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Apr 12, 2011


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sam Carr

Michael, by the same logic air too should be a commodity...

Michael W. Kruse

The "tragedy of the commons" argument comes into play when we are dealing with limited resources. Air is not remotely limited relative to demand.

The "tragedy of the commons" is based on the example of multiple small cattle grazers having commons upon which the graze their cattle. Six grazers with five cattle is not a problem for a commons of many acres. But what happens as the their herds grow to seven, ten, or twelve. At some point they will exceed the capacity of the land to feed the cattle.

With no property rights, there is every incentive for each grazer to get his cattle to the commons as quick as possible before it is used up by others. There is no incentive to conserve and replenish (what you replenish just gets consumed by someone else), or to limit the size of the herd.

But when everyone owns a piece of the commons they will manage the size of their herd accordingly. They will take measures to replenish the grazing area they own. Some who no longer wish to herd will manage their land and rent it to others. Granting property rights both incentivizes people to be judicious in their use of land (maybe limiting herd size to a sustainable level) and to protect it. Some enterprising types will enter the fray to find ways to bring more land into grazing use or to improve the productivity of existing land.

The same with water. With property rights, people will be judicious in their use, meaning less waste. Others will have the financial incentive to make water more plentiful. There will be competition to increase the water supply, generating more water than if it were left to common ownership.

With no ownership, everyone rushes to get theirs before it runs out. With government ownership, someone somewhere has to decide who gets what with no real time feedback loop for knowing when too much is one place and too little in another. Markets give that feedback loop. Finally, whatever bureaucrat is placed in charge of water allocation is in a prime position to solicit bribes and curry favor through his decisions, a real probability in many emerging nations.

Also, declaring something as right frequently has unintended consequences that hurt the poor. You may have a right but must be able to press for that right in the courts. The wealthy have the resources to press for what is "rightfully" theirs but the poor frequently do not. Frequently, their is government corruption that will not fairly see to the rights of the poor even if they make it into court. We've seen some of this in Africa where health care is declared a right. The wealthy are able to press for their Viagra and health care dollars are sucked away from HIV drugs that are needed by the poor but can't press for their rights.

Generally speaking, I think markets are usually the optimal solution.

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