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Yes, I realize that was the intended argument. It's a charming idea that, unfortunately, happens to be wrong. It works fine as long as you have single ownershi

Yes, I realize that was the intended argument. It's a charming idea that, unfortunately, happens to be wrong. It works fine as long as you have single ownership by a relatively rational person. hyperbovine pointed out the problem with the latter assumption; but the former is similarly problematic. On the other hand, once ownership passes to a collective entity with diffuse responsibility (e.g., a corporation), it's easy to end up in a situation where no single individual actually has an incentive to ensure the long-term benefit of the collective, and by extension the elephant's survival. A simple scenario along those lines is low-level employees paid unrelated to their impact on the company, high-level employees rewarded in response to short-term results, and a large number of small shareholders, none of whom have a large enough stake to justify time spent monitoring the company's actions directly. Privatization as a cure-all for tragedy of the commons is an idea with the rough shape of a solution, but oversimplified into something barely sensible enough to be called "wrong". Actual economics tends to be a bit more complicated than what popular presentations suggest, or what people with quasi-religious notions about how the economy should work wish.

gojomo 17y ago
Sure, a corporation might be insane, irrational, myopically short-sighted, or so dysfunctional that the management and employees pursue their own short-term enrichment at the expense of the shareholders' long-term assets. But these things, when they happen, are recognized as problems and eventually corrected -- at least enough so that most large corporations don't malfunction in asset-obliterating ways. (Even if you think corporations amorally destroy others assets via negative externalities, they do a reasonable job of protecting their own assets -- so much so that even labor unions and left-wing wealthy people keep most of their wealth in corporate shares.) That is, corporations malfunction plenty, but not often catastrophically, and they remain pretty good at holding and efficiently exploiting assets without destroying them. Compare that to the case of an unowned, depletable commons that's exploited my many individuals and corporations. If you think one corporation could tend to poor management, then the 'commons' case has no hope: every participant, including amongst them flawed corporations with short-sighted managers, can only profit by racing others to use the pool before it's inevitably gone. A government or regulatory agency could theoretically act the part of a single rational long-term-perspective owner -- but those multiparty hierarchical institutions have the same flaws you've pointed out in corporations. In my observations, they're even worse -- larger, with responsibility even more diffuse, and the 'shareholders' even more distracted and unable to hold staff accountable for egregious failures to protect stewarded assets. I'm far from certain monopoly ownership would work but it needs to be compared against what's actually happening, and against what's actually possible with unowned/government-driven approaches. It's not enough to just note, corporations sometimes malfunction and ownership might also result in overfishing.
- camccann 17y ago
  Well, I never claimed to have a solution. I was just remarking that "privatize it!" is, alone, not a solution either (although a viable solution might very well involve privatization). But yes, the eventual reality check of competition, stock prices, &c. is why market-based economies work out better in the end. But that's only a statistical guarantee, and doesn't necessarily help with specific cases, particularly when destruction is somewhat irrevocable, as with depleting wildlife populations. When a massively dysfunctional corporation couldn't really do any permanent damage, giving the market free rein is probably the best choice for average expected outcome. And actually, in some ways regulatory agencies have more incentive to "protect" whatever it is they exist for--they wouldn't have jobs otherwise, and there's less likely to be the destructive short-term incentives pushing in the other direction. The flip side is that they also have incentive to complicate, prolong and expand the scope of whatever problem they're supposed to be "regulating"--eventually "protecting" it to the point where no one wants anything to do with it because of the mountains of paperwork involved. As an aside, this is why unchecked monopolies are so dangerous--no competition means no reality checks and nothing to keep the company from going off the dysfunctional deep end.

gojomo 17y ago

Sure, a corporation might be insane, irrational, myopically short-sighted, or so dysfunctional that the management and employees pursue their own short-term enrichment at the expense of the shareholders' long-term assets. But these things, when they happen, are recognized as problems and eventually corrected -- at least enough so that most large corporations don't malfunction in asset-obliterating ways. (Even if you think corporations amorally destroy others assets via negative externalities, they do a reasonable job of protecting their own assets -- so much so that even labor unions and left-wing wealthy people keep most of their wealth in corporate shares.) That is, corporations malfunction plenty, but not often catastrophically, and they remain pretty good at holding and efficiently exploiting assets without destroying them. Compare that to the case of an unowned, depletable commons that's exploited my many individuals and corporations. If you think one corporation could tend to poor management, then the 'commons' case has no hope: every participant, including amongst them flawed corporations with short-sighted managers, can only profit by racing others to use the pool before it's inevitably gone. A government or regulatory agency could theoretically act the part of a single rational long-term-perspective owner -- but those multiparty hierarchical institutions have the same flaws you've pointed out in corporations. In my observations, they're even worse -- larger, with responsibility even more diffuse, and the 'shareholders' even more distracted and unable to hold staff accountable for egregious failures to protect stewarded assets. I'm far from certain monopoly ownership would work but it needs to be compared against what's actually happening, and against what's actually possible with unowned/government-driven approaches. It's not enough to just note, corporations sometimes malfunction and ownership might also result in overfishing.

camccann 17y ago
Well, I never claimed to have a solution. I was just remarking that "privatize it!" is, alone, not a solution either (although a viable solution might very well involve privatization). But yes, the eventual reality check of competition, stock prices, &c. is why market-based economies work out better in the end. But that's only a statistical guarantee, and doesn't necessarily help with specific cases, particularly when destruction is somewhat irrevocable, as with depleting wildlife populations. When a massively dysfunctional corporation couldn't really do any permanent damage, giving the market free rein is probably the best choice for average expected outcome. And actually, in some ways regulatory agencies have more incentive to "protect" whatever it is they exist for--they wouldn't have jobs otherwise, and there's less likely to be the destructive short-term incentives pushing in the other direction. The flip side is that they also have incentive to complicate, prolong and expand the scope of whatever problem they're supposed to be "regulating"--eventually "protecting" it to the point where no one wants anything to do with it because of the mountains of paperwork involved. As an aside, this is why unchecked monopolies are so dangerous--no competition means no reality checks and nothing to keep the company from going off the dysfunctional deep end.