I've never had the opportunity to actually lecture
with my sunglasses on.
So let's see.
I want to talk today, as Thomas suggested,
about the global commons.
And he first asked me to talk about this.
And I thought, hmm, how can I fit what
I know into that broader topic?
And once I thought a while, it seemed possible.
I do a lot of work on commons.
I call myself a property rights economist,
not in the legal sense of property rights,
but in the Alch and Dem sets, Coase type
of sense of property rights.
And my work involves examining property rights institutions
in all sorts of different settings,
whether it's among Indians or on Wall Street.
Lucy remembers last year, I talked about from Northwest
Coast Indians to Wall Street.
For example, a mutual fund is basically an open access
commons.
It's an open access institution where people can invest.
And they can invest as much as they want.
And if they don't like what they're earning in returns,
they can take their money out.
So free entry, free exit, which has tremendous implications
for how you regulate mutual funds that have yet
to be really recognized by the world of scholars,
including people as famous as Michael Jensen.
So quite a bit of work, of course,
has been done on the global commons lately.
Costello and Gaines and Lyman actually
did an empirical study that they published in the journal
Science, finding that rights-based systems have been
successful since, say, starting in 1950,
reversing the downward trend in many fisheries,
the so-called tragedy of the commons
or the tragedy of open access, which is more appropriate,
had been driving any number of fisheries toward collapse.
And I think he surveyed something
like 13,000 fisheries between 1950 and 1990
or something like that, and came up
with pretty strong empirical indication
that any kind of rights-based catch system,
whether you can call it privatization,
individual transferable quotas, or what have you,
those types of solutions have been successful, probably
not surprising to most of you in here.
You might be interested to know, though,
that I went to a meeting of the American Association
for the Advancement of Science and presented a paper there
in a panel on the privilege to fish.
And there was a fisheries biologist there
asserting that no, all this stuff about privatization
is wrong.
We need more gear restrictions, more entry restrictions, more
labor restrictions, which are exactly the kind of restrictions
we've had in many fisheries for over 100 years
and that have miserably failed.
So out there somewhere, there's somebody
who's arguing against the notion of privatization.
Now, oftentimes, privatization, of course,
one of the stumbling blocks is that it
has political implications.
There will be winners, and there will be losers.
And the question is, how do you set the situation up
so that the losers politically concede and allow
the privatization?
Now, for example, in New Zealand,
they've privatized and created ITQs
to a lot of their offshore fisheries,
Orange Ruffy, for example.
And one of the things they did in that negotiation
was they allocated a share of either,
I don't know if it was the catch,
but the revenue from the catch, to the Maori.
And somehow, politically, that was
necessary to get the deal done.
Now, one of the interesting things, of course,
about getting such deals done is the more value
you stand to create by doing the deal,
obviously, the more there is to share.
And what I'm going to do is make the case that privatization
of the British Columbia salmon fishery in a particular way
that's not only efficient from an economic standpoint
with regard to the fishery, but also culturally correct
with respect to the native claims that
have arisen in British Columbia Canada over the last, well,
I mean, they've been resurrected from 150 years ago.
But they've had case law adjudicating these things
and so on and so forth.
So currently, the British Columbia salmon industry
is in a deplorable state.
Starting in something like 1869 with the first cannery,
what was once an extremely prolific salmon fishery
has now reached the point, in many cases,
where individual stocks are endangered.
People, of course, are racing to intercept salmon.
And the Canadian Department of Fisheries and Oceans,
which regulates the situation, has allocated over time,
repeatedly, money to buy boats back, to issue licenses,
to buy the licenses back.
The resource, the fishery, has faced degradation,
habitat degradation, overfishing, of course,
and, as I said, stock extinction.
And basically, now, what we have is
conflicts between commercial fishermen, environmentalists,
and now the aboriginal native Americans
and the aboriginal interests have asserted themselves
legally.
So we have got quite a kind of a tangle there.
And political problems that are going to be tough to work out.
Let me just show you now, in case
you don't know where British Columbia is,
which is quite possible.
It's on the west coast of Canada.
I think you can see here, up along that northwest coast.
And it's a very interesting area,
because it has just thousands of rivers and streams.
Big rivers, like the Fraser River, down in the United States,
the Columbia River, the Skeena River, up further north,
the Stikine, the Nass, those are all the big rivers.
But thousands, thousands of little teeny rivers and streams.
I grew up in Seattle, which is just south of here,
when I was a kid.
I went out to go waiting in the stream.
I just moved there.
And there are four or five salmon in a stream this big.
And these are fish that are this big.
And I was amazed.
And a little stream, just like this.
It was a drainage ditch, is what we would call it in the United States.
But there they were.
So just thousands of streams, up along the northwest coast,
that, as I said before, at one time were extremely prolific,
in terms of their salmon populations.
So I'll say a little bit more about that in a minute.
And so one of the problems we have, in terms of the global commons
problems, is just the problem with fisheries, right?
What we also have is, increasingly, issues regarding Aboriginal rights.
And in many places, there have been moves
to restore the rights of Aboriginal people.
I forget what it's called.
It's the International Treaty on Human Rights,
or the United Nations Treaty on Human Rights.
It reflects sentiment that somehow Aboriginal peoples have been dispossessed
and that they should be, in some sense, repossessed.
I've actually looked at the words.
And I'm not surprised that neither Canada nor the United States
have signed off on it, because if you know anything about law,
the words in that document have tremendous implications
for just the whole notion and understanding of property law.
It basically negates our traditional notions of property law.
But nevertheless, that's a sentiment that's out there.
And in fact, that same sentiment was reflected in 1982.
Canada passed, the Canadian Parliament passed the Canadian Constitution Act,
which recognized and affirmed the existing Aboriginal tree
rights of the Aboriginal peoples of Canada.
And this, of course, set in motion a wave of litigation by native tribes,
trying to recapture what they claimed and what ultimately
was found to be their existing Aboriginal rights.
And those existing Aboriginal rights had lingered since, say, the 1850s or the 1870s
or 1880s or 1890s, or the Canadian courts found.
And we're not thinking of a kind of a frozen notion of rights,
that they have to be accorded whatever rights they had back then.
We have to accord them some sense of their relative position
in the advancing economy.
Now, that's not that unusual, because case law going way back in the English
common law had always said that in the age of discovery, England, Germany,
Holland, France out there discovering the world,
the law was that Aboriginal rights will be respected to the extent
that they are cognizable or understandable.
So when we, the English, go to Rhodesia and colonize it,
or whatever it is that the English did, their law
said that we recognize existing Aboriginal rights.
And the only way to extinguish Aboriginal rights
is either by conquest, cession, or treaty.
The courts in Canada have found that none of those things
have happened in Canada.
Neither conquest, nor cession, nor treaty.
It was just kind of a crowding experience.
Settlers came, gradually just crowded.
So the existing law, as stated in Henry Southern Rhodesia,
would say these native rights should be respected.
But just the rush of and the crush of settlers
made the actual execution of that law either troublesome, not necessarily
impossible, but it took a long time to get to that point.
That's where we are now.
And the same thing is going on, to some extent, in the United States.
In the United States, they did have a treaty with the Northwest Coast tribes.
And again, the crush of settlers pressed themselves
on the salmon fishery of the native people, and depleted it, and depleted it,
and depleted it.
And ultimately, then when fisheries managers said,
we need to restore this fishery, well, the Indians stood up
and said, well, listen, we have an equal right.
And courts said, yes, that's right.
So I mean, this is very interesting, because I'm supposed
to be talking about the global commons.
And in some sense, we all live in a commons, right?
We have law.
We respect law in Germany or in the United States.
But there's no overarching law, right?
Maybe there is international law.
Some people don't respect it, and have conveyed
that they will never respect it.
But even so, even for those who respect international law,
it's still somehow an agreement cobbled together out of a Hobbesian state.
And that Hobbesian state is lingering out there someplace, right?
So one of the interesting things about British colonialism,
I think I'm sure German colonialism to the extent it occurred,
is that British law tried to reach out past itself and say,
we are not going to regard the entire world as an open access commons.
That we're going to try to recognize and respect
and enforce existing aboriginal rights.
And if we don't, then we have to abolish those rights
in one of three ways.
OK.
So that's an interesting sidelight, I think, in a discussion on the global commons.
So what we've had here is litigation restoring lands and fisheries
to the Northwest Coast tribes in British Columbia.
One fairly famous case is Regina versus Vanderpete in 1996,
which basically gave tribal members the right to fish in their traditional fisheries
and to harvest once conservation regulators had set the total allowable catch,
to harvest a fixed amount of that catch off the top.
It's almost like in corporate finance a debt claim, right?
There are equity claims and debt claims.
Equity claimants get a share of whatever's left after debt holders have been paid.
Well, so in this case, the natives have been treated like debt holders.
They get a fixed amount.
If the allowable catch goes up or down, that will be relatively invariant.
So it's the commercial ocean-going fisheries that bear the residual, basically.
And, of course, then the commercial fishery comes next.
And then last but not least, the sport fishery.
In concurring opinion, the right honorable Justice Sarah McLaughlin
emphasized that, of course, this decision didn't solve everything
and finalize everything.
She emphasized that based on this decision,
we should try to achieve a negotiated settlement.
In other words, this case set the rule of liability.
And now, a la COS, you guys should go out there and try and bargain to a solution.
And they have.
Also, she mentioned something that's very important, I think.
And that is that the Indian fishery was not was.
There's this kind of extant notion that Indians didn't engage in commercial
enterprise.
And what I know about them is that's wrong.
And she said it was wrong.
So she said, no, they shouldn't simply have the right to catch enough fish
to put in their stomachs for what you would call subsistence.
They should have the right to participate as commercial agents.
So anyway, this is creating a situation in British Columbia
that will have to be solved somehow, maybe by doing nothing.
But I hope they can come up with a better solution than that.
For the Germans in the audience, it should be nice to understand that one
of the first scholars to study the Northwest Coast tribes was Franz Boas,
a famous ethnographer.
He went amongst them back in the 1800s to record their culture.
Franz Boas was the father of what we know as cultural relativism.
His point was to make clear to the world that when different peoples and
different cultures are regarded from their own standpoint, that I'm probably
making a batch of this, but that there's no absolute standard by which to evaluate,
I guess, their worthiness or whatever you have in your mind.
But he did record a lot of interesting stuff, and so it's there for
the record, and that's really nice.
Wasn't so interested in how they produced and so on.
Even in their property rights institutions was much more interested in their
ceremonies and what you would commonly think of as cultural practices.
We've already gotten the location down, and as I've already said, every chief,
every person known as a chief on the Northwest Coast owned property and
owned rivers and had exclusive rights to make decisions about those rivers.
And prior to European contact, and even into the time of European contact,
encroachment by another tribe was met with very severe retaliation when it occurred.
And it did occur sometimes, not always, but sometimes.
And I'll make the claim that they actually developed institutions to avoid
the violence and the conflict, and instead cooperate it.
Now, yes, Thomas.
I have a question, both countries are owned rivers, and it seems they are very small
pieces of rivers, and that's the reason that one tribe or one chief owns a river.
Or it was part of only when I write your paper like that?
Right.
Because you have all those problems of some sort.
So here's Vancouver Island.
Here's the mainland of British Columbia, right?
And we get the Fraser River.
Vancouver Island, mainland goes up.
Here's the Fraser River, right?
Here's where Vancouver is, and we go down to the Columbia River.
So here's Vancouver, Canada, Seattle, which is down in here.
So with a river like the Fraser River, there's tribes all up in different tribes,
right?
So that's a hard case.
That's more of an open access commons, because each one can fish the stream
indiscriminately, but what about this?
There's a little river right there, OK?
And one chief could own that entire set of rivers, all right?
So that's the pure play that I want to talk about, and that's why I want to focus
on the coast rather than the interior.
This is very interesting, how they arrange things in the interior,
but it's not the pure play, OK?
And in fact, I don't think it was in this paper, but in another paper, what I did
is I used the distinction between the large river with many tribes along it,
comparing that to the smaller rivers that were owned in their entirety
as a comparative statics kind of test of property rights hypothesis.
So in any event, so for these smaller rivers all up and down the coast,
some chief owned every river, and every chief owned some rivers.
Now, why is it so important to own the river?
Well, salmon are anadromous, right?
Anyone know what that means?
They're born in fresh water, right?
They're born in a stream, and they grow up a little,
and then they go out to the ocean, and they live for a couple of years,
and they get big, and then they come back to the same river where they were born.
Some people say within 10 yards of the spot they were born,
and they spawn, and then they die.
And the cycle repeats itself over and over again.
And it may be for some salmon, they're on a six-year cycle, Chinook salmon,
six-year cycle.
And in every year, you have a different cohort, right?
So we have cohort one spawning in year one, returning in year seven,
cohort two spawning in year two, returning in year eight.
And then we have different species, sockeye, chum, pink, and coho salmon, five species.
So they all have these different life histories
and these different biological characteristics.
But most importantly, they come back to where they started.
So if you're on a riverbank fishing and you kind of have an attachment to that place,
to use an Eleanor Ostrom term, attachment to place,
and you expect that you'll be there five years from now,
if you understand that salmon are anadromous,
you understand that how many fish you harvest today
is going to affect how many fish return in four years.
So that's tremendously important, right?
Because if you do recognize that, and if you have private property rights,
you'd be willing to kind of control yourself.
Maybe this year the salmon run is really small, what would you do?
You're hungry, OK?
There's not that many salmon.
You might, if your property rights were insecure,
you'd take as many fish as you could and just get by this year
and worry about tomorrow tomorrow.
But to the extent you have secure property rights, you might hold back a little.
You might make sure that you don't harvest all the salmon
so that some can spawn and return in future years.
And there's no question that the Northwest Coast Indians understood this.
Absolutely they understood it.
Every year with the first salmon, they'd have the first salmon right after,
when they spotted the first salmon migrating,
they'd give it a couple days or weeks, prohibit all fishing by the tribe,
and then they'd have the first salmon right.
And they'd say things like, we worship you and we want to treat you well,
and we won't fish for you until we've let so many go up and spawn.
So they understood this, because we want you to come back, et cetera, et cetera, et cetera.
OK, so they understood that about salmon.
And I proposed elsewhere that they understood a whole lot more.
So suppose you have a limited labor force, that's a reasonable assumption,
and that there are fixed costs in catching and preserving salmon,
catching, cleaning, and preserving salmon,
so that don't vary with the size of the fish.
In other words, to some extent, it costs $2 to handle this fish,
whether it's a big fish or a small fish.
There might be some variable cost with size as well.
But so if there are fixed costs in catching, cleaning, and preserving,
then do you want big fish or small fish?
Bigger fish, right?
Bigger fish are better.
And what harvesting rule would you impose on your workforce
if what you wanted to do is kind of grow bigger fish?
Suppose you take the biggest fish.
That's what every kid catches a fish, wants a big fish, right?
Better, more meat.
What happens if you start harvesting the big fish?
What happens next generation?
If you're harvesting the big fish, who gets to spawn?
The small ones, right?
Do small parents tend to give birth to small offspring or big offspring?
Small, OK?
So that wouldn't be a very good harvesting rule.
What you'd want is a rule that says we harvest the small fish
and we let the big fish go.
And it just so happens that there's a place in British Columbia called
Rivers Inlet, right about in here someplace.
If you want to catch a 50, 60-pound king salmon, that's where you go.
And that river really is no different than any of the other rivers
along the coast.
Why do we have bigger fish here than elsewhere?
One explanation is that some chief said, hmm, I got this figured out.
And I have secure property rights.
So I have the time to take and I can transmit this knowledge to my offspring.
And they did.
They had secret societies in which they transferred knowledge.
I just talked about the first salmon right.
Suppose you wanted salmon that would show up earlier in the spring
after a long winter of not much eating.
You know, you're hungry.
You haven't had much to eat all winter.
And sometime in the spring, the salmon show up.
If you let your tribe harvest the very first salmon that come along,
what's going to happen?
What if the arrival time of salmon is what we call, or what biologists call,
heritable?
It's a characteristic that can be influenced by natural selection.
If you harvest the earlier rivers, it's the late rivers who get to spawn, right?
What happens a generation or two from now?
Fish keep showing up later and later and later.
So there's some really interesting counter-intuitive problems here
that I think the native tribes, they'd figured it out.
And that's why their salmon fishery was so prolific.
Westerners came and said, oh, look at this.
Look at what mother nature has provided us with.
And I just think that's wrong, okay?
And it wasn't long after Westerners arrived that, of course,
downward trend in the fisheries started.
And it continued, and it continued, and it continued.
Because English law said, you can fish in the estuaries,
you can fish out in the inland waters, okay?
The Indians had the ability to fish in the open water, but they didn't, okay?
They had tremendously seaworthy canoes.
Could sometimes hold up to 20 or 30 people.
They would go on journeys of 1,000 miles and more, all right?
These are dugout canoes.
So they had the ability to succumb to the tragedy of the commons.
Imagine, well, the fishing is really great up on the Babin River.
And it's not so great here.
Let's get in the canoe and go there.
And they didn't do that.
They could have, but they didn't.
They could have just been nomads chasing fish around, and they didn't.
They somehow cobbled together an ownership structure that would seem to have been
calculated to preserve salmon.
And not only preserve, but ensure the prosperity of the fishery.
And of course, all that changed when canneries opened up along the northwest
coast, and the law basically said, well, you know, what they said to the Indians,
you guys keep going, go ahead and fish, but we're going to fish too, all right?
So how did the Indians cobble all this together?
Well, what I showed you at the beginning of the presentation,
here's how they caught their fish in many cases,
assuming they had a relatively small stream.
They stretch a fence across the stream, and the water is running down,
and the fish want to go upstream, but they can't get through.
So they swim into little holding traps, right?
And presumably, the natives didn't harvest all the fish.
They let some go, right?
But once they're in that holding trap, whoever's making the decision has to say,
well, I'll let you go, I'll let you stay, or you stay, I'll harvest you.
They're making some decisions.
This is a tremendously technologically advanced fishing method,
a lot better than a big boat chasing around out in the ocean.
Why would anyone chase after anadromous fish in the ocean?
To get there before the next guy.
But if you don't have to get there before the next guy,
you set this up at the opening of the stream,
and you catch them when they come into the stream.
You don't have to run around on the ocean after them.
So when white settlers came, they didn't recognize this,
and they probably didn't care.
They'd fish in the ocean.
In many cases, the tribes said stop, those are our fish.
You have to pay us if you want to take our fish.
There were lawsuits, there was violence, there were, no.
But, you know, they were, the natives were overwhelmed.
So I believe they engaged in what we would call scientific knowledge accumulation,
right, hypothesis testing.
That fish weir allows hypothesis testing.
It's a relatively noiseless information feedback system that it allows.
In any event, so how do they keep this, all this together, these private property rights?
Because one of the problems is, if for reasons, if you're a chief,
and for reasons out of your control, you have a bad salmon run one year.
Maybe there was a huge flood, and it scoured the stream four years ago.
Killed all the little eggs.
And now you're sitting there, and you're going,
when are the salmon going to come?
We're getting hungry.
And just up the coast, 50 miles, you get a report that your neighbor is catching salmon right and left.
What do you do?
I mean, what, what's the concern?
You see, the marginal product of your labor force, fishing, is very low, right?
And so the opportunity cost of using that labor to go and
encroach on somebody else's stream is also very low.
Whereas the incumbents up the coast that have such a good salmon run,
they have really productive labor, and they face really high costs of defending themselves.
So this is just standard kind of comparative advantage notion.
The tribe that's hungry and has no salmon run is going to be extremely interested in encroaching on the tribe
that has plenty of salmon.
And, you know, of course, violence is costly.
They used it.
They had wars.
They annihilated each other at times.
But what they ultimately came to was of some kind of resolution.
One tribe would come paddling toward another in canoes with clearly not the best of intentions,
and the incumbent tribe would float out a bunch of gifts, say, go away.
And I believe this is what ultimately evolved into what's called the potlatch system.
That is described as, by cultural anthropologists, as ceremonial competition to see who can give away the most well.
I invite you to my potlatch this year, and you invite me to your potlatch next year or the year after, and we keep score.
And we see who gives the other guy the most wealth.
And whoever gives away the most wealth is the big man and is elevated in the status of all the other tribes.
So this wasn't just a unilateral or a bilateral situation.
This was a multilateral reciprocal exchange system.
So my claim is, basically, that potlatching and the reciprocity from potlatching
was used as a way of paying off would-be encroachers who were experiencing the bad state of the world,
and knowing that these shocks can happen to any stream at any time and variously all along the coast,
they kind of recognized that, OK, I'll be in the bad state,
so maybe I'll give you something when you're in the good state,
and you give me something back when I'm in the bad state.
And on net balance, whoever gives the most and takes the least
is probably the person who's the best resource manager, best at accumulating knowledge about how to husband salmon.
I mean, it seems to me it makes perfect sense.
Now, let's see here.
So this is a way of paying off would-be encroachers and to respect private property rights.
It has been characterized as insurance, right?
But understand, you don't need insurance if you don't have private property rights.
It's private property rights that give rise to risk.
If you say, this is mine and that's yours, and all of a sudden what's mine isn't so productive,
I have to bear that risk.
I can't suddenly just decide, well, I'm going to go and take part of that,
because I already conceded that that's yours.
So once you agree on, or somehow, however, private property rights come into existence,
that creates risk.
You're confined to the residual from the asset that is yours.
Private property rights are actually kind of slowly parsing out these dimensions of variability in asset productivity,
to people, and that gives them an incentive to be more productive.
But at the same time, they have to bear the residual.
So I mean, it's standard risk return stuff from finance theory in a sense.
I don't think that's, this is a different kind of risk.
This is kind of the aversion of moral hazard is more like it.
But nevertheless, you have to assign responsibility for variations in productivity
when you have private property rights.
That's what private property rights do.
OK, so what does all this have to do with our current global commons?
Well, first of all, I think I already covered most of this.
So I'd say potlatching was a response to exogenous variations in resource stocks.
It replaced conflict with cooperation, prevented a tragedy of the commons,
assured what we would now call sustainability.
And we've been through all that.
Oh, there's one thing that I do need to mention, and that is there were actually
title disputes among property claimants on the Northwest coast.
And when two people claim the same property, two cousins or something,
and each one's claiming that, oh, grandfather left that to me.
And what they would then do, if it was unresolvable,
is they'd hold something called a rivalry potlatch.
And they'd both stack up gifts and claiming, that's mine,
and I'm putting these gifts up to prove it.
And whoever put up the most gifts won the rivalry potlatch.
And then the amount of those gifts, well, I don't know.
Let's say the amount of those gifts went to the loser.
So it's an auction.
It's a compensatory auction, right?
Now, if you're into auction theory, what kind of auction would you want?
The winner wouldn't pay the loser the amount of the winner's bid.
The winner would pay the loser the amount of the loser's bid.
So I don't know exactly what they did, but that would be a second price sealed bid
auction, right?
And it's pretty close.
The facts seem to suggest something like that was going on.
And that's, what, incentive compatible and all that good stuff,
if not first best, at least darn good second best.
OK, so what does this tell us about the global commons?
Again, I already asked the question, why are we
chasing around in the ocean after fish that are going to return to a stream
anyway?
It seems, in some grand sense of things, pretty ridiculously inefficient,
right?
And obviously, the first solution to the tragedy of the commons,
the results from something like that, is to eliminate the commons.
Well, eliminate the open access, but eliminate, you know.
But of course, there are political impediments.
And what you have to do then is be able to create sufficient value
to pay off the contending forces.
And I argue that privatizing the British Columbia salmon fishery
would create tremendous value.
What they've been doing now for a century is chasing around after salmon
in the open sea, fishing mixed stocks.
They don't know even where the salmon came from that they're catching.
It's just this huge, big tangle.
And nobody has any incentive to preserve salmon for the next generation.
Even if they had the incentive, they wouldn't have the wherewithal,
because they don't know which fish they're catching.
It's a mess.
I mean, it's amazing that fisheries biologists in British Columbia
have been running this deal for years and collecting data.
The data they're collecting must be just, I mean,
it has to be noisy, as noisy can be, compared to waiting for the fish
to come to the stream.
And it's interesting, I mean, there are reports that go way back that says
that these tribal, these natives could, if they went out in the ocean
and caught a fish, right, caught a salmon,
they'd be able to tell you what stream that fish came from.
Because there are little variations in these fish.
You know, one has little blue gills here, the other has red gills, green gills.
They actually have that ability.
That's known that those variations, fish are like that.
They're just tremendously heritable.
Any little difference in their environment will have a tremendous effect on,
and a visible effect on their physical characteristics.
So, all right, so what political impediments and how do we do this?
Well, like I say, I would propose what is a culturally correct solution,
that is a rivalry potlatch.
Somehow, I mean, we have to get the aboriginal interests organized.
We have to get the commercial fishery interests organized.
The commercial fishery has made a bet on the productivity of the commercial fishery based
on Department of Fisheries and Oceans regulations.
That is the traditional command and control, gear restrictions, entry restrictions,
licensing, which has been an abysmal failure.
There are virtually no opportunities left.
So, what do the commercial fishing interests stand to gain?
Virtually, to preserve their, what it is they've been doing, they stand to gain not much,
but imagine a fishery that's operated from the mouths of rivers with no commercial ocean fishing
of salmon, except perhaps what the Indians or the winner of the auction permitted, all right?
Then hold your auction.
If you could set that situation up, I mean, I would stake my professional reputation for sure
and maybe a lot more that the Indians would win, hands down.
They're just tremendously more productive, more valuable set of institutions
and methods, property rights system from fishing from the streams.
Now, it's not going to work for every stream.
It's not going to work for the Fraser River or the Columbia River or any of those large rivers,
but it could work for countless smaller rivers and streams.
And I think the proceeds could be more than enough to compensate the commercial fishermen.
I mean, for all, you know, maybe they could have given a share or, you know, a debt claim
or I don't know, somehow pay them off.
Now, you might ask the question, well, how are the Indians going to get financing?
I think there'd be a lot of people who'd be willing to participate in this.
We have, I assume in Germany, you do have something called socially responsible investing.
Anybody not heard of that?
So there are people out there who want to do the right thing with their money
and not only the right thing, but the profitable thing and the two don't necessarily conflict.
So I would think socially responsible investors would rush to do this.
Also, as I said before, in many cases through the process of negotiated settlement,
these tribes have been conceded huge tracts of land.
The Gitscan, I think, in British Columbia have just a huge area of land.
And I'm certainly not going to put words in their mouth or make a commitment on behalf
of their tribe, I wouldn't presume to do so, but I'd be willing to bet they'd concede a lot
of land for exclusive access to their fisheries, what were once their fisheries.
And so they sell the land and use the proceeds to bid in the auction.
Anyway, that's what investment bankers do and they know how to arrange financing
and I think that is a surmountable problem.
Setting up the contestants in the auction is the difficult problem.
And then I would propose, you know, creating kind of something I would call a tribal corporation,
you would call it Potlatch Incorporated, kind of a nested series of holding companies
in which the different tribes had some share of ownership in their neighbor's fisheries
and would be paid dividends, you know, as the success of those fisheries varied.
Dividends that increased or decreased as the success of those fisheries varied,
much like the Potlatch system, right?
Is there anything like the Potlatch system observable in the modern world?
Do you know the concept of the same?
Yes. That, Lucy knows about that because we talked about that last year.
So, for example, investment bankers form syndicates to make offerings of new securities, IPOs.
And the question has always been, why would investment bankers invite others to participate
as residual claimants in their IPOs?
Of course, the first explanation was, well, they want to diversify risk.
Well, you know, a lot of these IPOs are not that big.
And for a firm such as Goldman Sachs circa a decade ago,
they could easily have financed hundreds of such IPOs all by themselves, right?
Let me back up just a second.
In an IPO, what happens is the investment banking syndicate buys the shares
of the issuing corporation for a fixed price and then goes out and sells them.
So the investment banking syndicate is a residual claimant to the price they can get for the shares
because they're paying a fixed amount and now they have to go out and peddle them
for whatever they can get.
So then the question is, why bring in these other investment bankers?
First explanation, well, we want to diversify risk.
And that doesn't seem to be a good explanation.
My explanation with Michel Habib and Norm Barzell is basically that if you're an investment banker
who's selling something for the first time, it's never been bought before,
you want to set a price for it, right?
But your price is never going to be exactly accurate.
You might overprice it.
You might underprice it.
And so other sharp dealers out there in the world can take advantage of you
by subscribing heavily to underpriced issues and withdrawing any financing
or purchase for underpriced issues or for overpriced issues.
The problem with that is they have to spend some resources to figure out whether it's overpriced
or underpriced.
And those resources spent are a social waste, right?
So our argument is basically why you bring somebody into the syndicate is because that person could
really do damage to you if you don't include them and pay them off, basically.
And there are six or seven of you out there who could do that.
Just like in the potlatch system, who do you potlatch with?
You potlatch with somebody who's a potential threat.
It's Louis XVI, you know, Versailles.
Make sure that all of the people that could be your enemies, you keep close to you
so they keep them out of mischief, right?
That's why you have this big, huge palace.
So that's one explanation.
But in the resource management area, I mean, my easy answer is reciprocity is everywhere, right?
This is just one example of reciprocity.
I mean, I know people, this is, you know, as I get to know people for the first time,
you know, one of the things I think about is where are they on the reciprocity thing?
Some people are really quick reciprocators, right?
Or they even initiate what they hope will be reciprocation.
They'll go and do something for you, and they want to see, are you going to do something back for them?
And I'm not saying this is good or bad, but there are definitely people who play tit-for-tat strategy.
I have a brother-in-law who is very, very clearly a tit-for-tat player.
Sometimes he gets his tits and his tats mixed up, you know, but nevertheless.
And, you know, he's a successful guy, and so, but where else have I seen, you know, nothing comes to mind now,
but there are certainly, of course, you know how it is, Bern, when you have an explanation for something,
you see it happening everywhere, right?
I think that's it. I'm happy to take questions.
I know, you know, just the solution here is a little facile,
but I think it's certainly worth investigating, and certainly something that the current law
and the economic trauma that is being experienced would point to as a likely solution,
both to the fishery problems and to the native claims problems.
So I'm happy for questions.
And let me just say one.
Some of you may be thinking, I don't know, all right,
you know, this guy has romantic visions of American Indians.
I don't, okay?
What I like about the American Indians in this case is they did it right.
They knew how to do it, right?
They're better at it, and so give them what they do or let them achieve what they do.
So that's it.
Thank you.