In the July-August issue of Sierra Magazine was an essay called The Common Good, a broadside against the market system and the field of economics generally. It didn't sit well with Jason Scorse, Assistant Professor of International Policy Studies at the Monterey Institute of International Studies. He wrote an article in response and sent it to Sierra; they passed on it. (Read the background in this post on the Environmental Economics blog.) I offered to run an abbreviated version of the essay. Part one follows; I'll publish the second half tomorrow.
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Economics is largely the study of incentives, resource distribution, and how institutional arrangements affect behaviors and outcomes -- and therefore, economics is largely the study of trade-offs. Above all, economics is based on simple principles of how people generally act in the real world, not necessarily how we would like them to act.
Let us begin with the primary problem surrounding open-access resources. Open-access resources are those for which there are no clear and enforceable property rights and to which it is very difficult to limit access. The world's ocean fisheries and much of the world's largest forests are prime examples. Unless there is some type of agreement by the parties who access the resources to better manage and preserve them, rational individuals acting in their own self-interest will exploit them (catching fish or cutting down trees) until the resources are exhausted. In this way they obtain all the benefits from their efforts while the costs (the ultimate degradation of the resources) are dispersed among the entire population. When large numbers of parties are involved and the geographic area is large, cooperative management is unlikely to occur. This basic logic underlies why 90% of the world's ocean fisheries have either collapsed or are near collapse, and why the Amazon rainforest continues to be cut down at unprecedented rates.
So what are the solutions?
