Analysis has to presume who should own water, air, wildlife, and other natural values to begin with. "Entitlements" have a major effect on the relative bargaining power of different parties. For years, economists would ask, say, student canoers and kayakers what they would pay to keep a river wild. They got low valuations --poor students don't think of paying much, even hypothetically - and reported them as the value of recreation. Go ahead and dam that river, and damn fishermen, fish eaters, fish merchants, ornithologists, nature lovers, scenery lovers, tree huggers, and all such environmentalist wackos along with them.
It occurred to Allen Kneese and Orris Herfindahl (1965, rpt 1974, p. 287) from the old RFF -- the good RFF -- to invert the question and assume the boaters (along with all citizens) already own the wild river, or at least an easement to shoot the rapids. What would the power company have to pay them to take it away? What is their "Willingness to Accept" (WTA)? Surveys and polls began showing that WTA is much higher than WTP (Willingness to Pay). Many theorists fretted that "received theory" cannot explain this difference. Of course not: "received theory" was received damaged, it contains the Coase Theorem .
In its basic CERCLA [6] legislation, 1980, the U.S. Congress even specified it wanted measurements of WTA, not WTP (Carson & Navarro, 1988, p. 830). Even then, pre-Reagan, the kept U.S.D.I. contrived to overrule Congress' intent by pleading technicalities. Reagan (1981-89), of course, reversed Congress' attitudes for good ("If you've seen one redwood tree, you've seen 'em all", and "I'd shut down the whole university to pay for one new dam", etc.).
The Coase Theorem, as used by Stigler et al., says that entitlements do not determine outcomes. Free markets will sort it all out and arrive at the same allocation regardless. The eighth daughter of a slave has the same consumer sovereignty as the eldest son of a Rockefeller. That is wrong. In fact, distribution of wealth often dominates allocation of resources. An owner often says "My home is not for sale. I will not sell at any price, don't call again." She can take that attitude when she holds the entitlement. Buyers never say "I will pay any price, call anytime." That is, WTA is much higher than WTP.
"Modern" micro-economics, dominated by Coasians, is a reincarnation of the 19th Century Manchester School whose members touted "free trade in land" as the solution to all resource problems. The trade they called "free" was to begin with entitlements inherited from centuries of conquest, corruption, stealing, slave-trading, monopoly pricing, influence at court, confiscation, negligence, covin and fraud. In this narrow view, exchange launders all. Everything is for sale; everyone has his price; all values are determined at the margin; etc. This was to distribute land fairly among the people. Yet today, after 150 years of free trade in land, the "London Dukes" (Bedford, de Walden, Cadogan, and Portman) still own the heart of London, including Mayfair, where they collect rents from world bankers who collect interest from landowners who collect rents worldwide.
Mitchell and Carson use Coasian concepts in survey research: they poll people to put a value on environmental damages. One review faulted "the high rate of unusable responses" (Fischhoff, p.287). Why "unusable"? Mitchell and Carson throw out WTA answers when they exceed WTP answers by more than 5% (Mitchell and Carson, 1981, 1988, and 1989, pp. 32-34, 226). Sometimes over 50% of the responses are "invalid." They don't fit the Coase model; they must be, in Carson/Mitchell's phrases, "methodological artifacts," or "outliers," or "protest responses," or "aberrations." The case is something like that of NASA's Goddard Space Flight Center and why they missed detecting the ozone hole before Farman found it in 1985. "Their instruments had recorded the losses (of ozone), but the computer interpreting the results had been programmed to ignore readings that deviated so far from normal" (BW, 22 July 91, p.10).
The aborigenes are one of their aberrations, and an object lesson. Some Indian tribes have Treaty Rights to fish. Their WTP for those rights is minimal, partly because their ATP (Ability To Pay) is minimal. On the other hand, they will not sell "at any price": their WTA is sky-high. They may be unreasonable, but that's the point: ownership lets you be as unreasonable as you please, just like rich white people, and call it "Liberty." We notice mainly when it is someone else, especially someone different.
It is not just Coase's Theorem. All status-quo theory is shaken to the bedrock, pilings and caissons by survey findings that WTA>>WTP. Its criterion for acceptable policy changes is based on Pareto's and Edgeworth's notion that you mustn't deprive one rich landowner, even to help a thousand starving orphans, because you can't compare their subjective feelings. When, however, we acknowledge common birthrights to a clean environment, the shoe is on the other foot. Now you can't pollute anyone's air or water because the victims own it. They can be as unreasonable as any great landlord. This explains the busy-ness of theorists seeking to plug the leak.
Politics and institutions are involved: Treaty Rights are the most valuable mode of holding property there can be. They enjoy legal supremacy as high as The Constitution itself (Article VI, Section 2), preempting contracts and ordinary legislation. All those, and other important institutional and sociological considerations are outside the "perfect-markets" ambit of Carson and Mitchell.
American Indians are an extreme case, but most of us have a streak of their psychology. Not many generations back we share the same kind of culture, a dependence on traditional lands we held in common, in implied trust for our descendants. These traditions are still part of the cultural subconscious, and affect current attitudes. They are disregarded in mechanistic micro modeling in the modern style (except perhaps as tautological "revealed preferences").
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