Monday, November 06, 2006

Buy a whale: the Coase theorem in action

This is a great news item for anyone who teaches environmental economics and struggles to find real world evidence of the Coase theorem. An animal protection charity (WSPA) wants to use Ebay to raise $180,000, the amazingly high value of meat from a single fin whale. It then wants to pay this sum to Icelandic whale hunters and ask them to catch one less whale. This is a very nice example of the 'victim' compensating the 'polluter', OK the hunter, in order for them to do less of the activity which incurs a cost on the victim.

It was Ronald Coase who first argued that there should be an incentive for polluters (hunters) and victims to get together to come to a mutually beneficial agreement. Irrespective of whether the polluter has the right to pollute or the victim has the right to clean air, the result should be an 'efficient' level of pollution (whales caught). In reality there are a number of obstacles that would prevent such an agreement taking place and hence real world examples of 'Coasean bargaining' are hard to come by.

In this case individuals are asked to pledge sums of $10 or more, in so doing they would be providing clear evidence of passive use values, i.e. the extent to which individuals value an environmental asset even though they do not use, or plan to use, that asset in any. Another environmental economic concept neatly demonstrated.

Whether it works is another matter. Even if enough money is raised, the WSPA acknowldges that the whale hunters may refuse to accept the payment. A nice idea though and a good example of creative thinking on the part of an animal protection charity.

http://news.bbc.co.uk/1/hi/sci/tech/6108090.stm

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