This is a cute example of the power of hindsight. Today’s Guardian has a discussion of the christmas tree that appeared in front of Downing St: you can read David Cameron’s twit about it here[1]. The Guardian helpfully points out that Cameron got a rare “tall” tree, once again proving inequality is a potent force in British life. Apparently tall trees are now rare because the EU changed subsidies back in 2005, causing Irish and Danish growers to switch from this type of fir tree to something else – biofuels for santa’s sleigh, maybe. Which just goes to show that the European Union’s Leprechauns and Vikings are in league to destroy British christmases.
But cuter still, the Guardian has a link to the article in which the change to subsidies was announced. This article contains predictions by the responsible grower’s organization:
Supermarkets and wholesalers are turning to British varieties of spruce, pine and fir.
After initial worries that British growers would struggle to cope with added demand, their representatives are predicting a £10m increase in profits
Compare with the statement from the same organization today:
While he insisted that the shortage did not equal disaster, Hay said it was inevitable that “the numbers are not going to meet the demand”. Some suppliers have been panic-buying and importing up to 100,000 more European trees than in previous years, Hay said.
I wonder if they ever got their original 10m pound profits? It certainly seems that the “initial worries” were correct. Maybe this is why people just don’t buy British anymore? Finally, we see some evidence that private ownership of environmentally sensitive goods is not necessarily the panacaea for responsible management (at least in Britain):
The other problem was that, as the British public fell back in love with real trees, growers have been selling them at a shorter height, he added. “Over recent years, growers in the UK were inclined to cut their trees as soon as people wanted them and therefore did not allow them to grow larger.”
Maybe the Christmas Tree Growers Association was originally responsible for forestry management on Easter Island?
Privatization of the resources of the commons (fish stocks, white rhinos, etc.) is sometimes suggested as an effective method of conservation, since people will be less inclined to kill off their last white rhino if they have a financial interest in its future[2]. Obviously the Christmas Tree Grower’s Association didn’t get the memo on that one … One argument against this form of stewardship is that as the size of the available stocks decline, the price will go up and the owner may be able to retire permanently on the sales of their last few white rhino horns/christmas trees, giving an incentive to exhaust their stocks as quickly as possible. I think this is why some resource economists would prefer a license system, since an environmentally-minded technocrat can vary the allowable permit as stocks change. I’m guessing that the christmas tree market in the UK is not a perfect analogy for the market in white rhino horns[3], but maybe some of the principles are transferrable. Left to their own devices, owners of a private but exhaustible good may not respond to price signals in a way that is inherently pro-conservation. I guess the perfect market theorist would argue this means that the British preference for christmas trees now outweighs their interest in preserving the stock, and the price reflects this, but I’m not sure if when people pay 10 pounds extra for a bigger tree they are really saying to themselves, “this 10 quid represents the entire extent of the value I place on having a tree at all my future christmases.” But then, the entire concept of perfect information and rational consumers[4] is pretty suspicious if the information marketplace includes the Daily Mail, which will no doubt blame the entire shortage on unelected gypsies in the European parliament.
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fn1: would you be comfortable living in a country run by a man who can’t properly orientate photos before he uploads them?
fn2: A method of resource stewardship that reached rock bottom in one of the cannibalism scenes in The Road.
fn3: You have to get up pretty early in the afternoon to outsmart me!
fn4: I’m only pretending to know what these concepts even are.
Compromise and Conceit 
December 13, 2011 at 7:41 pm
There’s no such thing as perfect information or rational consumers, which is kind of what Adam Smith, Hayek, Bastiat, Bagehot etc. were getting at! 😉
On the Christmas tree grower point, it seems likely that this is one of those exceptions in which suppliers cannot easily respond to demand. The reason is obvious: Christmas only happens once a year, and Christmas trees are not instantly grown. Thus growers are always kind of working blind, having to predict a year in advance (perhaps more, depending how fast trees grow) what fluctuating demand will be.
I don’t think they’re really comparable to white rhinos, because if you’ve ever been to Scotland you’ll know that Christmas trees are farmed – they’re not a resource of the commons.
December 13, 2011 at 11:14 pm
I thought they farmed Guinness in Scotland 😉
I’m actually aware that rhinos and christmas trees are not comparable (I tried pinning our hello kitty christmas tree angel to a rhino once, and the response was quite unusual). But I think the christmas tree situation might provide partial evidence that property rights are not a panacaea as far as conservation goes – as you observe, christmas trees are farmed, so tree farmers have the choice not to kill the young ones this year, but they do. Were property rights to be allocated to, e.g. sharks or white rhinos, even though obviously they aren’t farmed so farmers have less power over the reproduction of their crop, we might still expect that – just like xmas tree farmers, who do have such control – they might kill the younger ones for short term profit. (My point here is that property rights aren’t self-evidently the best solution to the problem of the commons).
I’m sympathetic to the property rights argument but I think it’s probably better handled through the method of licenses, which are essentially property rights but a) avoid the problem of tagging individual sharks/rhinos and b) are purchased in the full awareness that a technocrat with a better understanding of overall fish/rhino stocks is going to put an upper limit on what you can take. I think a) is pretty uncontroversial but b) is very challenging in many countries with poor governance, and I guess there are countries with poor governance structures but quite good private property rights, where licenses wouldn’t be a good alternative to property rights. I can’t name which countries these might be (since poor governance and weak property rights often go together). Maybe actually the USA is one such country. But I still don’t know how one can assign property rights to e.g. Humpback whales.
Incidentally, I read somewhere that the chap who invented that theory about the commons (name and theory presently forgotten in a vermouth-induced fug[1]) also had a very distasteful theory about dumping toxic waste on developing countries because most of them die young anyway. Which aside from its moral dubiousness, would be extremely stupid (since the majority of people in developing countries who make it past 5 make it to 70). So I’m not sure his theories about the tragedy of the commons[2] should be taken too seriously[3].
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fn1: do not take this as evidence that I would remember them if not pressed with vermouth
fn2: ha! succeeds in his saving throw vs. vermouth!
fn3: see what I did then? That would be “poisoning the well,” and it’s a legitimate rhetorical flourish at this stage of the evening. I understand it’s about midday where you are, so probably doesn’t look so cool.
December 14, 2011 at 10:15 am
”Privatization of the resources of the commons (fish stocks, white rhinos, etc.) is sometimes suggested as an effective method of conservation, since people will be less inclined to kill off their last white rhino if they have a financial interest in its future. Obviously the Christmas Tree Grower’s Association didn’t get the memo on that one …”
Sorry. Are you suggesting that Christmas Trees are about to go extinct? If not, why on earth are you comparing them to white rhinos?
I’m guessing that the christmas tree market in the UK is not a perfect analogy for the market in white rhino horns, but maybe some of the principles are transferrable.
Yeah, probably not. Is the problem we’re facing here an inability on your part to understand how conservationism and capitalism work again?
”I think this is why some resource economists would prefer a license system, since an environmentally-minded technocrat can vary the allowable permit as stocks change.”
Or, if they were Greek technocrats they could demand earlier retirement and go on strike for better conditions while totally ignoring both the licenses and environment. Or if they were British jobs-worth technocrats (are there any other kind in the UK?) they could issue X number of licenses and then insist that they many trees be chopped down even if there weren’t that many left? Or they could be EU technocrat who would insist that all countries don’t exceed their licenses nor 3% of their GDP and each year refuse to sign off on the license information until the resource is used up and the world economy collapses.
See what I did there?
”I’m not sure if when people pay 10 pounds extra for a bigger tree they are really saying to themselves, “this 10 quid represents the entire extent of the value I place on having a tree at all my future christmases.””
Maybe I don’t understand how trees breed, but based on my hazy biology recollections it’s not the same way animals do. We don’t need to let trees reach breeding age and meet a catch size requirement before catching them, a la fish. In even if we did then paying $10 more actually is better as it means more tree breeding time.
But mostly I’m pretty sure that your analogy just fails and you should instead think of these as very slow growing corn. Are you going to suggest that agriculture threatens the extinction of the potato?
“I thought they farmed Guinness in Scotland”
The Irish embassy is contacting the Yakuza regarding your lifespan as I type.
”are purchased in the full awareness that a technocrat with a better understanding of overall fish/rhino stocks is going to put an upper limit on what you can take”
I love that you don’t believe in perfectly informed rational consumers, but that you assume this is the default state of being for a government employee. Tell me, is it the government paycheck that makes the technocrat more knowledgeable or do they install a smug sense of superiority separately?
December 14, 2011 at 6:11 pm
Hey! In criticizing my comments about licenses you just ignored all my points about governance. The greek civil service is hardly the best example to shoot down the validity of licenses with when I have stated several times that they don’t work if governance is poor (as in, e.g., Greece, at least as far as the media reporting would have it). Also, FYI, in any thread with a title like this the mandatory example is “faceless bureaucrats in Brussels,” not some happy Greek civil servant. You have to wait for the happy Greek civil servant to bring down the Union before you can do that!
To reiterate: my example of licenses works in a situation where a license is issued by a competent authority, with a well-managed scientific system of population assessment, backed up by good governance. Think tuna quotas … oops, maybe not … or, um, something … (actually I think recreational fishing licenses might work well; and isn’t the Whaling Commission quite successful?)
No I think they actually do have to reach a certain size before they flower. But in this case, the issue is not the existence of trees, but the existence of xmas trees of a certain size. So waiting is an essential element of the business. So in that sense (as opposed to corn or potatoes), there is a comparability with wild fish stocks. The decreasing size of the available trees indicates that these private owners of trees are cutting into their seed stock (consuming trees faster than they’re growing them). If this keeps up for a few more years, there will be an “extinction” event within the UK, and the purveyors of big trees will have driven themselves out of business. Whatever price signals are working in this market have failed to prevent this. That’s the entirety of the analogy, btw.
I said better, not perfect. Also, the technocrat in question could be a farmer’s or fisherman’s cooperative with good knowledge of the industry, and representative of its members. Like the Australian Wheat Board, who … oh, oops. Scratch that. But I think the Australian fisheries authorities have a reasonable reputation, don’t they?
Also, two points about private property and agriculture/ whaling:
1. I have it on good authority (i.e. my Dad told me many years ago) that the number and diversity of potato and apple types in the UK declined significantly over the past 30 years; this also happened to hops, and there’s now a movement to restore hops that had basically reached the edge of extinction. So it is possible for agriculture to eliminate sub-species of even very well-managed crops, that are definitely grown under a private property regime. And famines happened in England up until the mid-1800s, so it’s not like private property regimes didn’t occasionally fail in Agriculture. I’m not sure whether it was the introduction or abolition of subsidies (the corn laws) that solved this problem. I’m also not sure why this doesn’t happen anymore.
2. In Svalbard, the whaling industry of the 17th and 18th centuries actually had a kind of private ownership of whales: the company with the biggest guns drove out its rivals and got complete ownership of all the whales in the area. It was during this era that whales were hunted almost to extinction. This could be a case of easy-come easy-go (like EU carbon emissions permits?) but it’s also therefore a good example of private property rights issued in a situation of poor governance. So while private property rights could be construed as enabling the husbandry of wild animal populations, they don’t do so in a poor governance situation – just like licenses. And you could argue that in sending several gunships to Svalbard, with marines, to secure a port and destroy the Dutch whaling ships, the Muscovy company was investing a considerable amount (in capital, equipment and political capital) into its property rights, so would theoretically want to maintain a long-term population of whales. Any thoughts as to why it didn’t pan out this way?
I think these points are largely moot for animals like fish and whales because they’re too hard to assign individual ownership of (they move, and are affected by events in multiple different countries). For animals that don’t move (e.g. rhinos) I don’t dispute the possibility that private ownership might help to restore their stocks (or, since it could be too late, may have helped to have prevented the destruction of stocks). But the christmas tree example is a data point against that argument.
December 14, 2011 at 7:18 pm
” Also, FYI, in any thread with a title like this the mandatory example is “faceless bureaucrats in Brussels,” not some happy Greek civil servant.”
My comment about the failure to keep spending within 3% was a comment on Brussels technocrats. The Greek technocrats are incompetent and greedy, they bear much of the blame for the current problems. The Brussels technocrats are lazy, pointless, spineless rent seekers, they also bear much of the blame for the current problems.
And I love that the solution suggested to many (all recently?) EU countries ignoring the 3% GDP deficit cap is for the EU to agree a new agreement that says 3% is the cap but for real this time.
It’s not that they’ve failed to learn the lessons of history, it’s that they look at the history and decide “It’s all David Cameron’s fault”. Who do they think they are? The Guardian opinion page?
“actually I think recreational fishing licenses might work well; and isn’t the Whaling Commission quite successful?”
I suspect that recreational fishing licenses work in most cases because there aren’t enough recreational fishers to significantly damage fish stocks in most cases. You do realise that recreational fishing basically requires fishing in the same manner the Romans did it 2 millennia ago, right? If you wanted me to do enough to harm fish stocks that way you’d have to pay me. And at that point, it ceases to be recreational fishing…
And the Whaling Commission banned whaling except for the countries who ignored it (Japan and Norway) and used a flimsy excuse to just chose a level these chose to hunt to. That’s hardly a success by the Commission. It’s more “You can trust the Norwegians and Japanese to take advantage of a common resource without over utilising it”. Though of course that lesson is false the instant it’s tuna…
“If this keeps up for a few more years, there will be an “extinction” event within the UK, and the purveyors of big trees will have driven themselves out of business.”
The “extinction” event your referring to is having to wait longer to get big trees again. That’s a pretty lame extinction. How about we compare it to when I overeat at lunch and then don’t feel like eating dinner even though dinner looks really nice and I probably shouldn’t have had so much junk food at lunch. That seems to be a better comparison. “Stupidity earlier on means you miss a later opportunity, but who cares cause the next opportunity rolls around later anyway.” It’s not like I’m going to run out of hunger, and most of our society is based on an assumption that we’re not going to run out of a later [1].
“Whatever price signals are working in this market have failed to prevent this. That’s the entirety of the analogy, btw.”
Or “Price signals have correctly communicated the consumers preference for smaller trees.” Have you been inside a British house? They’re tiny and dingy and horrible. If I was in one on Christmas I wouldn’t want a bigger tree, I’d want a bigger drink.
“the number and diversity of potato and apple types in the UK declined significantly over the past 30 years; this also happened to hops, and there’s now a movement to restore hops that had basically reached the edge of extinction. So it is possible for agriculture to eliminate sub-species of even very well-managed crops, that are definitely grown under a private property regime.”
Yeah. Agriculture moves to the most efficient types of crops because it turns out people like eating. If we wanted to be purists we could insist on torching modern crops and try to resurrect the ancient ones that the original farmers used. The only problem is the yield on those crops is shite, so you’d probably have to select the 90% of the population you liked least to get rid of.
“I’m also not sure why this doesn’t happen anymore.”
Science!
“the company with the biggest guns drove out its rivals and got complete ownership of all the whales in the area. It was during this era that whales were hunted almost to extinction. “
Let me suggest a different interpretation. There was absolutely no private ownership of the whales so the company with the biggest guns had a massive incentive to kill all the whales while it had the chance and its enemies were gun shopping.
If you know that your property rights last until someone with a better gun shows up. And you know that someone is currently in the gun store, what incentive do you have to leave anything for when they get done with their shopping?
“Any thoughts as to why it didn’t pan out this way?”
Cause they knew that someone with bigger guns could come along at any time and take it off them? Because they had incredibly weak property rights? Because when you only had something for a limited period of time you are encouraged to squeeze it for all it’s worth then leave the dry husk to the next owner?
I can provide an additional example of this. One history book I read on the Middle East suggested that the nature of the nobility there shaped the treatment of the land. Under the system used, nobles didn’t inherit land that was passed on to their kids. They were given the tax rights to the land until it was taken off them and given to someone else. This meant while you were in charge you raised the taxes as high as you could because the money could stop at any time. There was also no incentive for investment because if you invested in anything then it could be the next guy who got the profit.
Please remember Svalbard and anytime you’re arguing that property rights are bad, remind me of it so I can quote it as an example of why you’re wrong. I place this fact in the public domain. Let’s see how well it lasts. [2]
“For animals that don’t move (e.g. rhinos) I don’t dispute the possibility that private ownership might help to restore their stocks (or, since it could be too late, may have helped to have prevented the destruction of stocks).”
I actually don’t have strong feeling either way on ownership of animals like rhinos. I suspect the cost of ownership and maintenance massively outweighs any potential profit, which means that private ownership wouldn’t work. The cost is so high as you’d need to maintain a large area of land (say an African nation) to support a breeding population and then you need to keep all the poachers out. And in return for this you get ownership of animals that are spread across a space the size of an African nation, so 1. You can never find then and 2. If you do find them the odds are you’ve been searching from ages and your miles from a decent toilet.
[1] If you dispute that idea then you should oppose Keynesian economics due to its unfair effect on irrational savers in a bound time set.
[2] I predict that common disinterest will result in its death. But I’m not worried. I’ll just wait till you provide more examples supporting my arguments.
December 15, 2011 at 10:19 pm
Actually, the lessons of history for your average petty Greek bureaucrat have largely consisted of a series of examples of their seniors (and their leaders) getting away consistently with corrupt practices. Greece was politically unstable or a dictatorship until 1975, and its main political figures since then have been awesomely corrupt. So why should your average ordinary Greek person think that this time around their small attempts to rort the system are going to be catastrophic? The difference this time occurred when an incompetent banking system was loaded on top of all that. The truly “reckless” figures in all of this are the German and French banks that the central powers of the eurozone are trying to protect from failure, not some office clerk in Athens who dodged their taxes.
In any case, you’re doing the same thing over – ignoring my points on governance while giving me a lecture on governance. Your response to my Svalbard example is to give me a lecture on property rights without governance … I think I noticed the importance of governance in the post and my last two comments! We’ll come back to this…
Did you read the linked articles? The problem here is caused by consumers preference for larger trees. The dingy nature of British houses aside, if consumers preferred smaller trees the article wouldn’t have been written. The unavailability of large trees is caused by consumers’ preference for large trees. So no, the price signal has not “correctly communicated the consumer’s preference for smaller trees.” It has failed to properly signal the consumer’s preference for bigger trees, which in an ideal market would drive the price up and force fewer and fewer people to buy the prized good. This is a failure by tree farmers to properly price their trees, I’m guessing because they didn’t realize that they were able to cash in on a fad until they’d already sold off most of their trees.
It doesn’t matter what the reasons are though, does it? If there are three animals with ownership rights assigned to them, and their owners realize that animal A is more popular than animal B or C, they’ll stop protecting B and C, or exhaust their stocks of B & C in order to raise capital to invest in A, or force increase stocks of A at the expense of B & C. The same process that happens with crops will happen with animals that have a role to play in biodiversity. Not as efficiently, because the owners have less control over breeding and livestock patterns, but they can still do it.
A reasonable explanation. Again, an example of the effect of poor governance on otherwise good ideas. But in fact, after a few years in Svalbard the whalers came to an arrangement – Muscovy Company here, York Company there, the Dutch over there… so some ad hoc security over property rights was established. So it’s not necessarily the case that they didn’t have secure property rights, after the initial conflicts.
I think the explanation for the destruction of whaling stocks has nothing to do with “the commons,” and is the same (sort of) as what’s happening with shark fins now, and also the christmas tree situation and white rhinos: it’s a response to a fad. Private property rights over endangered animals will (in most cases) work well while there is a stable equilibrium market. In this market, hunters/growers/cutters know what’s going to happen next year, and can plan culls according to the steady breeding propensity of the animals and the steady state of the market – if the number of animals/furs/trees they take increases, prices drop; if they reduce their take, prices rise; overall things remain relatively stable. But the system completely breaks down if there’s a fad. If suddenly consumers decide that rhino horns/shark’s fins are an enormously important good (for status or medicine reasons) then suddenly the price spirals and the hunters/growers/cutters have no reason to restrain themselves. The short term profits outweigh any long term considerations (because they can always invest their profits in a new industry after the stocks are exhausted, and/or they’re stupid) and while the fad lasts severe reductions in numbers drive up prices rapidly, making them self-justifying. If you know the situation is permanent (e.g. plant X is a cure for cancer) you have a huge incentive to preserve it; but if you think the situation is a fad (e.g. some stupid rich people think ground rhino horn will get them laid) then you know the fad will collapse, and you have every reason to exploit it as fast as you can. Add to that discounting (you might not be around in 3 years, etc) and you have a perfect reason to exhaust your stocks as quick as you can. In this situation neither property rights nor unmanaged access to the commons will work – strictly enforced licenses are the only solution. There are many situations like this: whale oil (the main destruction of whale stocks happened just before and during the Industrial revolution, but ultimately petrochemicals rendered whales much less valuable outside the soviet union); shark’s fins (a sudden fad brought about by China’s increasing wealth, which is enormously destructive for sharks); big christmas trees (a sudden fad in Britain that is now sucking in European growers); rhinos; elephants; possibly also baby seals (I can’t remember). The problem is not the particular system, but the frailty of a market of individual hunters/growers making decisions about their own personal wealth in the face of a sudden, huge change in demand.
This doesn’t happen with wheat or potatoes because they’re never a fad.
So I wonder if the solution to this might be something like a mixed property/license system, in which people are granted property rights with some kind of exploitation cap, set based on population numbers. But then, a properly constructed license probably works like this (in that during ordinary market periods nobody needs to fill their quota and the license is irrelevant, because market mechanisms will self correct; but during fads they hit their quota long before they can exhaust the stock).
But yeah, for most endangered animals the point is largely moot, because they bugger off to antarctica before you get a chance to skin them.
December 16, 2011 at 11:24 am
1. You seem to think I’m obsessed with the Greek technocrats. Sorry. No. My comment was about the EU generally. Go re-read the first three paragraphs I wrote in my last comment they clearly blame Brussels technocrats then make a generally observation about the EU and how the EU hasn’t learned from its incredibly recent history.
2. I said that Svalbard had weak property rights because you’d just said they had strong property rights! You said Svalbard was “a good example of private property rights issued in a situation of poor governance”. No it isn’t. It’s an example of weak property rights with weak governance. If you want to suggest strong property rights and weak governance then talk about the US, or feudal society were baron’s had property rights and could flout the law. You can talk about governance all you want, but my point remains that you’re property right example is really weak, regardless of how well it demonstrates weak governance.
This is like me claiming that Afghanistan is a good example of strong governance. It’s just arrant nonsense. I’d expect you to call me on crap like that and you shouldn’t think I’m going to let it sail past either.
3. I agree that weak governance tends to lead to weak property rights. You’d have to work really hard to set it up otherwise – maybe create a libertarian utopia where the only governance was enforcement of property rights…
“ So it’s not necessarily the case that they didn’t have secure property rights, after the initial conflicts.”
The companies may have established property rights over their settlements, but nothing you’ve said suggests they had property rights over the whales at that time. So there was an initial period of weak governance and weak property rights where the guy with the biggest gun got all the whales for while, then there was a period of weak governance and no property rights over whales and moderate property rights over settlements. If we wanted to talk about Svalbard house prices this is interesting, but its shows nothing much changed with regards to the whales, so there’s minimal data that can be extracted from it.
” But then, a properly constructed license probably works like this (in that during ordinary market periods nobody needs to fill their quota and the license is irrelevant, because market mechanisms will self correct; but during fads they hit their quota long before they can exhaust the stock).”
This effectively just restricts people’s ability to exploit their own property (NB This is a statement of fact, not an argument against the position). If the governance is any good it should work. Though I’d wonder why I’d bother owning them if I can’t exploit them the way I choose. The other issue that arises is licenses typically have some sort of cost associated with them. If the license has a cost then the license holder is encouraged to utilise it just to cover the sunk cost he’s already put into it. This may drive up the hunting/catch/usage during the ordinary market period.