27 Apr 2016

Do we need Austrian nobility to protect land?

Flip writes*

Even though sometimes forgotten, nature provides many great economic services that we all benefit from on a daily basis. In The Hague the dunes’ ability to purify water has provided clean drinking water for its inhabitants for many generations. Through trial and error mankind has discovered that letting self-interested people have free access to a depletable resource leads to over-extraction of given resource if there is not enough of the common good. In the dune example, people might extract more purified water than the dunes provide. This is a big problem. Some might even call it a tragedy.

As a solution to this problem, Ed Dolan suggests that an extremely radical solution would be to put the commons all up “for auction, and let the highest bidders regulate and economize on their use."1 Dolan calls this solution extremely radical, but how radical is it really?

The setting of the answer to this question is Austria -– a medium sized country in central Europe. Before Austria became Austria, they formed the ‘Austria’ part in Austria-Hungary, a large central European empire ruled by the almost divine (linked to the Vatican) and powerful Habsburg family. This family ruled the empire from its capital Vienna (but sometimes switched to Budapest to make that part of the empire feel respected also). In the provinces of the empire, noble families ruled from their castles and citadels and owned most of the land surrounding it. Just like a modern-day state, they let people use the land to make a living (they leased it).

The private ownership of the land by these families meant that they were governed sustainably, with an eye on the future. Strict controls made sure that people did not overuse the land they had been given or the common resources. Noble families ruled the lands with long-term in mind. This was so because:
  • The chances of nature being bought or stolen from you were very small. Large-scale theft of for example wood required machinery that had not been invented yet, whilst the market for large patches of land was quite small (you needed quite a bit of money and nerves to approach a landlord to buy his land).
  • There was a lot of pride involved in handing over as much of your lands intact as possible to your offspring (only sons though, daughters couldn’t possibly be asked to take on such heavy responsibilities like managing lands).
All of the above made sure that Austria’s many natural resources were not exhausted, but were kept alive for current generations to destroy use.

Bottom Line No. The bottom line is not that we should reinstall Austrian nobility. The core message of this story is that for much of the world (everything but the ‘new world’ really) the idea of privatized commons isn’t as radical as libertarian economists think.

(1) Page 64 of TANSTAAFL. The full title -- There Ain’t No Such Thing As A Free Lunch: A Libertarian Perspective on Environmental Economics -- is rather long, but the 2011 book suggests good market solutions to environmental problems (DZ's review)

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.