Friday, February 17, 2006

A Successful Operation (a dead patient!)

Most libertarians have, at one time or another, been challenged by the problem of public property, or how the market can best protect and allocate goods ‘owned’ in common such as fish in the sea, roads, airwaves and so on. An old economics parable sums up the problem nicely – let’s briefly review it before taking a strong swing at solving the problem of public property.

The issue is well described by a parable called the problem of the commons (POTC), which goes something like this: a group of sheep-owning farmers own land in a ring around a common area. They each benefit individually from letting their sheep graze on the common land, since that frees up some of their own farmland for other uses. However, if they all let their sheep graze on the commons, they all suffer, since the land will be stripped bare, and so they will end up watching their sheep starve, since their own land has all been turned to other uses. In many circles, this is considered an incontrovertible coup de grace for the absolute right of private property – and the free market in general – insofar as it ‘proves’ that individual self-interest, rationally pursued, can result in economic catastrophe. Due to the POTC, it is argued, the property rights of the individual must be curtailed for the sake of the ‘greater good’. Thus regulation and government ownership must be instituted to control the excesses of individual self interest for the sake of long-term stability, blah blah blah.

There is one significant difficulty with the POTC, however, which is that it fails to prove that government regulation or public ownership is necessary, or that turning the POTC over to the State solves the problem in any way. In fact, it is easy to prove that even if the POTC is a real dilemma, the worst possible way of solving it is to create government regulations or public ownership!

Problem #1: Public Ownership
The most simple rebuttal to the POTC, of course, is to point out that the problem faced by the farmers is not an excess of private property, but a deficiency! If we imagine the farms surrounding the commons to be doughnut-shaped, then clearly the POTC is best solved by simply extending the ownership of the farms to the very center, like pizza slices (yes, these metaphors are making me hungry as well!). If private property is thus extended to include the commons, farmers no longer face the problem of everyone wanting to exploit un-owned resources. Everyone can then use their extra land to feed their sheep, and everyone is content. (Alternatively, a woman can come along, buy up the commons and start charging grazing fees. To ensure the longevity of her resource, she will naturally take care to avoid overgrazing.)

However, let’s accept that under some circumstances the POTC is real, and cannot be overcome through the extension of private property rights. What solutions can then be brought to bear on the problem?

Solutions to social problems always fall into one of two categories: voluntary or coercive. Voluntary solutions to the POTC abound throughout history – the most notable being the kinds of social arrangements made by fishermen. When a number of fishing communities dot a lake, villagers develop complex and effective measures to ensure that the lake is not over-fished. Any display of wealth is frowned upon, since it is clear that wealth can only come from over-fishing. Communal leaders meet to figure out how much each village can catch – and it’s very hard to hide your catch in a small village. Furthermore, the problem of not knowing exactly how much fish is being taken by others – as well as natural annual variations in fish stocks – lead to significant underestimation of allowable catches, which ensures that sustainability is always achieved. Left-leaning economists might be baffled by the POTC, but there is scant recorded historical evidence of illiterates in fishing villages regularly starving to death due to over-fishing (unless their village leaders were left-leaning economists perhaps).

The POTC is yet another manifestation of that old bugbear: the blind insistence that man is a being whose sole motivation is immediate financial considerations. (Economists who believe this and who also have children are most baffling in this regard!) “Ahhh,” says the miserly farmer of this ‘instant gratification’ fairy tale, “I will graze my sheep by night and callously denude the commons, so I can grow a dozen extra turnips!” But what good will his extra turnips do him if no one in the village will talk to him, or when no one will help him build a barn, or when he gets sick and needs people to care for his sheep? No, even miserly farmers are far better obeying the rules and forget about their extra turnips – since they will lose far more than they gain by circumventing social norms. Communities have weapons of ostracism and contempt that far outweigh immediate economic calculations.

(Has this changed in the Internet age? Surely we are far less constrained by social norms than we used to be! Not at all – now, with tools ranging from credit reports, web searches and easy access to prior employers, conformity to basic decency is more important than ever!)

Problem #2: The State as a ‘Common’
However, let’s assume that none of the above rebuttals to the POTC holds firm, and in certain circumstances there is simply no way to extend property rights to (or exercise social control over) resources which cannot be owned – what then? Do we then turn such a thorny and complex problem to the tender mercies of the State to solve?

Well, one of the most interesting aspects of using the State to solve the POTC is that the State itself is subject to the problem of the commons.

Since the State is an entity wherein property is owned in ‘common’, the problem of selfish exploitation leading to general destruction applies as surely to State ‘property’ as it does to the common land ringed by greedy and short-sighted farmers. Just as farmers can destroy the commons while pursuing their individual self-interest, so can politicians, bureaucrats, lobbyists and assorted other State toadies and courtiers destroy the economy as a whole in pursuit of their own selfish economic and political goals.

The POTC argues that, due to ‘common ownership’, long-term prosperity is sacrificed for the sake of short-term advantage. Because no one defends and maintains property that can be utilized by all, that property is pillaged into oblivion. And the State is supposed to solve this problem? How? That is exactly how the State operates!

Let’s look at some examples of how the State pillages the future for the sake of greed in the here-and-now:
  • deficit financing

  • inflationary monetary expansion

  • government bonds, which future generations must pay out

  • spending the money taken in through social security, which future generations must pay for

  • offensive ‘defense’ spending, which future citizens will pay for through increased risk of attacks on America

  • massive educational failures, which have immensely deleterious effects on future productivity and happiness

  • the granting of special powers, rights and benefits to lobbyists such as unions, public sector employees and large corporations, which result in higher prices and deficits (the cost to the US economy for union laws alone is calculated at $50 trillion dollars over the past 50 years)

  • the failure to adequately maintain public infrastructure such as roads, schools, bridges, the water supply and so on, which passes enormous liabilities to the next generation

  • massive spending on the war on drugs, which increases crime in the future

  • the enormous pollution of public lands and other fixed assets, which saves money in the short run while ruining value in the long run

  • …and heaven knows how much more!

From the above examples, it is easy to see that the POTC applies to the State to a far greater degree than any other social agency or individual. If we recall our group of greedy farmers, we can easily see that they have a strong interest in avoiding or solving the POTC, since it is they themselves who will suffer from the despoiling of public lands. However, in the case of the State, those who prey upon and despoil the public purse will never themselves face the direct consequences of their pillaging. Thus their desire to prevent, solve or even alleviate the problem is simply non-existent! Furthermore, even if the farmers do end up destroying the public lands, they can at least get together and voluntarily work to find a better solution to the problem. Once the government takes over a problem, however, control passes completely from the private sphere to the public sphere of law, enforcement, corruption and politics. Once firmly planted in the realm of the State, not only is the problem of public ownership made incalculably worse, but it cannot ever be resolved, since the predation of the public purse is now defended by all the armed might of the State military! Consequences evaporate, competition is eliminated, and a mad free-for-all grab-fest simply escalates until the public purse is drained dry and the State collapses. (This is what happened in the Soviet Union; in the 1980s, as it became clear that communism was unsustainable, Kremlin insiders simply stole from the treasury until the State went bankrupt.)

Thus the idea of turning to the State to solve the POTC is akin to the old medical joke about the operation being a complete success, with the minor exception that the patient died! If the POTC is a significant issue in the private sector, then turning it over to the government makes it staggeringly worse – turning it from a mildly challenging problem of economics into a suicidal expansion of State power and violence. If the problem of the commons is not a significant issue, then surely we do not need the State to solve it at all!

Either way, there is no compelling evidence or arguments to be made for the value, morality or efficacy of turning problems of public ownership over to the armed might of the State. Both logically and ethically, it is the equivalent of treating a mild headache with a guillotine.

1 comment:

Greg Gauthier said...

Stefan,

Great analysis. One point, though. I believe the ultimate frustration I have with 'tragedy of the commons' comes down to the concrete nature of the 'commons' in question, and a definition of 'the good' confered to individuals by that common.

For example, suppose the commons in question is a federally protected coral reef. The "good" of a coral reef is, admittedly, mostly asthetic, but there are arguably environmental benefits to be had, as well.

Suppose the government chose to subdivide the reef, and sell the plots off to private owners (harkening to the 'extension of private property' analogy). Would it be reasonable to expect the health of the reef to continue unchanged? Suppose I purchased one of those subdivisions and decided to carve it up into saleable souvenir slabs, having calculated that by doing so, I could make enough money to retire. What would prevent me from doing so? What justification could be used to prevent this?

I'm not trying to make a case for State ownership of protected lands. I'm simply trying to come to grips with all the implications of private property as an absolute right. Indeed, if we are to make a convincing case to the statist, then we must not shy from approaching implications like these head-on.