Imagine a large pasture where anyone can graze their animals, without restriction or exclusions: the commons.
That pasture will be over-grazed, if there is no way of restricting access.
A single pasture owner, when deciding whether to increase the stocking rate, will weigh up the effects on the pasture’s ability to sustain the rest of the herd. Too high a stocking rate means less production overall – something not considered when a single small farmer is deciding whether to add one more beast onto a large commons.
Economists have spent much time thinking about commons problems. The University of Indiana at Bloomington’s Elinor Ostrom won the Nobel in Economics for her work documenting how and when communities can manage the commons without tragedy.
Communities can and do solve commons problems.
But creating a commons problem is fairly simple.
Take an exhaustible and appealing resource.
Make sure fees for using that resource are small to non-existent. Don’t allow local communities to manage access to it.
Then, run advertising campaigns telling everyone from everywhere around the country and around the world to come and visit.
Be sure not to do much to help those local communities strengthen the infrastructure needed to support that demand.
It won’t be long before sites are overwhelmed. Locals will be frustrated. The experience for visitors will be sub-par. And the agency nominally in charge of the thing will be “chronically overworked and underfunded,” as David Williams described the Department of Conservation, despite DoC growing from 2,124 staff in 2018 to 2,740 by the start of 2024.
The Department of Conservation oversees some of the world’s most beautiful places.
It does not charge for access to most of them. Places with no access charges and without other ways of rationing demand wind up severely degraded.
And for places where it does charge, like the Milford Track, DoC clearly does not charge enough. A commons problem then does not degrade the tracks, because entry is limited, but facilities could be improved through higher user charges. When bookings for the Great Walks for the 2024-2025 summer season opened in May, the bookings website crashed under the load. Far more people are willing to pay the going rate to stay in the huts during peak season than there are bunks to accommodate them, so they book out as fast as the DoC website can accommodate.
So. New Zealand has managed, through deliberate policy choices, to collectively engineer a situation in which a lot of people would be willing to spend money to enjoy the conservation estate, but are prevented from doing so. At the same time, DoC facilities are often not up to scratch for want of investment.
If movie theatres were put under DoC management, you’d have one chance every year to book tickets, every ticket would cost $1 regardless of day of the week or time of day. You’d have to bring your own popcorn and drink because nobody would be allowed to sell you any on site. Parking would be free but they would have five spaces for a 100-seat theatre with nobody checking up on the derelict van that’s been parked in one of those spots for months. To cap it off, they’d constantly be begging taxpayers for more money to be able to hire a cleaner to make the floors less sticky.
Policy has created a commons problem.
So far, policy solutions have not taken the problem particularly seriously.
International visitors are charged a $35 levy when entering the country that helps to fund facilities for tourists; the government has proposed increasing the levy to $100.
But this kind of levy cannot really solve the problem.
While the funding will surely help, the charge hardly reflects visitors’ burden in specific places. Once a tourist has paid the levy for entering the country, there’s no extra charge for visiting every busy tourist destination rather than just a few that are off the beaten path.
It would be like charging a $10 entry fee into a movie theatre, with visitors then able to stay and watch as many films as they liked.
It is not surprising that DoC claims only to have capacity to look after 70 percent of the visitor network. It charges nothing to access most of it.
Economist Alex Tabarrok has described prices as a signal wrapped in an incentive. A high price signals relative scarcity. That signal encourages some customers to shift to relatively more abundant alternatives, and suppliers to scale up production.
A visitor levy for entering the country does none of those things.
Some problems are hard. This one isn’t. User charges at popular tourist sites would help ease congestion and fund improvements in tourist and recreational facilities. They would also mean that government funding for DoC could focus on conservation projects.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
Economists have spent much time thinking about commons problems. The University of Indiana at Bloomington’s Elinor Ostrom won the Nobel in Economics for her work documenting how and when communities can manage the commons without tragedy.
Communities can and do solve commons problems.
But creating a commons problem is fairly simple.
Take an exhaustible and appealing resource.
Make sure fees for using that resource are small to non-existent. Don’t allow local communities to manage access to it.
Then, run advertising campaigns telling everyone from everywhere around the country and around the world to come and visit.
Be sure not to do much to help those local communities strengthen the infrastructure needed to support that demand.
It won’t be long before sites are overwhelmed. Locals will be frustrated. The experience for visitors will be sub-par. And the agency nominally in charge of the thing will be “chronically overworked and underfunded,” as David Williams described the Department of Conservation, despite DoC growing from 2,124 staff in 2018 to 2,740 by the start of 2024.
The Department of Conservation oversees some of the world’s most beautiful places.
It does not charge for access to most of them. Places with no access charges and without other ways of rationing demand wind up severely degraded.
And for places where it does charge, like the Milford Track, DoC clearly does not charge enough. A commons problem then does not degrade the tracks, because entry is limited, but facilities could be improved through higher user charges. When bookings for the Great Walks for the 2024-2025 summer season opened in May, the bookings website crashed under the load. Far more people are willing to pay the going rate to stay in the huts during peak season than there are bunks to accommodate them, so they book out as fast as the DoC website can accommodate.
So. New Zealand has managed, through deliberate policy choices, to collectively engineer a situation in which a lot of people would be willing to spend money to enjoy the conservation estate, but are prevented from doing so. At the same time, DoC facilities are often not up to scratch for want of investment.
If movie theatres were put under DoC management, you’d have one chance every year to book tickets, every ticket would cost $1 regardless of day of the week or time of day. You’d have to bring your own popcorn and drink because nobody would be allowed to sell you any on site. Parking would be free but they would have five spaces for a 100-seat theatre with nobody checking up on the derelict van that’s been parked in one of those spots for months. To cap it off, they’d constantly be begging taxpayers for more money to be able to hire a cleaner to make the floors less sticky.
Policy has created a commons problem.
So far, policy solutions have not taken the problem particularly seriously.
International visitors are charged a $35 levy when entering the country that helps to fund facilities for tourists; the government has proposed increasing the levy to $100.
But this kind of levy cannot really solve the problem.
While the funding will surely help, the charge hardly reflects visitors’ burden in specific places. Once a tourist has paid the levy for entering the country, there’s no extra charge for visiting every busy tourist destination rather than just a few that are off the beaten path.
It would be like charging a $10 entry fee into a movie theatre, with visitors then able to stay and watch as many films as they liked.
It is not surprising that DoC claims only to have capacity to look after 70 percent of the visitor network. It charges nothing to access most of it.
Economist Alex Tabarrok has described prices as a signal wrapped in an incentive. A high price signals relative scarcity. That signal encourages some customers to shift to relatively more abundant alternatives, and suppliers to scale up production.
A visitor levy for entering the country does none of those things.
Some problems are hard. This one isn’t. User charges at popular tourist sites would help ease congestion and fund improvements in tourist and recreational facilities. They would also mean that government funding for DoC could focus on conservation projects.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
1 comment:
Ngai Tahu operate serious tourism business under a trust model and pay NO IRD taxation on trust profits . This is the first issue that neads fairness and Parliamentary priority to stop the tourism division by ethnicity.
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