My thoughts on Daniel Bromley’s critique (1): Is open access the problem?

In 2008 Daniel Bromley gave a keynote lecture at the biannual conference of the MARE Centre in Amsterdam where he strongly criticized economists for giving flawed adivce to policy makers (to use the more polite terms). The conference organizers must have had a hard time finding an economist willing to write a reply to his lecture, because they even contacted me – I chickened out. I felt I hadn’t been working on fisheries issues long enough yet to have a well-founded opinion on Bromley’s writings. Shortly after his keynote lecture, he published an article in Fisheries with a central message similar to that in his earlier keynote, but phrased in stronger terms – and with a lot more impact. In his Fisheries article he took a few arguments further to the point where just about every economist I know disagreed wholeheartedly (again, I’m being polite here). I discussed it with some of them, and with other fisheries scientists. I also discussed it in class once, but the students, most of whom were no native English speakers and had little economics background, had serious trouble with Bromley’s rather difficult use of vocabulary.

Lately, after coming across other work written by Daniel Bromley (and his co-author, Seth Macinko), I started reading these two articles again. Although I broadly agree with the mainstream economic analysis of fisheries management, I got the impression that perhaps he has been misunderstood by my fellow economists and it would be a shame if his ideas were ignored because of the impression his Fisheries article made on most economists (again, to put it politely). I decided to put my thoughts on his criticism of fisheries economics in a few posts.

To start with, there is the conceptual confusion on what is open access, what are commons, and whether fisheries resources fall under any of those regimes. In casual conversations with colleagues I do find that some of them present fisheries as an example of open access resources; some economics textbooks do the same. But are fisheries open access resources? In his book Environment & Economy: Property Rights & Public Policy Bromley distinguishes four property regimes, similar to the four property regimes in ancient Roman law:

  • No property (res nullius): the classical open-access regime
  • Common property (res communis): a regime where a group of people owns, manages, and uses the resource together
  • State property (latin name not given, but I believe it should be res publica): the government, as a representative of society as a whole, owns and manages the resource, and sets the rules by which citizens are allowed to use the resource
  • Private property (I believe this should be res privata but my Latin is pretty non-existent): an individual owns the resource and has the right to manage and use it as he or she pleases.

If you look at it this way you see that most fish are caught within the Exclusive Economic Zones of individual countries; in fact, only one sixth of global catch comes from the high seas. Within the EEZs aquatic resources are either private property (for example, oyster and mussel fishers own parcels, which they seed, and they have the exclusive right to harvest them) or state property (with regard to most fish species, the government sets the rules on how much to catch, and with which methods). So strictly speaking, open access is more an exception than a rule.

This doesn’t mean, however, that the open access regime is irrelevant to our understanding of fisheries problems. By looking at fisheries under open access, we lay bare the mechanisms that make fisheries policy so difficult: the individual fisher reaps the benefits of catching one more fish, whereas all fishers bear the costs to the resource, i.e. the future productivity lost because the fish is in the basket instead of the sea. In theory, state property regimes are able to deal with this problem as governments can exclude people from fishing. In reality, however, governments have problems of their own that prevent them from keeping in check the forces that lead to overfishing: many fish stocks are shared by several countries, there is lobbying by special interest groups, rent-seeking, and so on. It’s like Hobbes’s Leviathan (named after a sea monster!), which starts with how unrestrained human nature leads to a war of all against all, and then explains how this restraining of human nature should take place. To understand the regime you also need to understand the forces it is supposed to rule.

Another confusion, by the way, is that between open access resources and common property resources. The confusion started when the American ecologist Garrett Hardin wrote his Science article named The Tragedy of The Commons, where he explained how common lands will inevitably be degraded because the individual land user reaps the benefits of an extra sheep while imposing the costs of overgrazing on all users. Daniel Bromley has repeatedly argued against this article and I understand why. The problem is the choice of words: commons. Commons are owned, managed, and used by an exclusive group of users who have every possibility and motivation to make good arrangements and stick to them. In fact, researchers like Elinor Ostrom found that many commons are managed quite well. The “Tragedy” that Hardin describes takes place in open access regimes, like the high seas. Unfortunately the confusion is still omnipresent: just this week The Economist refers to the Tragedy of the Commons to discuss the problems with high seas fishing.

To me, this underlines the importance of defining your concepts well, and being wary of oversimplification. It’s too easy to use the broad brush of open access to paint all problems with resource overexploitation. We need to get into the details to really understand the matter. How are rights, priviliges, obligations, and such distributed? How do they work on paper (de jure) and how do they work in practice (de facto)? How are things like decision-making, monitoring, and enforcement organized, and what resources do they need? What is the role of official laws on one hand and unofficial norms and customs on the other hand, and where do they contradict? I feel that these questions have been overlooked in the debate that was unleashed after Bromley’s Fisheries article.

The Prisoner’s Dilemma in traffic

Witnessing the traffic in Vietnam, whether it was the madhouse on the streets of Hanoi or the exasperating driving style of motorists on the highway, I realized that traffic is very much a Prisoner’s Dilemma. The overall motto in Vietnamese traffic is every man for himself. Drives prefer the left lane and adamantly refuse to let others overtake them. Be careful when you cross the street, even at green pedestrian traffic lights: red traffic lights are considered no more than suggestions so you might still be run over by one of the countless motorbikes.

It made me realise that in everyday traffic there are a lot of occasions where you can gain some benefit at the expense of other road users: cross a red light, overtake somebody on his right side, don’t let others pass or enter the highway. On the short term you may benefit from this behaviour, but if everybody behaves this way we are all worse off than if we would just show a little courtesy. You can see the result in many of Vietnam’s streets: congested roads, traffic accidents, aggressive drivers. A game theorist would say that Vietnamese traffic is somewhere in or near its Nash equilibrium (nobody has a reason to change his or her individual behaviour, given the behaviour of others), but the Nash equilibrium is not Pareto optimal (everybody would be better off if everybody behaved differently): the textbook definition of a Prisoner’s Dilemma.

In countries like Norway or the United States, however, the traffic seems much more organised (Dutch drivers, I must confess, are less courteous, but yet more so than Vietnamese drivers). Why don’t Norwegian drivers and American drivers obey our microeconomic models by behaving more aggressively? (I don’t mean to insult Vietnamese motorists, so let’s call it driving assertively.) I believe hefty fines are only part of the explanation. It is also that Norwegian and American motorists consider it bad behaviour: in other words, there are social norms that keep them from driving more assertively.

Another interesting observation is that a Norwegian wouldn’t get anywhere in downtown Hanoi unless he drives like a Hanoian. So once this assertive way of driving becomes the norm it will be very difficult to change it to a more courteous norm. Assertive drivers may get somewhere in Oslo, but perhaps their friends would tell them off for their driving style. In any case many Norwegians consider it bad form, and people have a natural tendency to conform to the dominant norm. So there are self-enhancing mechanisms that keep the dominant social norm in place.

So to understand Elinor Ostrom’s work you don’t have to go to the irrigated rice fields of rural Bangladesh: just get a driver’s license.


Mapping marine economics (3): Why do we overfish?

Let’s face it: it’s silly. The UN’s Food and Agricultural Organization estimates that about 30% of global fish stocks could have higher yields if they were fished less intensively. Think about it: spend less fuel, labour and capital on fishing, and catch more fish, not less, as a result – what’s not to like? So why are these stocks overfished?

It’s the diagnostic question: what are the economic drivers of natural resource depletion? In fact, it’s one of the oldest questions in the profession, and the answer is also one of the oldest concepts: the tragedy of the commons. The ecologist Garret Hardin introduced this term in Science in 1968, illustrating it with an example of a pasture commonly owned by several herdsmen. For each herdsman gaining an extra sheep will reap benefits available to that herdsman alone (wool, meat), while the costs are borne by all herdsmen (less grass available for other sheep). The result: too many sheep, too little grass. If the pasture were privately owned by one herdsman, this herdsman would reap all the benefits and suffer all the costs, so he would probably have a smaller herd of sheep than in the commons case.

The argument also applies to the fishery: the benefits of catching one fish go to the fisher catching it, whereas some of the costs (the loss of the offspring this fish could have produced) are borne by all fishers. In fact, fisheries scientists were already aware of this when Hardin published his article. The economist Scott Gordon showed in the Journal of Political Economy in 1954 that an open access fishery will be fished at a much higher rate than optimal.

Note the dates here: the most fundamental insights in this domain were introduced more than 40 years ago. Has nothing happened since? Of course the insights have been refined further, and there is a lot of game theoretic analysis happening that you could interpret as diagnostic research. When do countries cooperate in international fisheries policy – and when don’t they although they should? What is the bargaining position of a single state (say, Mauritania) in establishing the access fee of a long-distance fishing vessel?

But the more intriguing, and growing insight is that many commons, in Hardin’s definition, are actually managed quite well. The political scientist Elinor Ostrom (who sadly passed away this year) has described many examples of common property (water resources, grazing land, and so on) where the single user refrains from increasing his or her individual benefit at the expense of other users. Even worse: there are examples of such resources where the trouble really started when the government intervened, assuming it needed to solve the commons problem!

So what happened here? It seems (and I admit with some embarrassment that it always takes a non-economist to remind economists of this) human behaviour is driven by more than a calculated self-interest. Many common pool resources are shared by people who are friends or relatives of each other, their kids play with the kids of other users, or their older children may marry those of other users. Ostrom’s research showed that many communities of common pool resource users have developed rules of what they consider ‘reasonable’ use. Use more than your fair share, and you will have to explain yourself to your in-laws, your neighbours, and so on. The rules lead to a management that may not be strictly optimal, but it is certainly sustainable, and probably better than the Tragedy described by Hardin. And when governments introduced legislation to govern the use of the resources, this legislation conflicted with the older informal rules, making matters worse rather than better: formal rules have a nasty habit of crowding out informal rules.

So what should marine resource economists do with these new insights? It’s a difficult subject. So far the research into the role of social norms and informal rules has been very descriptive, with very few insights that can be generalized to the majority of cases. I know a few economists who try to understand how these informal rules evolve: surely a society that has developed the wrong informal rules eventually destroys itself. So you can model this evolution in a manner similar to how ecologists apply game theory to the evolution of species. But how much of that research yields insights that we can apply today remains to be seen, and I’m no evolutionary economist.

Therefore, the research I’m doing in this domain will probably remain limited to a few game theoretic analyses. In VECTORS we analyse how fishing treaties between EU member states (and non-EU countries like Norway) may collapse when stocks move northward with their preferred climate zones. (Actually, Adam Walker is doing this with Hans-Peter Weikard.) In BESTTuna we will analyse the bargaining position of Pacific island nations, and their willingness to cooperate in a common tuna fisheries policy. Hopefully this research will tell us more about the possibilities and impossibilities of managing cross-boundary fish resources through international treaties.

Economists need the softer social sciences

A follow-up to my remark on how few valuation studies include proper qualitative research: this remark was provoked by two travel cost studies presented at EAERE 2012. One looked at the effect that forest fires have on visit rates in Portuguese forests, whereas the other studied how people trade off entrance fees and mortality risk while visiting a nature reserve in Japan.

The Portuguese study reminded me of a paper by Erwin Bulte and others on what they called the ‘outrage effect’. They found that people are willing to pay a lot more for conservation of Wadden Sea seals if you tell them the population suffers from pollution than if you tell them the seals suffer from a viral disease. I would expect something similar to happen with regard to forest fires. People might even appreciate a scorched patch of forest if you tell them it is part of a natural or at least indispensible process, but they would be apalled if the fires were caused by human carelessness. I would also expect it matters whether multiple hectares are gone, or whether there are only occasional blackened patches. The researchers did not ask their respondents what they thought was the cause of forest fires, but almost all forest fires in their region were man-made, and they assumed their respondents were aware of that fact.

The Japanese study reminded me of the Darwin Awards, or rather, the fact that most of its recipients are intoxicated, overconfident males. Suppose a respondent prefers a $20 dangerous hike over a $30 safe one, does that mean that he considers $10 too much to lower his risk of getting killed? Or does he (I’m afraid it’s mostly a ‘he’) assume that bad stuff only happens to other people? In this case the researchers stated that it was widely known which hiking trails are dangerous, and that casualties have been all over the news. But that argument ignores how good some people are at downplaying risks – at their peril, indeed.

The bottom line for me is that too much economic research, especially the valuation stuff, seems to blindly jump into the issue, imposing wildly unrealistic assumptions on human behaviour, without doing proper explorative research first. Why not interview a few hikers first, to get an idea what considerations may be at play? Why not talk to a psychologist, or a sociologist, who has done research on how people view their own mortality risks?

I think economists should observe more, and take more heed of what other social scientists have found so far about human behaviour. Economics is a world apart from most other social sciences, notably sociology and anthropology. (Supposedly, an unnamed Hindu economist once claimed that bad economists reincarnate as sociologists.) But I think this is finally changing, as Economics Nobel prizes1 are being awarded to behavioural economists and political scientists, and economic experiments have become fashionable enough to be published in top journals like American Economic Review.

So how does this relate to my own work? Besides other activities, my work involves modelling of how people exploit natural resources, and estimating how valuable those resources are to them. I think the time is ripe to do such work together with anthropologists and sociologists. I am about to start a research project on international cooperation in management of Pacific tuna, together with Simon Bush from Wageningen University’s Environmental Policy Group. But I’ll keep my eyes open for opportunities to do more such interdisciplinary work.

1 Actually, I don’t like calling the Economics Nobel an Economics Nobel. It’s just that Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, as it is officially called, is a bit too long. But there is no such thing as a Nobel Prize for Economics. The only reason why there is an Economics prize that has “Nobel” in its name, and not, say, a similar biology prize, is that economists work at banks such as the Swedish central bank, and thereby have access to enough money to create the fund for such a prize. Unlike biology faculties.

Elinor Ostrom: 1933 – 2012

From the Environmental Economics blog (who got it from Indiana University):

The entire Indiana University community mourns the passing today of Distinguished Professor Elinor Ostrom, who received the 2009 Nobel Prize in Economic Sciences for her groundbreaking research on the ways that people organize themselves to manage resources.

This is a very sad day for natural resource economics. Elinor Ostrom single-handedly demolished the Tragedy Of The Commons paradigm: whereas textbook economics tells us that common pool resources will eventually be depleted, she described plenty of counter-examples where they were managed fairly well. Her work was so unique many economists simply refer to it as “Elinor Ostrom’s work”.

She will be sorely missed.