Wednesday, December 05, 2012

A Counter Example to the "Tragedy of the Commons"

To my deep shock, I learned something today by reading the NY Times.   This OP-ED by Andrew Kahrl is actually quite interesting.   NY Times monopolists such as Gail Collins (with her fixation for Mitt Romney's dog) and righteous Nick Kristof could learn from Professor Kahrl how to use scarce resources efficiently.   After reading Professor Kahrl's piece, I'm thinking of moving to Marquette University.  That's a place with serious scholars.

For at least 20 years, I have lectured on the "tragedy of the commons" that takes place both in cities and in the oceans.    Consider a smoker in a city, he gains $10 from smoking a cigar and he bears private costs of $2 from smoking because the cigar costs $1.8 and he recognizes that smoking causes him 20 cents of future health damage.  He will smoke.  If his smoking degrades the common air in the city such that 10000 people each suffer 1 cent of second hand smoke damage then his privately optimal choice causes a net society loss of surplus = 10 - 1.8 - 2 - 10000*.01 = -93.8  .  This is a simple example of the tragedy of the commons --- this smoker unintentionally degraded the commons as he pursued his privately optimal action.  The same logic applies to over-fishing in common oceans.  One "solution" to this property rights issue is to privatize the commons and the owner would charge a price to allow the smoker to smoke and the smoker would only smoke if he is willing to pay this fee.

We can now evaluate Professor Kahrl's claims.  He argues that the privatization of beaches in the Northeast is the reason that Hurricane Sandy caused so much damage.

He writes; "By increasing the value of shoreline property and encouraging rampant development, the trend toward privatizing formerly public space has contributed in no small measure to the damage storms like Hurricane Sandy inflict. Tidal lands that soaked up floodwaters were drained and developed. Jetties, bulkheads and sea walls were erected, hastening erosion. And sand dunes — which block rising waters but also profitable ocean views — were bulldozed."

So Joni Mitchell said that we paved over paradise to put up a parking lot.   As a first cousin of this claim, Kahrl is saying that capitalism and the pursuit of aesthetic beauty nudged us to drop our guard and destroy Mother Nature's coastal defense system.  Such a defense system would have lived on had the area remained public property.  For this claim to be true, he must assume that the tragedy of the commons would not have degraded such natural capital.  This may be true.

Mother Nature is now engaging in a takings as she tries to seize coastal property from incumbent owners.   I say let her win.  These place based stakeholders want to use your tax dollars as funds to build a wall around them.  A compromise would be for the state government to buy these properties and knock them down and revitalize the natural capital adaptation strategies that the author lists.  The property owners would take a haircut but the more inland coastal areas would be protected.  Federal dollars are not needed for this adaptation strategy.