From: frantz@netcom.com (Bill Frantz)
Date: Sat, 8 Jun 1996 13:51:31 +0800
To: hallam@etna.ai.mit.edu
Subject: Re: Anonymous stock trades.
Message-ID: <199606071858.LAA28924@netcom7.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain


At 10:52 AM 6/7/96 -0400, Perry E. Metzger wrote:
>... As
>any free market economist would tell you, the way to stop a resource
>from being destroyed is not to pray that people won't buy it but to
>assure that someone has an ownership stake in the resource, thus
>assuring that their investment would be destroyed if the resource
>vanished. Thats why, for instance, timber companies happily clear cut
>government land that they have leased (after all, not clear cutting
>would mean that they wouldn't extract maximum value for their lease
>under the idiotic terms that the leases are made under) but will
>almost never clear cut their own lands, because that would reduce
>their long term value.

I find this analysis a bit superficial because it does not consider the
difference between short-term and long-term value.  To use Perry's example
of the timber industry.  Before the late 1980s, the lands owned by Pacific
Lumber were managed for long-term production.  When the company was taken
over as part of the "maximize present value" movement in the late 1980s,
the management goals changed to increase timber production without regard
to long-term production.  (I seem to remember that the takeover was one of
Michael Milken's deals.)

My conclusion from this example is that if your interest is in the
long-term preservation of ecosystems, you need institutions that are
structured so they take a long-term view, and can not be subverted by
short-term trends in markets.  As far as I can tell, the US National Park
Service, for all its faults, does as good a job of preserving ecosystems as
any other institution, and better than most.  (If you disagree, please
provide examples of institutions that do as well.)


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