Environmental Economics
Source: https://mises.org/library/austrian-theory-environmental-economics
This blog post will be related to the class topic of property rights and the notion of “tragedy of the commons.” It will focus on how these relate to the environment and public policy issues stemming from that, as this is one of the more common situations where the term “tragedy of the commons” is used. The general summary of this conundrum is that in a society with private property rights, there are environmental externalities such as water pollution, air pollution, animal extinction, and over-use of resources. An example would be commercial fishing in the ocean, where each fisherman is incentivized to catch as many fish as possible, and thus creates a problem of over-extracting the fish. The article in reference makes the argument that this is only even a perceived problem because someone has deemed there is a “correct” number of fish and if fishermen lower the amount of fish to below that, it is not good. This same logic applies to the other environmental issues as well.
The article went into much detail about his reasoning and other factors, but I want to focus on the role of property rights since it most relates to the class. The conclusion reached is that the solution to this environmental “tragedy of the commons” problem is not the conventional method of attempting to regulate to achieve what is believed to be the correct allocation of resources, but rather on better defining and enforcing the property rights in question. Once you reach the realization that the typical solution to the “tragedy of the commons” in these scenarios is simply to attempt to allocate resources to the perceived right amounts, you realize that this is likely the wrong proposition overall. To better explain how property rights are the solution, it is because the main characteristic of these problems, for example pollution, is the consequences that stem from human conflict related to the resource of air. The solution to minimizing this human conflict is therefore strictly defining and enforcing property rights. This is not a perfect solution, but it is a better and more practical approach than the conventional method of regulating the goods themselves, which in practice has no way of guaranteeing it even helps the problem at all.
So now that we have concluded the better solution is to resolve conflicts related to the environmental goods, rather than the impossible task of the government guessing what is the most efficient allocation of these resources, how can this be implemented in real life? Let’s take the same example from the last paragraph, air pollution. Imagine Person A is heavily polluting the air on their property, and the polluted air moves to the property next to them owned by Person B. This pollution is negatively affecting Person B’s actions or business on his property, so property rights need to be enforced such that Person A corrects his pollution. This can be either through cleaning it up or paying Person B the amount of value lost due to this pollution. By having a society that functions in this way, it solves the problem for both people by forcing each of them to legitimately internalize the cost of negative environmental effects they produce. This changes the economic model of every business, as they now need to factor this in, and in cases where pollution was created, they are forced to either stop it entirely, keep it confined to their property, or compensate the property owners harmed. Overall, this is much better than the current system we have, which essentially just taxes or fines anyone that pollutes. The main possible flaws I see with my new proposed system are how do you assess the value of damaged property considering value is subjective, and how are these conflicts resolved? This can simply be done through the courts like we handle other conflicts, and the courts regularly assess values to various crimes, so I do not see that being an issue. Also, this is assuming the conflict cannot be resolved within the two parties themselves.
While we are on the general topic of property rights, I also wanted to add some additional commentary on other ways this affects society, especially related to the pandemic we are currently in. The concept of private property rights actually solves many debates we have in society. For example, there is the debate on whether to mandate mask wearing on private property. The government would argue that people do not have enough incentive to wear masks on private property without it being legally mandated, however I would argue this can be solved by property rights. An owner of a given property is incentivized in several ways to want his customers to not catch or spread Coronavirus on his property. It is bad for business in many aspects if your customers catch Coronavirus on your property. Therefore, the rational thing for him to do is make a rule on his property to wear masks. This, of course, carries the assumption that the property owner believes masks are effective at reducing the transmission of Coronavirus. This logic can be applied to all the other Coronavirus precautions as well, such as social distancing.