Owning the Ocean

According to The Economist, fishermen in Spain are clamoring for the creation of a marine sanctuary in the middle of their fishing grounds. Their reasoning is that the undisturbed ecosystems in marine sanctuaries support the entire reproductive-cycle of the local marine wildlife. Thus, though the total fishable area shrinks, total catch becomes greater than if the entire area were fished and the catch becomes more sustainable from year to year.

I’m glad that fishermen are accepting that fishing practices have to change. The fundamental problem, however, has never been the fishermen; it has been the prohibition by governments on the recognition of private property rights in the ocean. Without private property rights, fishermen have no ability to preserve the fish for future use; each one can only hope to grab as much of the resource before competitors harvest the resource to exhaustion.

As much as I like the marine sanctuary idea, what about also creating private property rights in fish stocks via individual fishing quotas?  Here is an excerpt from a Wall Street Journal article describing IFQs:

The system, which already operates in New Zealand, Iceland and the Philippines, sets a limit on the total allowable catch of any fish (such as the New Zealand orange roughy). Within that total catch, quotas are established, either by auction or by gift to incumbent fishermen. These quotas are tradable among individual fishermen. This offers an escape clause for some fishermen who no longer operate economically. It encourages more successful fishermen to buy fishing rights and exercise their property rights responsibly by fishing within their quota and monitoring others to make sure they do so as well. It also encourages brokers to speed up transactions and even allows environmentalists to enter the market and buy (and retire) quotas if they believe stocks are being overfished.

The success of this system is astonishing. In New Zealand the “value of the fisheries have doubled in recent years,” says Roger Beattie, a fisherman from Christchurch. The value of Icelandic fisheries has also soared, according to studies by Hannes Gissuarson, an Iceland University political science professor. Perhaps more importantly, fishermen in both locations have voluntarily reduced their catch to ensure sufficient stocks to provide a future livelihood. “Because they have the property right to secure future benefit from the resource, they are prepared to wait — to optimize their returns” says Mr. Gissuarson.

IFQs not only reach a good result, but, if done properly, are consistent with the libertarian homesteading principle of property: whoever uses a resource first has title to it.  By recognizing that historical harvesters of a particular fish stock have title to specified amounts of that fish – and permitting a free market in these titles – we will foster a libertarian, prosperity-generating revolution on and in the seas.

The Most Powerful, Renewable Resource in the World: Self-Interest

When it comes to global poverty, everyone is self-interested: rich people want to help poor people (or at least feel like they are), poor people want to stop being poor, and politicians want to appear munificent by spending everybody else’s money.

On the subject of global poverty, BBC News informs us today that:

Ebay, the world’s largest online auctioneer, has launched a website that allows people to invest in loans that lift people out of poverty.

The website, called MicroPlace, acts as a broker between ordinary investors and microfinance organisations.

For as little as $100, US investors will be able to help entrepreneurs in poor countries, be they coffee sellers in Cambodia or hairdressers in Ghana.

The investments last between two and four years and offer a small return.

The MicroPlace website contains this little gem: “Microfinance has emerged as an effective poverty alleviation tool because it is based on the fundamental principle that human beings are motivated to do whatever it takes to make themselves as well off as possible.”

Kudos to the folks at Microplace! They accept the fact that sustainable solutions to societal ills require us to harness human nature (i.e., self-interest), not work against it.

I’m about to invest $100 in Tanzania – I’ll let you know how it goes.

Why Are College Tuitions Skyrocketing?

I just read this unintentionally amusing article:

http://www.reuters.com/article/politicsNews/idUSN2245020820071022

Here’s the one-sentence summary of the article: college tuitions (and student loans) are rapidly increasing and legislators are going to “do something” about it.

What exactly legislators think they will accomplish by legislating the hell out of the student loan industry is beyond me. Of course, they don’t intend to accomplish anything; they only want to appear as if they’re doing something – and distract people’s attention from the real problem. The real problem has nothing to do with student loans, or even with colleges. The real problem is that the Federal Reserve is siphoning away the value of the dollar.

In a free market with a stable money supply, prices generally fall across all industries over time. Unfortunately, we do not have a stable money supply (we don’t have a free market, either, but that’s a topic for another day). Our money supply increases at an astonishing – and increasing – rate (check out this frightening graph from the Federal Reserve), which makes the dollars in our wallets increasingly valueless; more dollars floating around means that prices get bid up commensurately.

You might be thinking that prices have fallen or stayed flat for a lot of things. This is true, but if you think about it a little more you’ll realize that prices are stable or falling only for those goods imported from countries with incredibly low costs of labor. Prices for those items we must produce domestically (either because they aren’t easily transportable, like many services, or because of legal prohibitions, as is the case with sugar) suffer the unmitigated price effect of our inflating money supply.

In other words, the cost of college in the United States (and of a whole lot of other goods and services) isn’t ever coming back down, regardless of whatever asinine laws legislators manage to cook up. Get ready for a ride.

Revitalizing Unilateral Contracts

If you hadn’t heard, Google and the X-Prize Foundation announced a new competition a month or two back:

http://www.googlelunarxprize.org/

The first private group to put a robotic rover on the moon and drive it around wins $20,000,000. Pretty cool.

Past prizes offered by the X-Prize Foundation have resulted in amazing feats of innovation. In the Ansari X-Prize competition, for instance, Scaled Composites (the winner) engaged in the first privately-funded human spaceflight. During the course of a few short years, highly-motivated individuals transformed the space industry; private human spaceflight had been the exclusive province of a few dozen government employees, but because of the Ansari X-Prize, ordinary blokes are now only a few years away from being able to experience space first-hand.

These prizes are an efficient and effective way harnessing the creative, entrepreneurial spirit of the best and brightest the world has to offer. Whatever NASA might have accomplished during its existence, what more might have been accomplished if NASA’s budgets from every year were directed to these sorts of prizes rather than to a giant, creaking bureaucracy?

Why not rely on prizes to accomplish other goals? For instance, the U.S. government currently spends tens of billions of dollars every year on medical R&D to cure cancer and various diseases. Do you think that, if this money was instead divided up into prize purses for various development milestones (e.g., the first party to develop a cure for pancreatic cancer that meets specified requirements and standards receives a prize of $X), more diseases would be cured, or fewer? The U.S. government spends over half a trillion dollars on its military every year. What if the U.S. government took just ten percent of that (still over $50 billion!) and, instead of spending it on adventures in Afghanistan and Iraq, offered it to whoever hands over Osama bin Laden, dead or alive? Do you think someone close to bin Laden would rat him out for that much money? Me too.

Prizes like these are what courts refer to as “unilateral contracts.” Unilateral contracts are contracts where only one party is obligated to perform. Google offered to pay a prize to the first person to drive around on the moon, and so it is obligated to pay the prize when the condition is met – but nobody else is obligated to do a damn thing.

Courts tend to disfavor unilateral contracts, deeming them to be unfair – and sometimes sticking the offeror with liability that, by the terms of its promise, it did not expect to have. Why are unilateral contracts viewed with suspicion? Pure paternalism: “these poor people worked so hard, but all of the time, energy, and money they expended was wasted! We can’t let them go home empty-handed!”

Never mind the fact that the performing parties know full-well and ahead of time that there was a risk involved. Never mind the fact that, if the performing party doesn’t like this risk, he or she can attempt to negotiate some type of security – or walk away from the offer altogether.

Courts should stop second-guessing our ability to look out for ourselves – doing so only discourages free people from self-organizing to solve problems in ways far more effective and efficient than can be done by central planners. And most importantly, prizes – unlike government bureaucracies – don’t depend on institutionalized theft (i.e., taxation).

Water Restrictions: A Dumb Solution to Droughts

In case you haven’t heard, a severe drought is currently blighting the southeastern United States:

http://wdef.com/news/…

Per usual, cities and counties and states are dealing with the situation by pleading for people not to water their lawns and by threatening mandatory water restrictions. These democratically-elected tormentors will NOT permit – or even mention – the one simple change that would resolve the problem entirely: removing the laws and regulations that prevent the price of water from adjusting upwards.

When prices are legally prohibited from rising in response to reduced supply, demand outstrips supply and there are shortages. However, if the price is then allowed to adjust upwards to its equilibrium price, consumers adjust (typically, reduce) the amount of the good they want to buy. In other words, if the price of water were to go up, as it would in a free market, consumers of water would wash their cars less, shorten their showers, and maybe decide against putting in new swimming pools (or against refilling existing ones). Consumers will do so because they know they will pay a high price when their next water bill shows up. Compare this to mandatory water restrictions, which involve a fine only in the unlikely even the user gets caught – people take the chance, and shortages continue.

In any event, its simply wrong to prevent, by force (i.e., law), a person from selling water at whatever price a willing buyer can be found. Conversely, it’s wrong to use or threaten force to stop people from using water they pay for. Whether the ends of these types of laws are well-intended (a questionable premise) does not erase the unavoidable fact that the means are immoral.

Somalia: Anarchy Without Chaos?

I strongly encourage you to read this fascinating article on the state of affairs in Somalia, a nation that has had no central government in over 15 years:

http://www.mises.org/story/2701

A Different Way of Thinking About Net Neutrality

The US Justice Department issued a statement this morning in opposition to net neutrality:

http://www.usdoj.gov/opa/pr/2007/September/07_at_682.html

This got me thinking about how most of the arguments floating around out there for or against net neutrality have been based on social utilitarianism or, more specifically, consumer welfare. Why does consumer welfare guide the debate? Just because I would be better off being able to buy a brand-new Audi R8 for $100 doesn’t mean I should be able to use the coercive power of the state to force Audi to sell it to me at that price. That would be a violation of Audi’s right to do with its property what it sees fit and its right to refrain from any bargain it does not wish to enter into. Certainly you as a consumer would not want Audi to be able to force you at the point of a gun to pay double the car’s sticker price.

You might be thinking that net neutrality is different from the bargain to buy a car. And you’d be right, of course – government has interfered much more in the market for internet access and traffic than in the market for cars. The government has created monopoly rights, subsidized the building of infrastructure, and passed other harmful regulations. For a cogent and succinct discussion of how this government interference is responsible for the problems at the heart of the network neutrality debate – and how to cure the disease instead of addressing its symptoms – I point you to a short piece by Tim Swanson:

http://blog.mises.org/archives/007100.asp