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Protecting the Antarctic Commons. Problems of economic efficiency.

PROTECTING THE ANTARCTIC COMMONS. Problems of economic efficiency by Bernard P. Herber

The confidence in the "market" as a powerful and efficient tool for allocating resources has grown stronger in the last decades as is shown by the deregulation and privatization processes which are taking place in most of the developed market economies. As every student of economics knows, for the market to produce the social optimum, several very stringent conditions are necessary. The good or service to be produced should be a private one, that is, an excludable and consumption rival good with no external effects and for which property rights are well defined. When such a good is produced in a market where competitive conditions prevail (no barriers to entry and exit and very large numbers of actual or potential producers and consumers) the outcome will be the "socially best" thanks to the working of the "price" mechanism. Competitive market prices are necessary signals to allocate resources in an efficient way. But under most circumstances, known as market "failures", the socially best outcome cannot be reached through the market because the "signal" is incorrect or missing. This occurs if a private good has external effects (the market price does not capture the value of the external effect), when the good is a public one, with no rivalry and no excludability in use (underproduction or no production will result), and finally, when the good is a common or free access one. In this case the result will be its misuse up to its destruction. (The tragedy of the commons, as this effect is known in the literature).

A great merit of this neat, well-argued and concise book is to tell the world the Antarctica continent is indeed a bunch of private goods with externalities, public goods, and common goods with no well defined property rights. Such a concentration of market failures exists in no other part of the global village. Thus, public intervention is necessary to prevent the incentives of the market to produce the dismal outcome of using Antarctica up to its destruction. Public intervention is necessary not for minor corrections of the market not functioning at its best, but for avoiding the worst outcome. The choice is radical: leave it to the market and the destruction of wealth will inevitably follow because the market signals are incorrect or missing.

This core message of the book is extremely important because far too frequently the general public looks at environmental problems with a wrong attitude, namely that of "believing or not believing" in the causes of natural processes, or of going into philosophical speculations about the nature of human beings. It is very clear from the book that the consequences we will face in the absence of public intervention stem from pure economics. Although economics is not a hard science, it has its own laws (or regularities) on the basis of which we can predict what will happen in terms of resource allocation and goods production. The market is indeed a powerful mechanism for the best outcome, when prevailing conditions channel incentives/disincentives in the proper direction, but it can also lead to the worst outcome, when conditions are of the opposite type.

Finally, I would like to mention two other important qualities of the book. The first concerns technological progress and the second possible solutions. Another widespread and unjustified attitude is the unconditional belief in technological progress. Even those ready to admit that we have some moral obligations with respect to future generations find it easy to rely on technical progress and its spontaneous evolution as a means to solve the problem. Unfortunately, this is not always the case and in fact it may make things even worse. An intuitive example comes from fishing. The spontaneous, market-driven evolution of technical progress has gone in the direction of accelerating fish depletion because it has greatly enhanced the capability of vessels to catch fish (and in fact, several fishing practices and instruments have been banned). The same seems to apply to Antarctica: technical progress makes it easier and less expensive for tourists to visit such a pristine environment, while in the past its remoteness could not easily be overcome and therefore it was "protected". I found it very important to call attention to this aspect on which every one should meditate, and admit, once again, that no protection can come automatically and free: international public intervention is necessary.

Confronted with the bleak prospect of losing Antarctica, all nations have to react and collaborate to find out viable solutions. As we learn from the book, a practical solution is not only possible but also at hand. In fact, the Antarctic Treaty System, grown out of the Antarctic Treaty of 1959, has been able to protect the Antarctic region in the past. Now it only needs substantial reform and updating to deal with the amazing and manifold changes which have taken place (and still are taking place) in our global village. To do that, as I understand, Herber suggests to decide which one is the most important output of the economy of the region and then to choose the best way to secure it, while making the others compatible with it.

Antarctica, he says, produces private goods with externalities (fishery and tourism), public goods (peace and science) and common goods. No one can deny that the most important good for humanity is the common good called the strategic link to global atmosphere, climate and oceans. We can love the market mechanism, but we know from plain economics that in such a case the lack of public intervention will bring about the destruction of the common good. Hoping the international community will take action soon to revise the Treaty system, I could not agree more on the implicit ranking of outputs: global common and public good first; fishing and tourism as private goods with externalities later and only to the extent of their compatibility with the first.

Natural sciences and economics are warning us that the time left to avoid the tragedy of the commons may now be very limited.

Laura Castellucci, professor of Economic Policy, University of Rome Tor Vergata, Italy, www.economia.uniroma2.it/sefemeq/professori/
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Author:Castellucci, Laura
Publication:Public Finance and Management
Article Type:Critical essay
Geographic Code:8ANTA
Date:Sep 22, 2007
Words:1035
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