This note makes four points in regard to management of common pool resources, illustrated by the case of fisheries.2 First, I argue that the critical issue in regard to environmental problems is that prudential environmental constraints not being imposed at all – in many cases no constraint beyond sheer physical availability is respected.3 Second, I argue that monopolies are sometimes preferable over 'free competition' in the ownership and management of integral natural systems such as fisheries.4 Third, I argue that shared-ownership limited liability companies, regulated by appropriate authorities, can be useful legal entities for solving such problems. Fourth, I suggest that the ownership of shares in such a company (with monopoly rights to control access to the fishery) could be given to fishermen. This would change the fishermen's role from 'harvestry to husbandry', ensure political feasibility of the plan, and, it is argued, protect the fishery from long term degradation and destruction.
Environmental constraints (as opposed to resource constraints) we define here as those that are prudential rather than physically binding. In the short term, it is possible to fish more that a fishery will sustainably yield, but that will eventually cause the collapse of the fishery (fundamentally because fish are being harvested faster than their rate of reproduction replenishes the stock). Respecting environmental constraints requires two things: a) the imposition of a constraint, defined by some human assessment of natural limits; and b) the allocation of any rents from such a constraint5. Why does the environmental constraint not follow 'naturally' from the laissez-faire operation of the market and from private property rights? The problem (from the perspective of laissez faire) is that property rights have not been defined in the case of large environmental assets such as fisheries.
Imagine for a moment that an individual has no property rights over his home, and furthermore the home is open access – anyone can enter. Suppose furthermore that there are no other social structures – wary neighbours, traditional morals – to prevent others from entering, and that the house is well known to everyone in the world. In this case, despite the good nature of most people, it seems likely that thieves and looters would enter and steal the home's contents. Even the continued existence of the house is in doubt, since the building materials used to make it could also be looted. Now compare the house with the open sea fishery. The sea is entered at will by fishermen, often with huge industrial-scale nets. No access charge is made. The result would be the same as that of the open-access house. The sea is looted. Just like in the case of the house, there is a simple solution – private property. Private property of the house entails a monopoly of use and access to it by the owner; private property in the case of the fishery means a single legal entity with a monopoly to determine access. The main difference is that a fishery is a much larger entity than a house (it's more of a hotel than a house!); but the principle remains the same.
If we agree that proper management of the fishery entails at the very least that access to it is adequately rationed (for example through a price), this raises the question: what is the correct legal structure to do so? The literature on these issues provides some suggestions. Garret Hardin mentions the two structures to prevent "The tragedy of the commons": private property (already mentioned) and the state ('mutual coercion, mutually agreed upon').6 Elinor Ostrom, by contrast, finds that many of the traditional approaches that have preserved environmental systems fit neatly neither into these two categories.7 We may say, perhaps that the solutions are traditional, which includes in the West, the state and private property and also other systems around the world. Mancur Olson notes that collective institutions, such as the state, often respond to narrow interests rather than broad ones, because narrow interests have a greater incentive to engage in lobbying and other political activities.8 Given this, environmental policy that is essentially conservative (i.e. policy that does cause a redistribution of financial interests) may be preferable: other approaches may be politically infeasible.
In this essay I deal primarily with two institutions: the state and the limited liability company. Which is best? A state might be expected to act in the public interest, but faces a few constraints: a) it must respond to political pressure, and that pressure may come from fishermen who observe only their own short term gains; b) it may not have sufficient focus or information processing capacity to work out the best fishing yield; c) the problems may cross international borders.
We therefore consider another option: the limited liability company. By contrast with the state, firms typically have a narrowly defined set of objectives (although more narrow in UK and USA than for example Germany). In fact firms are so focused as they have been defined as 'pathological'. The firm is defined as a legal structure defined typically by limited liability and characterised by profit maximisation. Typically firms are strategically focused on core aims or mission. We should note also that the term 'corporation', has also been used traditionally in the UK to denote not just firms owned by shareholders, but also focussed public entities. Public corporations have been used in the past to solve environmental problems, such as the construction of a public sewerage system in London.
It is the proposed that fisheries management could be managed by a corporation. A new institution would be set up to manage fishing rights in a certain area, for example the British zone of the North Sea. The corporation is granted the right to charge fishermen access fees and other charges, and to limit the types of ship entering the zone, how they are permitted to fish, and their total catch. The corporation is regulated according to certain conditions: it must maintain fish stocks to a minimum standard set by scientists. Beyond basic regulation, the corporation is free to do what it likes to manage fish stocks. Shares in the corporation could be given to fishermen in proportion to their existing fishing quotas, to compensate them for their increased cost. The rent charged to the fishermen to use the fish stock would return to them. The fishermen could sell their stocks in the fishing husbandry company should they wish. But in the first instance the fishing husbandry company would protect the fish stocks for the long term, and be owned by the fishermen themselves. This corporation would be expected to act in the best interests of the fishermen and the fish, and through regulation it would be guaranteed to ensure the basic sustainability of the fishery.
2In the writing of this note I have been conscious that political ideas often find a voice because they are consistent with a wider set of ideologies espoused by one movement or another. Mostly, I hope to raise some pique in this paper by attacking simplistic versions of existing ideologies rather than actively supporting one or another. In particular I wish to illustrate ideas opposed respectively to simplistic (and, I would say false) versions of Georgism (the idea that the only tax should be a land rent charge); free market laissez faire; and environmental socialism. The ideas are, I suggest, consistent with other, perhaps more principled, versions of each political philosophy. I feel, however, that I have not entirely resisted the temptation to pin my colours to one particular mast, since the very modes of thought in economic ideas are, I think, somewhat political. In any case, I beg the reader not to let her politics blind her to her own reasoning and common sense, and to the arguments set out here.
3Rather than the problem being that rent is collected by private rather than public institutions. In the extreme case where no prudential environmental constraint is being imposed at all, there is clearly no rent associated with an environmental constraint to be collected. However, there may still be a rent to do with fundamental physical availability, however, this rent must be distinguished from that connected with the rent from a prudential environmental constraint. There is still a limited number of fish at any one time in the sea, however the prudential environmental constraint for fishing each year is tighter than the total number in the sea. If we fish all the fish in the sea, there won't be any to breed for next year. However, we should also note that imposing an environmental constraint is likely to reduce the private rent of the fishermen first (collecting the rent for public purposes), and only after that has happened, to impose further rents corresponding to the tighter, prudential environmental constraint.
4Although the cases illustrated could alternatively be viewed as a special case of the importance of private property, where the asset in question is very large and used by many people.
5Imposing criminality rather than a tax is another option – as has been tried in the case of narcotics – but such a policy tends to make those who can evade the law extremely rich as they can collect the scarcity rent associated with restricted class of people able and willing to evade the law.
6Garrett Hardin, “The tragedy of the commons,” Science 162 (1968): 1243-1248.
7E. Ostrom, Governing the commons: The evolution of institutions for collective action (Cambridge Univ Pr, 1991).
8M. Olson, The logic of collective action: Public goods and the theory of groups (Harvard University Press, 1971).