Thursday, June 25, 2009

Property Rights the Solution, Not the Problem

Dan’ at Migrations Blog (HERE): writes: ‘Tragedy of the Commons Still Has Meaning’

“The Tragedy of the Commons” is an influential article written by Garrett Hardin and first published in the journal Science in 1968. It’s one of those pivotal articles at the dawn of the environmental and conservation movements, which describes a dilemma in which multiple individuals acting independently in their own self-interest can ultimately destroy a shared limited resource even when it is clear that it is not in anyone’s long term interest for this to happen. [He?] challenged the philosophical assumption of Adam Smith that decisions reached individually will be the best decisions for an entire society and advocated “social arrangements” that produce responsibility. These arrangements might include some form of “mutually agreed upon coercion”, although perhaps “coercion and incentives” more accurately describes his intentions.

Today, the strongest criticisms of the environmentalist and conservationist political stances, advocating regulatory measures and incentives for directing human industry, are still being voiced by the intellectual descendants of Adam Smith. These critics – Libertarians – continue to take the position that anything benefiting individuals in a competitive economy is good, and any hindrance of those liberties is bad, even when scientists indicate that the opposite is the case

Adam Smith did not write that ‘decisions reached individually will be the best decisions for an entire society and advocated “social arrangements” that produce responsibility.’

This idea, along with the myth of ‘his invisible hand theory’ is an idea that was invented by some modern economists, and propagated since the 1950s by people who have not read Smith’s Wealth Of Nations (1776) or his earlier book, Moral Sentiments (1759).

Dan appears to be one such miss reader of Adam Smith, who gives over 60 examples in Books I, II, and III of Wealth Of Nations, of the malign consequences of individual decisions and their detrimental outcomes for the entire society. Indeed, Book IV of Wealth Of Nations is, what Smith called, a ‘very violent attack’ on the individual decisions of the legislature (and those who influenced its members) in the mercantile political economy, both in domestic and foreign trade, since their initial interventions of governments in the economy from the 16th century.

It is amazing how the notion, honestly presented by Dan I don’t doubt, that Adam Smith wrote anything remotely like
that which he has been credited with since the 1950s by theorists of general equilibrium and neoclassical economics, such as Milton Friedman, Paul Samuelson, most Noble prizewinners and almost all economics tutors in the US and UK. The simple remedy of reading all of Smith should correct the error, instead of relying on a few quotations.

The Tragedy of the Commons by Garrett Hardin was an excellent essay, spoiled by his main obsession in the essay about population growth. He set out to prove the not difficult idea that successive population increases on a fixed area would deplete the natural resources beyond a sustainable state. Diminishing returns (Ricardo) had established such a conclusion in 1817.

Hardin’s excellent point was that the over-exploitation of any natural resource – such as the ancient ‘commons’ of pre-commercial society – would inevitably exhaust the resource, particularly where the resource, like the old commons, was open to all to use.

The proper conclusion, not discussed by Hardin, was to introduce prices for access by removing its ‘free’ status. Each free user is not constrained to limit his use, but would be if property rights were introduced. Of course, this is anathema to most environmentalists, who regard commercial pricing as the cause of the problem when in fact it is the solution.

Thus, when Dan draws on the experience of open, free, access to the fish stocks of the world by whoever has access to fishing boats (which is just about everybody with access to the world’s oceans), he misses the main point of the tragedy of the commons – the free access encourages some – it doesn’t take many – boats to over-fish, which is what has been happening for decades among all fishing fleets of all sea-going nations.

The proper response to the tragedy of the fishing stocks – property rights – is articulated by ‘the intellectual descendants of Adam Smith’, though I suspect Dan’s selection of the people who fulfill his version of who these individuals are may not be the same people that Lost Legacy would identify.



Blogger Dan said...

As I'm no economist, I obviously have not read much of Smith's original works - I doubt that many non-economists have. But I presume that Friedman and Samuelson did, as well as the unnamed Nobel laureates you refer to. The short story is that it seems that even amongst economists, there is debate as to what Smith meant by the "Invisible Hand." So whether his original intent has been distorted or not, my impression is that you have your work cut out for you convincing respected economists that they're wrong about Smith, and that might be a good place for you to focus your efforts.

Regardless however, I was referring to Smith's legacy as it's known today, not about any lost or misinterpreted legacy.

6:31 am  
Blogger Gavin Kennedy said...

Hi Daniel
Thank you for your courteous comment on my criticism of aspects of your article.

I think we can agree, at least in principle, that the modern attribution to Adam Smith of assertions he never made (individual self interested actions lead to social benefit irrespective of their nature) somehow (a mystical invisible hand 'theory')benefit society, is of questionable validity (and provenance).

A sort of 'whatever is', 'however achieved' is somehow 'best' in (in some cases among some economists it is 'religious' in content), is a mockery of Smith's philosophy.

I agree Lost Legacy faces an uphill struggle against a strong tide among economists. But by banging away almost daily, some will look at the evidence from Smith's books and some will also speak out.

Smith's ideas are not taught in universities, with very few exceptions. I am in Denver this week presenting Smith's actual views to many economists who do read his books at the History of Economics Society. Not all of my colleagues agree with me but I can do no other than present as best as I can, and hope to initiate some interest.

However, my point remains that property rights (public or private) in diminishing resources - the world's fish stocks - is a better solution to Hardin's valid point that free access leads to over-fishing.

I read your article with interest and wish you well.


12:54 pm  
Blogger Dan said...

You're point certainly sounds agreeable. ;-)

I must thank you by the way for directing me to the scholarly debate over what Smith actually meant by his reference to the Invisible Hand. I learned something with that.

All the best,

3:21 pm  

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