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The Tragedy of the (unmanaged) Commons

Mason Gaffney: Land as a Distinctive Factor of Production

Access to land is open by nature until and unless land is appropriated, defended, bounded and policed.  No one claims land by right of production; no producer must be rewarded to evoke and maintain the supply; and submarginal land is not worth policing, unless to preempt it for its possible future values, or to preclude anticipated competition for markets or labor.  Centuries of human customs have developed around regulating common use of lands with open access.

Tenure control of some land tends to drive the excluded population to untenured land (the "commons"), creating an allocational bias unless all land is either tenured or common.  Thomas N. Carver styled this the phenomenon of "The Congested Frontier", and he might have added backwoods.  Land which is partly common today includes parks and public beaches, streets and highways, water surfaces, wild fish and game, and some at least of the "wide open spaces" in less hospitable regions.  Today there are homeless people for whom life would literally be impossible without some form of access, however precarious, to untenured land.  Some of it, ironically, is near the centers of large cities, where the price of land is highest.

No great damage is done if submarginal land is untenured: it won't be used anyway.  There may be damage, however, when rentable land is untenured.  It attracts too many entrepreneurs with too much labor and capital, leading either to the use of private force to establish tenure - unjust, dangerous, and wasteful – or overcrowding and waste, called the "dissipation of rent," when the average cost of the average firm equals the average product of labor and capital.  Fisheries and open range are classic cases.

Some land of high value is untenured or underpriced because consumers resist paying for what they think of as "free" because it has no cost of production, and which nature continues to supply even though the price is too low to ration the land economically.  Examples:
  • water whose natural source is in southern California (it is tenured, but underpriced);
  • city streets for movement and parking space, even in New York;
  • air and water used for waste disposal in populated areas;
  • housing that is subject to rent controls;
  • popular beaches and trails;
  • oil and gas subject to field price controls; and so on.
When land is open to public access, so maybe the capital used to improve it, e.g. paving of rights-of-way.  Such capital may also suffer the "tragedy of the commons" of excessive congestion.  This open access to capital is mainly an incident to the lack of land tenure - a characteristic more of land than of capital as such.26.
Remember, capital occupies space, but land is space.
26.     The question of public restrooms is unpleasant but essential.  It is a question whether to describe this as access to public capital or to the waste-disposal aspect of land, but viewed as the latter it is as undeniable a natural right as one can imagine.  The late Arthur Becker was one of the few to elevate this lowly, embarrassing topic from being a subject of evasive scatological humor to the philosophical/ethical level it really deserves.  A society may quickly be read, and in part judged, by its public restrooms.  Consider this jointly with the matter of the homeless in crowded cities.
It is also possible to legislate and subsidize open access to some kinds of labor and capital services, e.g. public health measures, and education.  These differ from common lands in that they are not open "by nature," but by art and public expenditure. Read the whole article

Mason Gaffney -- Cannan's Law

Mason Gaffney -- Canada's System of Revenue Sharing

It seems to me therefore that we need to face up to the question that is known in my trade as Fiscal Federalism, that is, how is money going to be distributed by the federal government out of its so-called surplus, either to people or the States, or localities? ...

The reason it's so hard to sell growth policies at the local level today in the United States is very much due to the fact that the United States federal government taxes people and it gives subventions to landlords. So the landlords can get the subventions without having the people. So who needs people? That's it in a nutshell. We need to reverse that, I think, if we're going to be able to make Georgism work at the local level. ...

At any rate, let's begin by looking at the similarities between the federal systems in the United States and Canada. In both countries we find something called 'vertical balancing' which means that the senior governments send money to the junior governments. We find also something called 'horizontal balancing' which means that the payments are made more to the poorer governments, those that are poorer on a per capita basis, than to richer ones. ...

 ... Cannan's Law. ... But the general idea is, you may think you have tenure control of land but if the municipal government can tax that land and use that money to finance public welfare services, public education and other things that are open to all comers, then you will end up with an uneconomical distribution of population. ...

At the same time, in both countries you find something I will call Hammer's Law. This is not a carpenter's tool but again the name of a man, an economist in Missouri, who observed in 1935 that if you compared population to land values in the different counties of his State (in the very poor counties of the Ozarks the land was hard scrabble land of very little value, with the very rich lands in the north-western part of the State, which resembles Iowa) you found that the population density was much greater on the very poor land of the Ozarks than it was on the very rich land of the northwest. ...

Now another similarity to the two countries us that the subventions that do go from the federal government to the provinces in Canada (and you find a similar thing in the United States) do not come from the richer provinces. They come instead from the general fund, the general taxpayer. There is in other words more vertical balancing than there is horizontal balancing (horizontal balancing you remember means equalization among the different jurisdictions). It's a little like what somebody said about foreign aid. 'Foreign aid is a device by which poor people in rich countries are taxed to subsidize rich people in poor countries.'

We'll see that equalisation in most countries works something like that; that is, in addition to this inter-provincial equalisation, there's a tax shift involved where local sources of taxation like the property tax are being displaced by the federal income tax. I suppose Ferdinand Marcos would be a splendid example of the kind of person I was talking about in the poor country and in West Virginia you have all these coal companies whose owners live in Palm Beach, whose shareholders live in Palm Beach and such places, who benefit from an inter-state equalisation that benefits West Virginia. Well these are similarities.  ...

The federal aid in Canada goes to provinces, whereas in the United States it goes to specific cities, The U.S. Congressman likes to have his fingerprint, as they say, on every dollar that goes from Washington. ... So in the States the idea has been: Tax the States according to their population and then give the money back according to political power. In the United States Senate it means that the smallest State has just as much clout as the biggest State or would have if their senators weren't so merchantable. (I mean, in California when we need something we just look to Nevada or one of those places for a Senator who is having difficulty raising funds for his next election. But that's another story.) ...

But the most delightful distinction about Canadians is the strong and explicit recognition among almost everyone, even if he's an economist, who discusses this subject, that different resource endowments are the basis of inter-provincial differences. Equalisation in Canadian politics means sharing the economic rent. Everybody talks that way. Canadian economists even when they come to the States talk that way. Just as though rent were a permissible word in polite discourse. It's very refreshing. However there's a very selective attitude towards rent -- towards what rents are shareable, I should say.

  • Rents from oil and gas are fair game.
  • Forest revenues are fair game.
  • Mineral revenues of other kinds are fair game.
  • Water power is fair game.

But now how about the rents that are generated by the valuable lands of Montreal, or Toronto, or some of those other big and powerful cities in the east? They are not fair game. As a matter of fact, if you pore through the fine print of the equalization law, which I did on the airplane, you find the most interesting exception to what's included in the formula. I'll explain the formula to you in a moment if you are still awake. ...

Now let's look at the sharing formula. The sharing formula in Canada is essentially based on population and potential tax base. And it can be made to look very complicated but I think I've boiled it down to its essence. You take a province's percentage of the population of Canada, and then you take the percentage of the tax base that it has, subtract that and that gives you another percentage. And then you multiply that times the total tax revenue that's collected throughout Canada from that tax source, and then you pay them that amount out of the provincial treasury. ...

The conclusion of all this is that the Canadian system is really better in terms of its Georgist implications because the payments to the provinces, with all the faults that I've described, are essentially based on population. Population is in the formula. And if you compare this with the way things are done in the States, population plays a very minor role in the formula for equalisation payments in the United States.

Now, how should it be done? Well, there's a well known Georgist economist who figured this out a long time ago and wrote an article about it. His name is Colin Clark. ... He came up with a plan for collecting economic rent at the federal level, and he said what we really should do, and this I think is the ultimate equalisation payment, is we should classify local jurisdictions according to land value per capita, and those that have the least land value per capita, we'll leave all of that land value for them to use for local purposes. But then we will graduate the federal land tax according to the amount of land value per capita in the jurisdiction, and thus we will have a federal tax that automatically achieves inter-regional equity, without all this razzmatazz that I've been describing about inter-regional equalisation payments. Read the whole article

Mason Gaffney:  Property Tax: Biases and Reforms
Priority #1. Safeguarding the property tax
Priority #2: Enforce Good Laws
Reassess Land Frequently
Use the Building-Residual Method of Allocating Value
Federal Income Taxes
Priority #3. De-Balkanize Tax Enclaves
A. Rich and Poor
B. Timber and Timberland
The Role of Timber and Timberland
Two More Areas Deserving Attention
  • Offshore Oil
  • Tax All Natural Resources Uniformly and Comprehensively
Priority #4. What Tax to Fight First?
Priority #5: Make Landowners Pay Their Taxes...

Very likely it is wise to limit fish catches and avoid the "tragedy of the commons." It is also necessary to police the waters and keep out alien interlopers, a dicey business calling for the full power of a strong national government. It is not necessary, however, to give away the quotas so dearly policed. It is obvious to any objective observer that the quotas should be sold or (better) leased to the highest bidder. If the Feds insist on giving them away, states and localities should class them as taxable property subject to a high rate. The best time to levy appropriate charges is when quotas are new, and the injustice of the present dispensation is apparent to all.


Mason Gaffney:  Rent, Taxation, Dissipation and Federalism

I. The issue
II. Sources of rent
III. Dissipation of rent before the fisc takes it: what and how?
A. Dissipation means waste and destruction or suppression.
B. How rent is dissipated.
C. Open access followed by tenure: rent-seeking institutions.
IV. Dissipating rent via public spending
A. Taxes and lease provisions need not twist incentives.
B. Public spending of tax proceeds may dissipate rent.
C. History of recognition of this spending effect
D. Successful compromises with the principle.
1. Barriers to immigration or sharing.
2. Selling voters on the benefits of immigration
E. Less successful compromises with the principle
1. Public works.
2. Subsidized public works in tandem with exclusionary zoning
3. Hocking the revenues
V. Solutions
A. Socialize rent at the national level.
B. Limit benefits to citizens per se (not to landowners per se).
C. A social dividend to citizens is the obvious route.
D. Return rents to local school districts in inverse proportion to local tax base per capita (the Colin Clark principle).
E. Promote James Madison and Neville Chamberlain to elder statesmen emeritus.

The question before us is "how can we prevent the dissipation of resource rents?"

This cuts to the heart of ancient and modern issues of land tenure, growth management, fiscal Federalism, tax methods, and spending priorities.

I premise we understand "rent" to mean the income imputable to natural resources, and natural resources means gifts of nature, fixed and limited in quantity. We understand there are marginal resources yielding little or no rent, grading up to superior ones yielding much. We understand there is a dynamic secular tendency for rents to rise with rising population and moreso with rising disposable income per capita. There is a tendency for marginal exhaustible resources to rise in value with the depletion of superior ones that are normally used up first.

Because land is not produced, rents may be zero or less, and rise without limit. There is no competition from new production.

I premise resource rents are the joint product of three distinguishable factors:

  • nature;
  • complementary private activity; and
  • public works and services, publicly financed.

I premise rent is the most basic and general source of taxable surplus, especially in an open economy in which other input costs and product prices are set at world levels in world markets.

Triffin's epigram says "Surpluses are either competed away or imputed away." Rent is what we call it when they are imputed away. He might have added, they may also be frittered away: that is what we seek to avoid. ...

How rent is dissipated.
Open access, tragedy of commons. Arthur Young, Scott Gordon, Garrett Hardin, et al. Simple cases like open range, fisheries, public parks and beaches, freeways: a principle easily perceived (although not usually by undergraduates). ...  Read the whole article

a synopsis of Robert V. Andelson and James M. Dawsey: From Wasteland to Promised land: Liberation Theology for a Post-Marxist World
Because George asserted, "We must make land common property," he is sometimes erroneously regarded as an advocate of land nationalization. But, as we have seen, he was nothing of the sort. The expropriation of land makes it practically impossible to fairly compensate people for the improvements to land, which are their legitimate property. George's system renders to the community what is due to the community, without doing any violence to the wealth that has been fairly earned by productive workers.

Common property in land is sometimes discredited by equation with what Garrett Hardin calls "The Tragedy of the Commons." Referring to the common lands that were a major English institution until the mid-nineteenth century, Hardin describes the tendency of individuals, each rationally pursuing self-interest, to overgraze, denude, and use the commons as a cesspool. That which belongs to everybody in this sense is, indeed, in danger of being valued and maintained by nobody.

The enclosure movement ultimately brought an end to this ecologically destructive process, but not without literally pushing people off the land, exacting a baneful price in human misery that might well be termed "The Tragedy of the Enclosures." George hit upon a way of securing the benefits of both commons and enclosures, while at the same time avoiding their evils. Land value taxation rectifies distribution so that all receive wealth in proportion to their contribution to its production. This liberates the economic system from exploiters who contribute little or nothing. Apportioning the wealth pie fairly increases the incentive to increase the size of the pie. The market becomes in practice what capitalist theory alleges it to be -- a profoundly cooperative process of voluntary exchange of goods and services. Paradoxical though it may seem, the only way the individual may be assured what properly belongs to him or her is for society to take what properly belongs to it: The ideal of Jeffersonian individualism requires for its actualization the socialization of rent.

Just as Marxists err in insisting that everything be socialized, extreme capitalists err in insisting that everything (even public parks and forests!) be privatized. The middle way is to recognize society's claim to what nature and society create -- the value of land and its rent -- so that working people, including entrepreneurs, may claim their full share of what they create. In this balanced approach can be found the authentic verities respectively inherent in socialism and individualism. Read the whole synopsis

Peter Barnes: Capitalism 3.0: Preface (pages ix.-xvi)

I began pondering this dilemma about ten years ago after retiring from Working Assets, a business I cofounded in 1982. (Working Assets offers telephone and credit card services which automatically donate to nonprofit groups working for a better world.) My initial ruminations focused on climate change caused by human emissions of heat-trapping gases. Some analysts saw this as a “tragedy of the commons,” a concept popularized forty years ago by biologist Garrett Hardin. According to Hardin, people will always overuse a commons because it’s in their self-interest to do so. I saw the problem instead as a pair of tragedies:

  • first a tragedy of the market, which has no way of curbing its own excesses, and
  • second a tragedy of government, which fails to protect the atmosphere because polluting corporations are powerful and future generations don’t vote.

This way of viewing the situation led to a hypothesis: if the commons is a victim of market and government failures, rather than the cause of its own destruction, the remedy might lie in strengthening the commons. But how might that be done? According to prevailing wisdom, commons are inherently difficult to manage because no one effectively owns them. If Waste Management Inc. owned the atmosphere, it would charge dumpers a fee, just as it does for terrestrial landfills. But since no one has title to the atmosphere, dumping proceeds without limit or cost. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 1: Time to Upgrade (pages 3-14)

If you heard about the commons before you picked up this book, your impressions were probably shaped by a 1968 article called “The Tragedy of the Commons.” In that article, biologist Garrett Hardin used the metaphor of an unmanaged pasture to suggest a root cause of many planetary problems.

The rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another. . . . But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit — in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest. . . . Freedom in a commons brings ruin to all.

Hardin’s notion of tragedy was taken from philosopher Alfred North Whitehead, who in turn drew upon Aristotle. According to Whitehead, the essence of tragedy is “the remorseless working of things.” In Hardin’s view, commons are fated to self-destruct. There’s nothing humans can do in the context of the commons to halt this inexorable outcome.

Hardin was right about humanity’s unrelenting destruction of nature, but wrong about its cause and inexorability. He blamed the commons itself, when the true destroyer was, and remains, forces outside the commons. In Hardin’s hypothetical, the commons does nothing to protect itself against those forces. It’s completely unmanaged. But there’s no inherent reason why commons can’t be managed as commons.

Contrary to the picture painted by Hardin, medieval European commons (which included not only pastures but forests and streams) were far from unmanaged. They had rules barring access to outsiders and limiting use by villagers. For example, a rule that persists today in many Swiss villages is that villagers can’t graze in common pasture more animals than they can feed over winter on their own land. A managed commons, in other words, isn’t inherently self-destructive. The real danger to the commons is enclosure and trespass by outsiders. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

In his essay “The Tragedy of the Commons,” Garrett Hardin envisioned only two ways to save the commons: statism and privatism. Either a coercive government would have to stop humans from mindlessly destroying the planet, or private property owners, operating in a free market, would have to do the job. In the next two chapters I’ll show why neither of these approaches suffices.

In considering the potential of governmental remedies, let’s clarify what we mean. We’re not talking about tyranny; we’re talking about legitimate forms of government activity such as regulation, taxation, and public ownership. Can these traditional methods effectively preserve common wealth for our children? ... read the whole chapter



Dan Sullivan: Are you a Real Libertarian, or a ROYAL Libertarian?
The tragedy of the common misunderstanding
In their search for excuses to deny any common right to land, royal libertarians are fond of citing Garrett Hardin's work, "Tragedy of the Commons." Or at least they cite the title, which is all most royal libertarians are familiar with. Hardin is himself an advocate of land value taxation, and has criticized misinterpretations of his work with the lament that "The title of my 1968 paper should have been `The Tragedy of the Unmanaged Commons.'" [Emphasis Hardin's] ... Read the whole piece

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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper