Privatize Truffula Trees?

Paul over at Public Brewery is a very bad man!

He's tempted me with one of the most seductive themes (to me), and one of my favorite books.

A couple of months ago, Paul wrote a post humoring a rebuttal to Dr. Seuss' The Lorax. Published by the Wood Flooring Manufacturer's Association, The Truax mirrors the tree-protecting Lorax with an ugly wood ogre character who learns from a logger, among other faulty lessons, that clearcutting forests promotes biodiversity. Hmm, too bad for all the animals whose habitats are destroyed (ivory-billed woodpecker anyone?).

I've delayed my response, mulling over the different approaches to how I could react to a post Paul made on Monday about a new Lorax development - this one focusing a post by Jonathan Adler in The Commons blog, in which Adler tried to use the The Lorax to justify privatizing natural resources because, presumably, privately-owned resources are better managed than resources held in "common."

I'm not wholly against the idea. How much better, for example, might our national forests be protected if, instead of the National Forest Service allowing logging companies to clearcut the timber, the forests were managed by the Natural Resources Defense Council, or the Sierra Club. The National Forest Service is the managing agency for a collectively-owned resource in which competing commercial interests having goals at odds with the purposes of that preserving that resource are allowed a stake.

Ultimately, I decided the narrative approach was most satisfying. Here, finally, is my long and very personal response (thanks Paul):

In some ways, it was the rock upon which the great ship of my graduate school career was smashed into splinters. A difficult ending, but in another sense, a new beginning and a journey along an unexpected path in which the intellectual underpinnings of my thoughts were enriched.

I wasn't happy when, after a disagreement with the Tulane Latin American Studies Assistant Director about my choice of thesis topics, I was released from the program. I always felt that certain of the (former) program's administrators steered students away from issues that were "too contemporary" (translation: political). As it happens, the program was created with an endowment from Sam Zemurray, the king of United Fruit and Central America's banana republics. His daughter, Doris Stone, was a major patron before she passed away in 1994, and the program continues to receive major support from the enrollment of military intelligence recruits. The topic I so impudently chose to research was the history of Central American land tenure, and (that nasty little promise of revolutionaries) land reform.

After much persuasion, I was allowed to proceed with my research, but on the condition that my principal advisor be selected for me. This new advisor seemed obsessed with the goal of reigning the entire universe of observable phenomena into a Ricardian paradigm. His impatience with contrary evidence, or facts that could not be easily explained by rent-seeking behavior, visibly registered on his face with a tightening of the lips and a stiffness of the joints. Here was my challenge. I would have to master a new paradigm, if I could, apply it to the issue of land reform, and come out the other side alive and of sound mind - all within a matter of weeks.

But that's another story.

The story I wish to tell, that relates to The Lorax, The Truax, and property rights generally, begins with my introduction to institutional economics and property rights theory: Garrett Hardin's "Tragedy of the Commons." I had been exposed to it before, but I never had to vigorously refute its argument that private property always produces the most efficient outcome. I always held to the moral virtue that, viewing the highly skewed pattern of land ownership in Latin America, people ought to have a right to redress an imbalance of resource distribution. But from an economic perspective, what then of efficiency, economic development, and land stewardship? Leaving alone the issue of whether one person's property should be taken to give to another more needy person and where that leads, could small farmers efficiently produce and compete in the marketplace? Would their condition improve or worsen? Would the society and economy progress? Would masses of small landowners be good stewards of the land?

The answers to all of these questions, and many more, as one might suspect, depends upon the circumstances. There is no one solution that can be applied to all problems. As all problems look like nails to a hammer, to the neoclassical institutional economist, all economic problems look like issues of well-defined private property rights, where the stream of benefits from economic activity accrue to private owners who tend to be, therefore, good stewards of those assets. It is an attractive argument, but one whose narrow focus fails to account for, principally, the role of culture, ethics, and morality in guiding personal behavior.

As I would come to learn, after becoming totally submersed in the literature of property rights throughout history, what we in the West (the contemporary United States in particular), have come to think of as property rights is private, fee simple, titled property. You buy piece of land. Perhaps the bank loans you money. You have a deed of transfer. When you finish paying off that piece of land, it's yours to (presumably) do with whatever you please.

Throughout history, among many different cultures, and even within the United States, however, there exists an entire spectrum of property rights - everything from non-property (often misidentified as "common property"), to collective property (or "common property"), to private property. Ownership can only be secured as long as an asset can be enclosed or defended from others. In particular, when a resource becomes scarce, from basic supply and demand theory, there will be a tendency for ownership to be applied to that resource. Ownership will obtain when the costs of defining and enforcing property rights are less than the benefits of ownership. Typically, those costs are driven down by the formation of state institutions that codify the requisite practices, and that establish a system of penalties for violators, or for economic damage to owners.

In reality, however, there are lots of resources that aren't brought into a private domain. The typical examples are air and surface water, over which it is impossible to define rights. Nevertheless, it is possible to define a person's right to clean air downwind of a factory, and clean water downstream from a urban sewer outlet, and therefore, the need for pollution regulations. But what of more esoteric rights?

What of your right that no harm be done to your unblemished view of a mountainside, or a beach, or a forest? What of future generations' rights to clean air, water, and species diversity? How should we calculate the cost of what future generations' would pay, or charge us, not to be inflicted with the problems of global warming, or species extinction, or genetic manipulation of vital food cultivars. The answer, or course, is that the cost of calculating those rights approaches infinity. It can't be calculated - which is why it is always discounted in neoclassical models.

It is into this realm - when the cost of well-defined property rights is prohibitive, where public works projects are undertaken (like terracing for plots on mountain hillsides), or when society so values a resource that private ownership (and private consumption) is banned - that collective property rights emerge over relatively scarce (or valuable) resources. A society decides collectively how that resource may be accessed and used, and the costs of enforcing rights over the resource may rely heavily upon cultural norms of behavior. You're not suppose to urinate in a public pool, just as you're not supposed to cut down trees in a national park to start a campfire. There may be penalties for violating collectively-established rules, but the least expensive mechanism for enforcement is the violator's fear that he will be publicly shamed.

An important detail that is often (or conveniently) overlooked is that ownership is only ever guaranteed by the consent of society. Whether a government guarantees a private right to an asset, or whether a group or club governs ownership rights, a private owner only enjoys the fruits of ownership as long as society agrees to that owner's right (note the recent New London Supreme Court decision for a test of that fact). An owner's right can be taken away or circumscribed if society deems it necessary. This is the fundamental basis for the alphabet soup of agencies and regulations that guide every type of owner activity from noise regulations, to pollution controls, to workplace protections.

Another important detail that is often overlooked is the role of personal behavior in the enforcement of property rights, and in the smooth functioning of a marketplace. If everyone tried to violate everyone else's property rights, the costs of enforcing everyone's rights, and of enforcing every contract, would make the costs of property rights prohibitively high for their existence. What if government had to enforce every individual's right to live in his own home? What if every family had to arm itself to defend a piece of land. This is akin to the illustration of what would happen to traffic (and personal safety) if nobody obeyed traffic lights (although at least one person has pointed out to me that some societies seem to find ways to adjust to this reality - albeit in a chaotic manner). The result, of course, would be total chaos, the collapse of rules governing ownership, and the demise of economic activity related to private ownership. But another result would be a tendency toward collective organizing to defend smaller groups within similar geography, with kinship ties or cultural bonds, and successful groups would grow in size over time.

For an example of what happens when norms of personal behavior are violated - of what the average person should be able to trust and expect of a peer - witness the recent fiascoes on Wall Street. A multitude of corporate leaders (Enron, Worldcom, Tyco) violated not just legal contracts, but basic expectations that they would tell the truth. Driven by greed, they were allowed to lie about the worth of their companies because wholesale deregulation of the banking industry led to inadequate societal, governmental, and market oversight, resulting in corporate bankruptcies, collapsing investment funds, stock market crash, people's life savings dissolving, and pensions disappearing. These business failures and the chaos they caused have proven a powerful case for much stronger regulation of corporate behavior vis a vis the resources they manage, because the harm caused to millions of people who will never be compensated. By the way, note that regulations cost money!

It would be much cheaper if we could all rely upon people's honest behavior. We should be suspicious of people who suggest that regulations aren't needed, and make sure they are people we can trust.


Having clarified some of the basic principles of property rights, I can now address, specifically, my own analysis of Jonathan Adler's alternative understanding of Dr. Seuss' The Lorax.

Under what kind of property rights regime can we deduce the Truffulas to be held?

In a situation defined as "the tragedy of the commons," everyone with access to a scarce resource in which property rights are not defined (or are not enforceable), will attempt to harvest as much of the resource as they can, maximizing their personal well-being, even to the point of exhausting the resource. According to the outcome obtained by the "prisoner's dilemma," the share of a resource that one individual doesn't harvest will be taken by someone else. Therefore, each individual's well-being is diminished by the amount of a resource they leave to someone else - an irrational outcome.

The prisoner's dilemma was a concept that emerged from the Nash Equilibrium (yes, bonus point for those who recognize this as the theory developed by the protagonist in A Beautiful Mind). Unfortunately, the prisoner's dilemma assumes that individuals exist in a sterile environment devoid of interaction and evolving information about the need to conserve a resource. In reality, over time, people may find that cooperative behavior produces a better outcome for everyone, than does the blind pursuit of individual advantage. Enforcement mechanisms may then be established to force compliance with an agreement about resource use, and to punish free riders.

None of this seems to apply to the Truffulas. There isn't a group of people chopping down Truffulas. There's just one person, the Once-ler. The only other character interested in the Truffulas is the Lorax, and he's not chopping down Truffulas. The Truffulas may exist under a non-property regime, but without additional actors harvesting Truffulas, by definition, there is no "tragedy of the commons" situation at all.

The role of the Lorax is very interesting. As someone else noted in the Adler discussion, the Lorax might be, for example, a member of an indigenous forest tribe who claims ownership of the Truffulas under a collective property regime that the Once-ler doesn't recognize, or that the Once-ler chooses to ignore. Were that the case, however, one would expect Dr. Seuss to tell an entirely different story about how the tribe comes into conflict with the Once-ler. Unless the Once-ler possesses individually an overwhelming technology to overcome the tribe, or an army with which to threaten the tribe, he would otherwise be quickly subdued by the tribe.

There exists the possibility that the Once-ler belongs to the same group as the Lorax, and that the group owns the Truffula Trees collectively. This scenario most closely approximates that of "tragedy of the commons," in which the Once-ler represents a free rider, taking as he pleases without penalty from the group. The Lorax appeals to the Once-ler's conscience to no avail. The introduction of industrial capitalism and consumerism has altered the balance of the group away from traditional group values of conservation, instead toward commercialization of Truffula Trees by a rogue member of the group. In this scenario, the Once-ler improves his personal well-being at the expense of other members of the group. Notably lacking from this scenario, however - what would be critical for the argument that the resource is collectively owned to hold - are other members of the group who appear to protect the resource. I would think that more than an appeal to the Once-ler's conscience would be brought to bear on his activities, but some physical coercion to force him to halt his activity. Clearly, if the Lorax is to be considered a member of the group that collectively manages the Truffulas, his appeals to the Once-ler are representative of a culture that values the Truffulas, and other members of the group should appear to reinforce the Lorax's message, or to restrain the Once-ler from furthering his activities.

Bear in mind the fact that, even if we assume the Truffulas are collectively owned and managed, the Once-ler's activities represent stealing from the group, and he would be punished. The same would be the result if the Truffulas were privately owned. Nothing prevents the Once-ler from stealing from a private owner (except his personal morals and fear of punishment), but if he were to steal, punishment would follow if the Once-ler could be caught and prosecuted. There is no difference. Both a collective regime, and a private regime, have rules of enforcement to prevent behavior that is harmful to others.

Again, Dr. Seuss doesn't tell this story. He doesn't describe a hostile tribe, or any other group claiming ownership of the Truffulas, nor does he describe the Once-ler as a rogue member of a group whose culture inveighs against overexploitation of the trees.

Neither does Dr. Seuss explain if the Once-ler owns the Truffula Trees. Let's just assume, since Mr. Adler seems to think the best outcome is obtained by private property rights, that the Truffulas do exist in a free-for-all non-property regime. Let's then assume that private property rights over the trees are then granted to the Once-ler. Is the Once-ler then bound to the (theoretical) laws of private property to better manage the Truffula Trees?

No!

Why?

The basic answer, as one could deduce from the explanation above, is that the problem is multi-faceted, but we don't have enough information to even speculate. Dr. Seuss didn't intend a discussion of property rights. Therefore, it is an absolute fallacy to suggest that private property would produce a better outcome. Dr. Seuss was interested in promoting a culture of conservation.

We don't know what the Once-ler's motivations are, beyond greed. And that's Dr. Seuss' point. He is not criticizing non-property ("common property") resource management. He's criticizing greedy behavior in any ownership regime along the entire spectrum of ownership rights.

If, for the sake of argument, the Truffula's are privately owned, nothing prevents the Once-ler from harvesting the very last tree if, as someone pointed out in the Adler discussion, he intends to convert the land to some other more highly-valued use - maybe a Wal-Mart, or luxury condominiums. Part of the problem may be that there isn't a market in which to price the esoteric value of the Truffula Trees - their value to the Lorax. Maybe the Lorax doesn't have anything of value to compensate the Once-ler for income lost from leaving the Truffulas unharvested. Certainly future generations can't negotiate with the Once-ler for the price they would pay the Once-ler to preserve the Truffulas. The problem, ultimately, in a private property regime is that in the absence of a market, or societal conventions about appropriate activity, the private owner will do whatever he wants.

There is only one set of solutions that would guarantee conservation of the Truffula Trees if they are held under private ownership.

1) The Lorax could lobby the government for rules against Truffula logging.

2) The Lorax could get the government to compensate the Once-ler for leaving the Truffula's alone.

3) The Lorax could help the Once-ler to realize the economic benefits of an alternative use for the Truffulas that preserves them - like tourism.

4) The best outcome, however, would be if the Lorax could successfully cause the Once-ler to change his behavior - to change his attitude toward Truffulas, and forego some of his income from harvesting Truffulas. The latter solution is the least expensive, and the most efficient.

I think this last idea is precisely what Dr. Seuss intended. He wants people to stop and think before they go about destroying the natural world. He wants us to stop our wastefulness, and to appreciate the beauty and diversity of life in the natural world. He wants us to think about more than how much money we can make by exploiting a resource to exhaustion.

It seems to me that author of The Truax, and those who suggest that Truffulas would be better managed under a private property regime, can be grouped along with proponents of the so-called "Wise Use" movement, which advocates privatization of public lands and elimination of government regulations over natural resources. We should be highly suspicious of people who suggest that private property is a panacea. It is far more likely that they just want to eliminate public oversight, so they can herd more cattle into national parks, to level mountainsides and pollute streams while strip-mining for coal, and to clearcut the forests that exist for the appreciation of all citizens.

As was always the case, Dr. Seuss created a fantasy world - devoid of the entanglements of civilization. In The Lorax, that fantasy world was created to make a very simple point about how greed can diminish life. To read more into The Lorax is just wrong. Furthermore, the responsible reader should suspect the motives of anyone who suggests that private property is a desired outcome of The Lorax. I am confident that Dr. Seuss wanted readers of The Lorax to come away with a sense of tragedy at the losses the world can suffer due to industrial consumerism and greed. He was appealing to the good in people, asking them to consider more thoughtfully how they can change their behavior to create a better world, irrespective of the property rights regime, or any other institutional arrangement.

If you've made it this far through the post, and wish to read more, I strongly recommend anything by Douglass North.