argument against national parks too. You talk about wanting to try a new system, but how is this new? Plenty of things are owned privately by people and most of those things seem to have been damaged or exploited or unmaintained.
    So lay it out for me. How would you have the tiger owned and follow that through explicitly to the happy conclusion. (that's not a stubborn challenge, I'm really trying to understand.)
    Again, with all due respects, enviroecon - I'm not as naive in this as you seem to think. I have no problem with the cost/benefit analysis, and I know the exploiters or the people who sell private property to developers are not evil, just desperate. I actually don't believe in evil people, just ill-thought-out action. My only point is that, as you yourself point out, this seems to fail us in the long run because we don't have the long term and external benefits figured in correctly, not to mention the subsidies. Privatizing without doing this seems devastating to our future, or at least our children's futures. SO the magic trick is getting the benefits figured out correctly, not the privatizing itself. Any democratic system that really gets that down, seems to me has solved the problem anyway by finally taking the longer term, sustainable view.
    Personally, I don't believe that the protection of any plot of land or species does us diddly anyway. I think that consumers as a whole have to get less numerous and less hungry for goods, or we are screwed no matter what we try to conserve - even as private owners. I would rather dissolve all protections on lands and items and slash the human population to less than a billion people who each only consume what they truly need than otherwise.
    But back to the private tiger - lay it out for me.

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  6. @ Michelle,

    Sorry for not answering earlier, I forgot about this topic.

    Here's a couple of links to answer your question: the first is the EU's TEEB (The Economics of Ecosystems and Biodiversity), the first report. I suggest, especially, chapter 3, "A Valuation Framework".

    http://ec.europa.eu/environment/nature/biodiversity/economics/pdf/teeb_report.pdf

    The second is from my own blog, with a slightly tongue-in-cheek title, but a valid topic:

    http://enviroecon.wordpress.com/2009/07/21/getting-killed-might-be-good-for-seals/

    I don't really mean getting clubbed to death is good for seals; haven't heard anyone say such practice is used with medical purposes. But I will give you this example: yesterday I was discussing Kindle with my sister. She says it'll be good for trees; I say trees will lose value, and so will be more easily felled and no replanted to make way for development of alternative land uses.

    If the owner of the land can make a profit in managing the forest in a sustainable way, he will; that's exactly how, in places with well defined property right (i.e., US and EU) forested areas have been growing in later decades.

    A friend of mine says that what matters gets measured; I add that what matters gets valued. To have value, you need an owner - private, public, state, whatever. If not, the resource gets overused and destroyed. In case of doubt, try Gareth Hardin's "Tragedy of the Commons":

    http://www.garretthardinsociety.org/articles/art_tragedy_of_the_commons.html

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