WEW-051

Microeconomics Question from Walter E. Williams:

Oysters settle and grow in shallow water in areas known as oyster beds. In some states (private property states), most oyster beds are privately owned and can only be exploited with the permission of the owner. In other states (common property states), most oyster beds are the common property of all and may be exploited by anyone. Investigators found that:

• (1) prices of oysters were lower in common property states than in otherwise similar private property states,
• (2) oysters were marketed earlier (oysters were smaller) in common property states. Explain why. Which arrangement is preferable and why?

Answer

The first can be explained by the larger supply of oysters on the market. Since there is no incentive to leave oysters for the future (only to be grabbed up immediately by someone else) harvesters will take all they can and supply them to the market immediately. In addition, the oysters are likelier to be smaller and of poorer quality (assuming time and investment are needed for larger, higher quality harvest.) The second is a result of the lack of property rights over the oysters. harvesters will not leave the oysters to grow larger once they have reached the minimum saleable size for fear that a competitor will scoop it up. Consumers who care about the quality and sustainability of the oyster harvest will prefer a private property arrangement.

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