Friday, April 17, 2015

Big Fish, Little Fish

And the undersea economy

As I mentioned in my last post we spent Spring Break at a Mexican uber-resort. And while we enjoyed it – sprawling pool, wave pool, swim-up bar, very good food – I kinda missed the smaller St.Croix resort we visited a few years back. While uber-resort offered everything, the interactions with other guests were brief and often coerced by hotel staff. CONGA LINE !!! By contrast at the smaller resort – perhaps merely because it was a more condensed space – we made week-long friends with other guests and had a lot a personal time with staff who remembered our names day to day.

Which brings me to one of our day trips in Mexico: a morning catamaran sail with snorkeling. The sail itself wasn't very relaxing as wave runners and speedboats motored up and down the coast. But once head down in the water off Playa Maroma, all the noise disappeared and my mask provided my own little window on the coral and fish below.

The Mexican government, tour operators, and guides are very jealous of this natural resource – don't disturb the coral, hands off the fish, wear only water-based sunscreen – and rightly so: the government imposes a 2-buck-a-head fee on visitors, businesses make a profit, and workers make a good living on wages and tips.

And just as said in my last post, the serenity got me thinking about economics. (I am such a geek.) My son, more aptly, was thinking about becoming a marine biologist.

So my thoughts revolved around the locals, the government, and the property rights assigned to the reef and wildlife. By imposing a fee and terms of use, the government was claiming ownership while allowing the locals to conduct business and make a living; tour operators probably need licenses and workers pay taxes. But the government's property right is not absolute: coral and fish are affected by externalities such as pollution and rising water temperature that are beyond the government's ability to control.

Consumer anonymity is the invisible hand of the market economy. But producer anonymity (even when the product is a by-product of consumption) can result in negative externalities where costs are not borne by the producer but, rather, by someone else. The ownership of land is clearly defined and what occurs on my land is my right and responsibility: if your dog poops on my lawn I can insist that you pick it up; if I foul the ground water that leaches from my property I can be fined or sued. However I don't own the air that flows over my property and am limited in seeking compensation if my neighbor fouls the air beyond my liking.

Under my land the situation gets complicated, a situation exemplified by the drought in California and the use of its aquifer for agricultural irrigation. The Central Valley aquifer stretches 400 miles under towns, farms, and residences. And since water flows underground, it can't be assigned ownership to property.

My Mexico example shows that collective good arises from enforcement of property rights as well as from cooperative action. Conservation and preservation can be seen as a renewable resource: overfishing bad, sustainable fishing good. Coastal preservation goes beyond saving the reefs for tourists: it also reduces flood risk by acting as a buffer between the sea and populated areas. (By contrast subsidized insurance encourages coastal construction and degradation.)

Part of this story is big guy versus little guy. Property rights and responsibilities are absolute only if they can be enforced: they do not depend on the size of the property. But the risk from externalities is inversely related to property size: an acre fouled is much more damaging to a small landholder than large. And the Playa Maroma reef is but a tiny section of Mexican coastline, but it makes the local economy healthy.

This post is a little disjointed and I'm rambling a bit, so let me wrap it up. On another daytrip we visited and swam in cenotes: limestone sinkholes often filled with water (which would allow us to swim, duh). The cenotes were sacred to the Mayans, believing they were gateways to the afterlife.

Our right to earn a living is a gateway to prosperity and the pursuit happiness. Our right to pursue a living is also sacred. Enforceable property rights for individual and collective action benefits all – no matter the size of the fish or size the pond.