With property rights, there are plenty more fish in the sea

We at the Adam Smith Institute need little further evidence that property rights are the best way to an efficient allocation of resources. Even so, more literature on how property rights can work in different industries and regulatory environments is always welcome. A new National Bureau of Economic Research paper looks at how the strength of property rights can affect regulators' willingness to allow the exploitation of natural resources. They focus on the most common system of regulation, which sees a limited number of firms given the right to extract to the level of a cap set by a regulator. They attribute this, at least partly, to a benign form of regulatory capture.

Commonly, it is seen as an unwelcome anticompetitive force, leading to the overexploitation of resources by monopolistic producers in industries with clearly defined property rights. However, because of the temporary, weak, and ill-defined nature of rights in the natural resources sector, the authors suggest that this analysis is not applicable. Instead, they find that

when property rights to the resource are strong, the regulator’s choice (which is the product of resource harvesters’ influence) coincides with the public interest. However, when property rights to the resource are weak, the regulator’s choice leads to overexploitation. This suggests that the resulting extraction level is closer to the socially-optimal extraction level when rights to the resource are strong.

The authors distinguish between 'weak' and 'strong' property rights using the probability that such rights will be revoked – the more likely, the weaker the rights. They propose that, when rights are strong, firms influence regulators (either formally by voting in regulatory councils, or by informal means) to choose a lower extraction rate than they would in a situation with less secure property rights, because they are less concerned about those rights being revoked in the future. In addition, regulators discount utility from future harvests less when there is less risk of rights being revoked, causing them to favour less current extraction.

The paper tests this thesis empirically against novel panel data from 178 of the largest commercial fisheries, and finds that regulators are "significantly more conservative" in their management of resources when property rights are most secure. In those cases where poorly managed fisheries switch to a 'Catch Share' system, with more secure property rights, there is a significant fall in exploitation, supporting their thesis (the fall prior to the switch is attributed to a gradual policy change in the face of overexploitation):

If in practice the Coasean idea that the assignation and enforcement of property rights – through their effects on the decisions of regulators – lead to more efficient outcomes, this has important implications for policy. It gives us an even greater incentive (as if we need it) to promote the institution of secure property rights, especially in those resource-rich low-income countries which could be subject to a swift depletion of natural resources due not only to tragedies of the commons, but also to the insecurity of extractive firms property rights.

They must be mad, literally mad: to be lucky in one's opponents

It is easy to take the view that we British defenders of immigration have never had a tougher time being heard over the omnipresent calls for restrictions, policy changes, and–most frequently–an “open and honest debate” on the subject. Issues of immigration and race relations have indeed increased in salience, but I remain bemused by (and somewhat thankful for) the sterility of the debate as it exists today. Opponents have got to the absurd point of having to pretend that it isn't immigration that they care about, but migration. To this end, they speak about net migration rather than immigration statistics, and give their pressure groups names like Migration Watch. In my view, this is quite transparently a PR move and nothing else. Migration Watch claim that their goal is ‘balanced migration’, though I doubt they would be delighted if tens of millions of Brits were replaced with immigrants each year. I am entirely willing to be convinced otherwise when the soi-disant migration sceptics urge the government to do everything it can to reduce net migration – including using state power to increase emigration (perhaps subsidies for yet more Brits to move to sunnier climes).

When one's opponents have to contort themselves in this way, resorting to the specious economics of the so-called lump of labour fallacy (which most good evidence seems to refute), one should be grateful. They are hobbled by their partial adherence to ideas of acceptable discourse set out by those who would see them silenced. They are less likely to be accused of racism while talking about pressure on wages or queues at the GP surgery than about the merits of multiculturalism.

Various arguments against immigration are unheard beneath this cacophony of mistaken economics. Speaking to the sense of insecurity–alienation, even–that some feel in response to the changing character of their communities, these points can be troubling when made with passion. Enoch Powell wasn't citing the fluctuation of net migration statistics in his Rivers of Blood speech. Neither was Robert Putnam (though not an opponent of immigration per se) in Bowling Alone when he reflected that the more diverse the community

…the less people vote, the less they volunteer, and the less they give to charity and work on community projects. In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings.

The observation that these arguments aren’t being made is less cause for optimism and more for wariness. For the moment, while our opponents for the most part refrain from basing their arguments on normative claims about the cultural effects of immigration, and focus on claims about economics, we can rebut, present evidence and, I hope, convince some people that they are mistaken. Indeed, when surveyed, people report that they are most concerned about immigrants’ effects on jobs, public services, and wages, rather than culture, so it might follow that they can be convinced otherwise by contradictory evidence.

However, if the point comes when those opposed to liberal immigration policy realise they are abiding by standards which restrict their side and weaken their argument, and stop doing so, those of us who want immigration (and lots of it) should be worried. The other day, Nigel Farage spoke about protecting our ‘Judeo-Christian’ culture, and yesterday of the moral cowardice of Europe: a taste of what we've avoided, or of something yet to come?

Welcome Sophie and Nick!

Sophie Sandor and Nick Partington are joining the ASI as gap-year employees for six months. We asked them to write this post to introduce themselves to our readers.

Sophie:

As I almost enter my third week with the Adam Smith Institute, I welcome myself as one of two new gap year students evolving in a world-leading think tank. And how thrilling it is to be here; immersed in the works of my favourite thinkers and a family of ambitious, intelligent minds. It really is the dream.

Crafting ideas that have changed our world before and will change it again. And if you love a challenge - even greater is the fun for the views we advocate are not the most popular or acceptable. Like our relationship with what we consume: we are not always attracted to the healthiest options. We are a consistent rebellion against common thought.

In my time so far I've witnessed eager 6th form students gather for our annual Independent Seminar on the Open Society, celebrated the 25th Anniversary of the Fall of the Berlin Wall with former European leaders and met and worked with a plethora of inspiring, hard-working individuals. I could not be more excited for my imminent future here and look forward to writing more about my educational and economy ideas.

Nick:

Having finished my A Levels in History, Politics, and Economics, not excited by the prospect of ‘finding myself’ while pretending to help build an orphanage in Mongolia, I decided to eschew ‘gap yah’ clichés and apply for the Adam Smith Institute’s gap year internship programme. Few places are as keen to engage with pre-undergraduate students as the ASI, and I am delighted to have been selected.

Being sceptical of what Jeremy Bentham called the “rhetorical nonsense” of natural rights theory, I admire places like the ASI which provide compelling justifications for a wide-ranging liberal programme quite apart from the vague philosophical assertions so often invoked by others. More than anything, I admire the ASI for so often saying the unpopular thing and holding the counterintuitive line against public opinion on so many issues. There are few institutions with the status of the ASI which approach consensus with such irreverence.

At the same time, the ASI makes prominent what I see as another powerful justification for free markets and the minimal state. For me, that classically liberal social and economic policy benefits those worst off in society is extremely important, and too rarely emphasised in circles on the liberal right (with one notable exception being Matt Zwolinski and the other Bleeding Heart Libertarians). Framed in this way, proposals such as freedom of movement across borders, sometimes dismissed by those otherwise passionate about reducing the coercion of the state, become powerful tools for ameliorating suffering in the most deprived areas of the world.

Working with and learning from the ASI's employees, all of whom do fascinating work on policy, is a rare opportunity. Added to that are the various things which come about from working in Westminster and being able to live in London for the duration of the position. I am looking forward to taking advantage of these while I am here because, perhaps unsurprisingly, there aren’t many Institute for Economic Affairs events on the flat tax in rural Northumberland.

Also, during my time at the ASI, I am hoping to write further about how and when ideas of meritocracy, debates in libertarian political philosophy, and utilitarianism can (and should) affect politics and policy research.