Category - Econ-Utopia

[See part one]
Jonathan Teller-Elsberg, CPE Staff Economist

It’s worth remembering that commons already exist, lots of them, in various places and parts of the world’s economies. Most often, however, they are informal arrangements—holdovers from before the rise of modern market capitalism. In general, commons are not recognized formally by governments as a type of property arrangement deserving protection, the way conventional private property is legally protected.

It is this lack of protection that enables the famous “tragedy of the commons.” Barnes argues that, contrary to the standard perception, commons aren’t undermined by internal tragedies—they are victims of infringement from the outside. Marx described the enclosure of common land into private land as “the primitive accumulation of capital”; today, Barnes is primarily concerned with the ability of corporations to horn in on remaining commons as they seek new resources to exploit for private gain. A recent example is with the digital TV broadcast spectrum, with an estimated value of $70 billion but which the U.S. government gave away for free in 1996 to media conglomerates, even though the airwaves are supposed to be the shared property of all Americans.

The 14,500 doctors and 58,000 nurses of this health-care organization serve 7.6 million enrollees, delivering care that outperforms both commericial insurance and Medicare–let alone poor, underfunded Medicaid–on a host of indicators of quality of process and outcome. While Medicare costs increased from $5,000 to $6,800 (36 percent) per patient-year between 1996 and 2004, its costs stayed constant at $5,000 per patient-year. And the patients receiving this high-quality, moderate-cost care are disproportionately poor and disabled.

Is it Kaiser Permanente? Is it a new for-profit chain of health clinics? No, it’s the Veterans Health Administration (VHA).

Jonathan Teller-Elsberg, CPE Staff Economist

A few weeks ago, CPE Staff Economist Jerry Friedman wrote an Econ-Atrocity reviewing Bill McKibben’s new book, Deep Economy. Though he says McKibben “has written a clear attack on much of what ails us,” Friedman nonetheless criticizes McKibben for approaching the environmental and social problems of the day from an individualist perspective. For all that McKibben wants to promote and revive “community,” he has the attitude (says Friedman) of a “personal Salvationist . . . [who thinks that] the enemy [is] ourselves: we use too much, waste too much, want too much; and the only salvation for the environment is to change our preferences, use less, recycle more, and choose to live simply.” What McKibben misunderstands or ignores, Friedman argues, is the power of social institutions to drive behavior, regardless of the desires and seemingly free choices of individuals.

I think that Friedman will find solace in Peter Barnes’ recent book, Capitalism 3.0: A Guide to Reclaiming the Commons, since Barnes’ approach is definitively institutional. The problem, according to Barnes, is that the structure of the economy and society leave too much power in the hands of corporate capitalism. Even if all the CEOs and boards of directors and politicians were replaced with kind-hearted souls like McKibben, we would still face pretty much the same issues of environmental decay, economic inequality, and other social ills—the logic of capitalism and the legal structure of private property rights force the leaders of corporations to do what they currently do. He learned this from personal experience as co-owner and manager of several business ventures, most famously Working Assets (a telephone and credit card company that donates one percent of gross revenues to progressive charitable organizations). “I’d tested the system for twenty years, pushing it toward multiple bottom lines [that consider social and environmental impacts in addition to profit concerns] as far as I possibly could. I’d dealt with executives and investors who truly cared about nature, employees, and communities. Yet in the end, I’d come to see that all these well-intentioned people, even as their numbers grew, couldn’t shake the larger system loose from its dominant bottom line of profit.” (Ironically, Bill McKibben is quoted on the front cover of Capitalism 3.0 helping to promote Barnes’ book.)

By Matthew Riddle, CPE Staff Economist

The Regional Greenhouse Gas Initiative, or RGGI, grabbed headlines in Massachusetts recently when Governor Deval Patrick signed onto it, committing Massachusetts to a cut in its emissions of greenhouse gasses from power plants, and reversing Mitt Romney’s decision to abandon the agreement. In addition to rejoining RGGI, Patrick also outlined some proposals for its implementation, which may prove to be even more significant than his decision to join.

By Jonathan Teller-Elsberg, CPE Staff Economist

With Al Gore on Oprah giving his “inconvenient” PowerPoint presentation, new reports of melting ice sheets and rising sea levels, and the release of the British government’s Stern Review, which is the latest major estimate of the economic costs of climate change, the issue of global warming is becoming a part of mainstream politics and kitchen-table conversations. Since the burning of fossil fuels (oil, natural gas, and coal) is the main source of human-caused warming, the need for alternative forms of energy is clear.

By Jonathan Teller-Elsberg, CPE Staff Economist

In the U.S., talk of tax reform usually means debates about taxes on income and wealth. A little less common are discussions of flat taxes and a shift from payroll, income, investment, or property taxes to consumption taxes—that is, a federal sales tax.

We’ve seen the miserable results of lowering taxes on the rich, and we’ll be dealing with the massive government debts for decades to come. Flat taxes are simply another way to lower taxes on the rich, under the guise of simplifying the tax system. (To be sure, simplifying taxes is not exactly something to dismiss out of hand—the system is far more intimidating than it should be.) The supposed advantage of a shift to consumption taxes is that the shift away from payroll and/or other taxes should lead to more jobs. This is because a payroll tax makes it “expensive” for a business to have an employee. If the payroll tax is reduced or eliminated, the business will have more money available to hire additional workers. The problem with consumption taxes is that they tend to be regressive—meaning that they fall hardest on lower-income members of society.

Another type of tax reform that deserves more attention is the environmental tax shift (ETS), also known as the green or ecological tax shift. The idea here is to increase taxes on activities that result in environmental damage and use the money generated to reduce other taxes by the same amount. As with the consumption tax idea, most proposals center around reducing payroll taxes.

By Heidi Garrett-Peltier, CPE Staff Economist

In 1810, 84 percent of the U.S. workforce was employed in agriculture. Today, it’s down to two percent. Thanks to dramatic increases in productivity resulting from advances in technology and the mechanization of agriculture, we can produce a great deal more food with far fewer people than we could 200 years ago. But does this progress come at a cost?

Large-scale corporate farms are able to out-compete small-scale (often family-owned) farms and drive them out of business. Economies of scale (the competitive edge gained by being bigger) enable large corporate farms to produce more cheaply than smaller farms. These large farms are able to invest in expensive machinery and buy their inputs (fertilizer, seed, etc.) more cheaply than small farms, which in turn makes it difficult for small farms to compete. One might think that corporate farming is better for the consumer – large farms, producing more efficiently, can offer products at lower prices. In addition, the vast network of global agriculture allows consumers access to many varieties of foods throughout the year that can not be produced locally.

By Thomas Masterson, CPE Staff Economist

The Basic Income Guarantee (BIG) is just what it sounds like: a guaranteed basic level of income. Most proposals suggest that it be distributed to every adult citizen without regard to income or wealth. BIG would replace all of the social programs currently in place that attempt to reduce or eliminate poverty, such as welfare, unemployment insurance, and Medicaid, with a monthly payment sufficient to lift an individual out of poverty.

Interestingly, this proposal is drawing support from the right as well as the left (leftists have long supported versions of this proposal). Even Charles Murray (think “The Bell Curve”) likes it: he has written a book about it in which he seems to say that he thought it up, calling it “The Plan.” By eliminating the need to monitor for fraud and abuse of the system, BIG would actually be cheaper than our current system of multiple benefits and eligibility criteria. BIG would also get rid of the disincentive to work built into the welfare system–often working for pay leads to a decrease in benefits, making work a less attractive option. And, by allowing people to decide on their own what to use the money for (though Murray’s plan calls for $3,000 of his $10,000 annual grant to be spent for health insurance), BIG would increase efficiency. Lefties like it because it frees people from dependence on employers and gives them more bargaining power to demand good working conditions and better pay.

By Jonathan Elsberg, CPE Staff Economist

One of the more attention-grabbing ideas that has crossed academic disciplinary boundaries, as well as entered into everyday language, is the notion of the “tragedy of the commons.” Made most famous by late Professor of Human Ecology Garrett Hardin in an essay by that name, the idea is not too complicated, very powerful–and rather alarming.

The tragedy describes a situation in which there is public access to a resource. It is to the advantage of each individual to use a little bit extra of the resource, but when all individuals do this simultaneously, the resource is ruined for everyone. Dozens of references to the “tragedy” can be found in newspapers in just the last year, dealing with issues such as depleted fisheries, email spam, risky growth in hedge-fund investing, and worker migration and associated destruction of local communities.

While resources available “in common” sometimes have been tragically exploited, reality is (happily) more complicated, and tragedy is not destiny. One aspect sometimes overlooked by pessimistic analysts is that there are different kinds of common property resources. Some resources are totally open to any and all users, and are properly called “open access” rather than “commons”. These are the ones that are most likely to suffer tragic overuse. The earth’s atmosphere, and its ability to absorb global warming pollution, is one example.

Often, the “cure” recommended for these tragic commons is either strict government control or the conversion of the resource into pure private property. Under the ruling ideology of our times, it is the latter that gets the most promotion.

However, many resources are held in common by a group which is able to sustainably use the resource without resorting to the use of strict private property. The members of the group, be it a local community, professional organization, or national society, control and share access to the resource, yet establish and follow rules of behavior that override greedy urges and keep individual’s use of the resource to an acceptable level. These successful cases of working social rules and norms are arguments against the call for knee-jerk privatization of common properties, or for total government control.

Some examples include the sharing of fishing zones in Alanya, Turkey, maintenance of acequia irrigation systems around New Mexico, U.S.A., and the Ozone Transport Commission NOx Budget established among eight northeastern U.S. states to reduce smog-related air pollution.

These are important lessons, because some potentially tragic commons cannot be fully privatized or put entirely into the hands of the government. For example, avoiding global warming will require extensive international cooperation (there is disagreement on whether this cooperation can be built from the ground up, or must be imposed by a powerful, central world power). Not only will the citizens and businesses of each country have to take responsibility for their CO2 emissions, but each government will have to help establish a working institutional framework for such responsibility within its borders. However, each government, business and individual faces the tragic temptation - allow all the others to control their CO2, while we fake compliance and reap the economic advantages.

No international treaty will hold if the signers don’t want to follow it. Only through combined dedication to the well-being of the whole along with creative, yet feasible, new institutions to guard against cheating will the individual community members make triumphant rather than tragic choices. It is through the study of past common property success and failures that we can learn to succeed more often.

Sources:

Herman Daly, “Logic that leads to a plundered world,” The Guardian (London, England), September 1, 2003, pg. 25. www.guardian.co.uk/wto/article/0,2763,1033054,00.html

Nives Dolšak and Elinor Ostrom, eds., The Commons in the New Millennium: Challenges and Adaptations, MIT Press, 2003. (I especially recommend the chapter by Einar Eythórsson on Icelandic fisheries. It is an excellent analysis of a privatization scheme with mixed positive and negative results.)

Garrett Hardin, “The Tragedy of the Commons,” Science, Vol. 162, No. 3859, Issue of 13 Dec 1968, pp. 1243-1248. (Also available online at www.garretthardinsociety.org/articles/art_tragedy_of_the_commons.html.)

Tor Hundloe and Daryl McPhee, “No reason why we can’t have our fishcake and eat it,” Courier Mail (Queensland, Australia), August 25, 2003, pg. 11.

Barney Jopson, “Don’t turn to hedge funds when depressed,” Financial Times (London, England), March 31, 2003, pg. 25.

Las Vegas (New Mexico) Citizens’ Committee for Historic Preservation, “Historic Acequias of Las Vegas, New Mexico” web-brochure. www.nmhu.edu/research/cchp/tours/acequias/default.htm.

Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge University Press, 1990.

Jonathan Turley, “Uncle Sam and spam,” Milwaukee Journal Sentinel, (Wisconsin, USA), April 28, 2003, pg. 13A.

(c) 2003 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.