photo: jon hanson

It was interesting to open up BBC News and to read the article “Ownership key to saving fisheries“. In brief, essentially scientists have surveyed fisheries across the world and found that giving fishermen long-term ownership of fisheries is the way to keep stocks at a sustainable level. It’s a vindication of basic economics.

In this article, I want to discuss the issue of deforestation in the Amazon - one of the biggest environmental issues facing the world. I’ll run through a simple demonstration on how we could preserve the Amazon Rainforest using the exact same principle as that used in the Amazon.

The Amazon Rainforest

The Amazon Rainforest encompasses 1.4 billion acres (5.5 million square kilometres). In the 10 years from 1991 to 2000, about 500,000 square km of the Amazon was lost to deforestation. It’s been estimated that 17.1% of the Amazon has been lost to deforestation since the 1970. And at the present rate of deforestation, the Amazon Rainforest will be reduced by 40% by 2020.

That’s a big problem for all of us. The Amazon is a huge carbon sink - it locks away huge amounts of the greenhouse gas CO2. Deforestation not only reduces the world’s capacity to lock away CO2; it leads to the release of CO2 too. The existence of the Amazon Rainforest has huge benefits for all of us.

photo: angela7dreams

Ask a typical person on the street how to solve the problem of deforestation and you’ll get answers such as: prevent illegal logging or ban deforestation of the Amazon.

But then put yourself in the position of somebody who lives in or near the Amazon. Obviously, you’ll need to feed your family and make a living. Cut down some trees and sell the timber to make a bit of money. Use the land to farm and to graze cattle and to feed your family.

I think it’s extremely unfair for anybody to tell the people who live in the Amazon they can’t do this. I mean, how are they expected to make a living otherwise? Sure, we all lose out from the deforestation because it contributes to climate change. But it’s only fair that the people living in the Amazon should primarily be allowed to look after themselves and their families in the only way they have.

The Problem with Al Gore’s Public Commons

In 1989, Al Gore said:

Contrary to what Brazilians think, the Amazon is not their property, it belongs to all of us.

Essentially, Al Gore was blaming the Brazilians for cutting what does not belong to them - the Amazon.

Here’s the problem of a public commons. It could get a little mathematical, so bear with me.

Let us, hypothetically, say that a single acre of the Amazon Rainforest benefits everybody in the world by one millionth of a dollar. Every acre of the rainforest locks away CO2… that’s good news

photo: markg6

According to Google, the current world population is 6.6 billion. So the economic value to society of an acre of rainforest would be $6,600.

Now, we’ll enter the mindset of somebody living in the Amazon (call him Barack). Just like the rest of us, Barack benefits from lower CO2 levels by one millionth of a dollar. CO2 levels don’t have any local effects so we can make this assumption the benefits are the same for everybody. So the economic value to the private individual (Barack) is $1/1,000,000.

Barack could choose to cut down this acre of rainforest. He can sell the wood, and then he can graze his cattle on the cleared land. That’ll probably make him a good $2,000 or so.

So Barack has two choices:

• Cut down the rainforest and make $2,000 of money
• Leave the rainforest standing; benefiting him by $1/1,000,000 in a lower CO2 level.

It’s quite obvious to see that Barack will cut down the rainforest. He doesn’t care about the rest of us who all lose out by a millionth of a dollar - in fact it’s such a small amount that none of us would really make a big fuss about it. Would you make a fuss about a millionth of a dollar?

But look at it from a global perspective: as a global community, we’re all losing out on the rainforest worth $6,000 and getting timber and beef which is only worth $2,000 to us. As a community, we’re made $4,600 worse off by Barack’s decision.

We can pay Barack to preserve the rainforest

photo: Hamed Saber

So here’s a proposal. What if we gave Barack the deeds to that acre of rainforest? He’ll own it and have responsibility to look after it. In fact, we’ll collectively give Barack a sum of $4,000 to preserve that rainforest because we know we’re getting a lot of good out of it.

Now Barack has two options:

• Cut down the rainforest and make $2,000 of money
• Leave the rainforest standing and make $4,000 of money

It’s a no brainer. Barack will preserve the forest.

Now look at it from a global perspective. Collectively, the global community is benefiting by $6,600 from Barack’s acre of rainforest. But we’re only paying him $4,000 to preserve it - so we’re collectively made better off by $2,600 by Barack’s decision to save the rainforest. Everybody wins from property rights.

To sum it all up…

Without property rights: Barack cuts down the rainforest. Barack makes $2,000. The world loses out by $4,600. CO2 levels rise.

With property rights: Barack preserves the rainforest. Barack makes $4,000. The world benefits by $2,600. CO2 levels fall.

So there we have it. The big environmental issues won’t be solved by telling other people what to do, banning deforestation or giving money to people to plant trees. We don’t need to wait for scientific advances to fix the environment. We just need some open-minded thinking and some basic economics.