Property Rights Solutions to Environmental Problems

In 1968 economist Garrett Hardin analyzed situations in which a “commons,” such as a fishery, or our water supply, or the global atmosphere, was used by many different people.  His conclusion was that unless a system was devised to prevent over-use, a “tragedy of the commons” would take place in which they fishery would be depleted, a water supply would be overused or over polluted, or in which the global atmospheric commons would be over polluted.  Hardin himself realized that reliance on personal conscience (or “value system” or “mind-set”) would not be adequate to secure such environmental commons for degradation.

It is increasingly being recognized that indigenous peoples often relied on property rights to ensure the sustainability of the natural resources on which they relied.   This description of how the Alaskan Tlingits managed their salmon fisheries before the arrival of the white man is one such example:

House or family groups controlled access to locations where the sockeye could be caught, while the clan determined the fishing locations.  Each group had exclusive rights to its fishing locations. When an outsider infringed on a location, the trespasser was required to compensate the owners or potentially face violent consequences.

The eldest clan male, the yitsati, generally possessed superior knowledge about salmon runs, escapement, and fishing technology and became the "custodian or trustee of the hunting and fishing territories". He also assisted in parceling out goods that had been produced collectively to members of the clan. Rights initially could not be transferred to those outside the group.  This allowed the exclusion of those who might not abide by customary norms.
(from Donald Leal, "Community Run Fisheries")

The important fact with respect to sustainability about this anecdote is that the Tlingits did not rely on a “value-system” or “mind-set” alone, but rather on specific institutions:  a set of property rights and corresponding norms about transfer of those property rights.

In the tribal context in which we evolved, it made sense to influence those around us by means of persuasion and criticism.  Just as we have an evolutionarily propensity to eat fats and sugars at every opportunity, so too we have an evolutionary propensity to criticize those who are engaging in harms to the community and to the environment.  Indeed, in a tribe of 150 who lived their entire lives together, such criticism was an effective force for constraining behavior.  But praise and blame, our natural tools for socializing each other, are no longer adequate tools as our communities become larger than the evolutionary tribe.

The Tlingit population of southeastern Alaska was about 15,000 at the time of contact with the white man.  The “value system” or “mind-set” of their original culture had most likely been an inadequate means of managing the salmon fisheries for many thousands of years.  There is fascinating research showing that under many circumstances, people spontaneously develop norms for resource allocation; Robert Sugden gave this famous example in his ground-breaking article on norms, “Spontaneous Order,”

In a fishing village on the Yorkshire coast there used to be an unwritten rule about the gathering of driftwood after a storm. Whoever was first onto a stretch of the shore after high tide was allowed to take whatever he wished, without interference from later arrivals, and to gather it into piles above the high-tide line. Provided he placed two stones on the top of each pile, the wood was regarded as his property, for him to carry away when he chose. If, however, a pile had not been removed after two more high tides, this ownership right lapsed (...)

No doubt, many generations in the past, the Tlingit began to involve norms for fishing salmon fishing rights much as the Yorkshire villagers had evolved norms for driftwood gathering.

Formal property rights, now enforced by law throughout most of the world, are an essential pre-requisite to the large scale, complex societies in which we now live.  These property rights originated in tribal customs, but have since been integrated into our current system of legal documents, courts, and policing.

There is a sense in which all of our environmental challenges are the result of the fact that property rights solutions, similar to what the Tlingit independently discovered thousands of years ago, have not been created rapidly enough to keep up with the pace of economic growth and population growth.  This does not mean that such solutions are not possible; it simply means that we need to focus our energies on creating such solutions.

In order to get a sense of how such solutions might work in the modern world, and what new institutions need to be created, let’s look at some recent institutional innovations in contemporary fisheries management.  In order to see the power of well-designed institutions, it is worth reviewing the history of Alaskan halibut fisheries, which show the dramatic contrast created by good institutions:

The Alaskan halibut fishing season once lasted for almost ten months.  When regulators decided that overfishing was a problem, they began reducing the length of the season.  Before long, however, the season was down to 48 hours, with almost no change in the amount of fish caught.  The motivation to catch as many fish as possible, as quickly as possible, remained, and so ingenuity and technology overcame restrictions.
(from De Alessi, "One Fish, Two Fish, I Fish, You Fish")

I happened to live in Homer, Alaska, when the halibut season was 48 hours long.  Thousands of fishermen, owning hundreds of millions of dollars worth of big, fast, fishing boats with sophisticated fishing detection equipment would prepare for weeks for the race to the halibut grounds.  Although most of them had other jobs or participated in other fisheries at other times of the year, the halibut fishery represented a significant portion of their annual income.  Their families depended on them to get out there fast and catch as much as they could.

The result was grim:

To take advantage of this narrow window, crews went out for 48 consecutive hours, working through the night and - at times - in dangerous weather conditions. Boats and lives were lost. With no time to waste, crews wouldn't bother struggling with tangled long-lines. They would simply cut them loose and cast new ones, even though the old lines continued to lure and kill fish (a destructive process known as "ghost fishing"). There was no time to sort each haul either, so undersized halibut and other species that would normally be released were torn apart and thrown overboard dead or dying. "Bycatch," as these innocent victims are called, is always an environmental cost of fishing, but this cost escalated significantly during the 48-hour season.
(from www.etei.org)

Millions of tons of fish were simply left in the water to rot, the sort of sickeningly wasteful behavior reminiscent of the massive buffalo slaughter of the 19th century.  In the eagerness to get their way, fishermen would sabotage each other’s boats, shoot at each other when another boat came near them, and cut each other’s fishing lines, thus wasting more fish in the horrid feeding frenzy.

It is very important to realize that this wasteful and vicious behavior was not caused by “western civilization,” or “capitalism,” or “value systems,” or “mind sets.”  It was caused by poorly designed institutions – a lack of property rights in the halibut fishery.  In 1995, a system of property rights in the halibut fisheries was created based on “Individual Transferable Quotas” (ITQ) whereby a total limit of 37 million pounds of halibut to be caught each season was allocated among existing fisherman based on a complex (and controversial) system of historical catch.   The ITQ could then be traded, though it remained a provisional privilege granted by the government rather than a real property right.

Immediately after the ITQ system was implemented the insanity of the halibut fisheries came to an end.  Again, the fishermen’s behavior did not change because they had a new “value system” or “mind-set.”  It changed because they faced far more sensible incentives.  After the ITQ system was passed, they halibut season once again extended to months and fishermen settled into less wasteful practices.  The beliefs or personalities of the fishermen had not changed.

Critics of the halibut fishery in Alaska after ITQ point that the Alaska fishermen are still not pro-actively investing in the fishery.  But once again, the problem is not values, mind-sets, or beliefs:  it is flawed incentives.  New Zealand hoki (a flaky whitefish that is New Zealand’s most important fishery) fisheries have combined a more flexible ITQ market (closer to a real property right) along with weaker anti-trust laws (fishermen cooperating on ITQ shares would violate U.S. anti-trust law); as a result the hoki fishing community has been more proactive.  Because the hoki fishermen have secure property rights, a futures market in ITQs had developed, and because it is in the fisherman’s long term interest to increase the value of the ITQ, they now have an incentive to preserve the fishery. 

After the system was established, the hoki fishermen collectively decided to catch 50,000 metric tons less fish than the government proposed not because they had become environmentally enlightened, but because such a decision increased the long-term value of their fishery.  Because of these well-designed institutions, there is every reason to believe that the hoki fishery is now sustainable; the fishermen are proactively committed to ensuring that sustainability.

At the most mundane level, people like the Alaskan halibut fishermen do not regard themselves as bad people – they are just ordinary folk out to earn a living.  Again, the problem is not extraordinary greed (among the Tlingit or the halibut fishermen) but merely ordinary people engaged in ordinary behavior. 

The solution is to create well-defined property rights to prevent the tragedy of the commons.