Monday, 7 May 2018

The problem is not dirty dairying; it's still dirty government

Environment Minister David Parker is all set to tell dairy farmers how many cows he's going to be let them have on their own farms.  This is, he claims, to fix "dirty dairying."

But turns out you neither need nor want central planning to fix the alleged problem. What you do need is property rights -- and common law.

Here's a repost from 2008 that's sadly topical again, explaining what that means...

Enforced downsizing and limits on herd sizes! Talk about shooting your prosperity right in the foot.
Never underestimate the ability of politicians (and appeasement of them) to destroy your livelihood, while making a problem worse.
The problem they're mostly attempting to address is water -- how it's regulated, how dirty it is, and the role of agricultural intensification in the declining environmental standards. Said Parliamentary Commissioner Jan Wright at the report's release, the report finds water quality is "declining" in areas used for farming, and "the Resource Management Act is causing fundamental problems for water management." In response, Murray Rogers of Canterbury's Water Rights Trust campaign group says "agricultural development needs to slow down while research and regulatory structures are put in place to manage water."

Both Wright and Rogers are right, although not in the way they think they are.

Since it looks like farmers could have their future prosperity limited on the back of what this report says about water, let's see first what it actually says. (you can read the whole report here.) On inspection it turns out that the body of the report which contains the actual data is less frightening than what the headlines and the deleted 'summary' chapter say about it. (No surprise there -- it's on a par with the various summaries of the IPCC's global warming science.) About water the body of the report says:
  • By international standards, freshwater in New Zealand is both abundant and clean.
  • Because New Zealand has a low population and high average rainfall, it has more total freshwater per person than more than 90 per cent of almost 200 other countries around the world. However, not all of this water is in the right place at the right time...
  • With land-use practices becoming more intensive, particularly in farming, there is greater demand for water now than ever before, and evidence is building that its quality is declining in many water bodies.
  • As the dominant land use in New Zealand, agriculture has the most widespread impact on water quality.
  • Rivers in catchments that have little or no farming or urban development make up about half of the total length of New Zealand’s rivers and have good water quality. Water quality is generally poorest in rivers and streams in urban and farmed catchments. This reflects the impact of non-point-sources of pollution in these catchments... The proportion of the total river length that is in farmed catchments is more than 40 times the proportion that is in urban catchments.
  • In recent years, the impact of agricultural land use on water quality has grown as a result of increased stocking rates and use of nitrogen fertilisers. Within the agricultural sector, there has also been a move away from low-intensity to high-intensity land use (for example, converting from sheep farming to dairy or deer farming). The net effect of most intensified land use is to increase the amount of nutrients, sediment, and animal effluent dispersed into water bodies.
  • The median levels of nitrogen and phosphorus have increased in rivers within the national monitoring network over the past two decades. More specifically, over 1989–2003, there was an average annual increase in levels of total nitrogen and dissolved reactive phosphorus of 0.5 per cent to 1 per cent. While this increase may seem small, and is difficult to detect from the slope of the median (dark blue) lines in Figure 10.3, it signals a long-term trend towards nutrient-enriched conditions that are likely to trigger undesirable changes to river ecosystems. Furthermore, New Zealand rivers with relatively high levels of nitrogen are deteriorating – becoming more enriched – more rapidly than rivers with low levels of nitrogen. This is illustrated most clearly in Figure 10.3.

  • Seventy-five of the 134 lakes in New Zealand for which nutrient data are available have high to very high levels of nutrients (see Figure 10.5, right). Thirteen per cent of these lakes are known as ‘hypertrophic’, meaning they are ‘saturated’ with nutrients and their water quality is extremely degraded. In such lakes, algal blooms are common and the health of aquatic animals is often at risk.
  • Levels of nutrients (nitrogen and phosphorus) and algae are between two and six times higher in lakes in pastoral catchments than in lakes that are in natural catchments (see Figure 10.6).
  • A large majority of the 3,820 lakes greater than 1 hectare in area in New Zealand are not monitored. By extrapolating the results for monitored lakes, it is estimated that the majority (about two-thirds) of all lakes are likely to have relatively low concentrations of nutrients and good to excellent water quality because they lie in natural, or only partially developed, catchments (Ministry for the Environment). The remaining third of lakes are likely to have high levels of nutrients and poor water quality.
  • Pollution from organic waste in rivers has reduced since the late 1980s. This indicates improved management of point-source discharges of organic waste, that is, pollution from a single facility at a known location, such as discharges from wastewater treatment plants, meatworks, and farm effluent ponds.
  • Two-thirds of New Zealand’s lakes are in natural or partially developed catchments, such as native bush, and are likely to have good to excellent water quality. Small, shallow lakes surrounded by farmland have the poorest water quality of all our lakes.
  • Sixty-one per cent of the groundwaters in New Zealand that are monitored have normal nitrate levels; the remainder have nitrate levels that are higher than the natural background levels, and 5 per cent have nitrate levels that make the water unsafe for infants to drink.
  • Fertilisers and stock effluent are major sources of the nitrogen and phosphorus in water bodies in agricultural catchments. The erosion of soil also contributes significant amounts of soil-bound phosphorus to waterways.
Now I don't know about you, but overall that looks like a pretty credible pass mark to me [and since this 2008 report, things have been getting cleaner rather than the reverse]. Says the report: "By international standards, freshwater in New Zealand is both abundant and clean."
So much for the blowhards.
But there do appear to be two main issues:
  1. increased draw-offs for irrigation and resulting 'competition' for water in Canterbury and Southland, and
  1. the effect of farming on water quality in lakes and rivers.
You won't be surprised to hear I've got something to say about both, nor that both things that need to be said involve property rights.
Competition for water presently is complicated by bureaucratic systems of allocation. Protection of water quality is stymied by bureaucratic systems of protection: which means there are no effective legal remedies against pollution, and no effective agent to argue on behalf of that which is being polluted. Both problems are the direct result of what's known as the Tragedy of the Commons problem. As long as a resource is either unowned or held in common ownership (which is the case with water in NZ), then the incentive for each resource user is to take as much now as they can, and whenever they can, no matter the consequences for the quality of that resource, and no matter the long-term effect on the quantity of that resource. That's the tragedy: common ownership provides no incentive for genuine 'stewardship.'
The answer is clearer property rights, and greater common law protection of those rights.
As Jan Wright almost inadvertently pointed out in interviews yesterday, "the Resource Management Act is causing fundamental problems for water management." She's right, but not in the manner she thinks she is. The fundamental problem caused by the RMA is insufficiently secure property rights. The cure for both problems is more secure property rights. Let's me tell you how.
1. Competition for water
As water users realise every summer, competition exists for existing water resources. Bureaucratic distribution of access to water does nothing to secure the resource, and nothing to give water users long-term security of supply. By contrast, recognising secure property rights in water means that water users have a long-term interest in maintaining security of supply, and that rights to use water end up in the hands of those who are going to value it most.

Instead of a bureaucratic system of allocating water use, a system of secure tradeable water rights give users of water the benefit of long-term time horizons to plan their use (discouraging the short-termism that generally stymies 'sustainable' resource use), and establishes for all users the real value of those rights. With tradeable water rights, where and when water is in short supply price signals will communicate that information to users, indicating that more care should be taken with the valuable resource, and more attention paid to expanding the resource (by construction of greater collection capacity for example).

There's nothing complicated about any of that: that's how the markets for all other resources function, and the long-term effect of such markets is that for all sorts of reasons -- including greater incentives for increased efficiencies -- resources become less and and less scarce, and of better and better quality.

The key to swiftly effecting such a scheme is to immediately secure the rights of existing users, ensuring that such rights are tradeable so that they can be transferred to others who might value them more. A heavily politicised scheme for tradeable water rights was being discussed in 2006, but like all politicised schema the feet are still being dragged. What's needed quickly to avert moratoria and meddling is a system of clear property rights by which water can be traded.

As the Canadian Environment Probe organisation has said for a long time, a system of clear property rights and common law protections of property rights offers the best long-term security for water and those who rely on it. My colleague Craig Milmine has a dissertation from 2000 discussing the theory in detail, and showing how a water rights regime could function in the South Island's Kakanui district. 
2. Water Quality
We're told by all the usual suspects that dirty dairying is destroying our clean green reputation, and that agricultural intensification is destroying water quality. I suggest the answer to that is not more bureaucratic intensification, which is what has produced the problem, but less.
Property rights under a common law regime provides superior environmental protection -- that is, a system of clear property rights as a means by which water can be protected in common law. No question about that ( I invite you to follow those three preceding links to check that claim). When the costs of one's own actions are one's responsibility, a change of behaviour is greatly encouraged. When producers themselves have to pay for their own pollution, a change in methodology of production has to be considered. When water users themselves have clear rights in common law to protect the water in which they have property, then looking at it as a long-term resource that merits looking after is going to happen. And when neighbours' actions start to destroy that resource, then with their property rights secured rights' owners have the motivation to act in protection of that resource, and under common law they have simple and effective remedies with which to take action -- remedies that simply don't exist under the bureaucratically intense RMA.

Under common law for example, those with recreational or water rights along the Waikato or with rights to fish the lakes of Rotorua or the headwaters of the Tarawera River would have recourse against farmers or pulp and paper mills who polluted the fishery -- whereas with the RMA the polluters get a license to pollute and the affected parties find they have no particular legal standing, and no particular protection in law to protect their resource, common law grants them solutions, standing, and the means by which to protect their resource long-term.

What common law does in other words is give effective legal power to recognised resource users to protect their resource long-term. If we genuinely want to rehabilitate NZ's clean green credentials, then I maintain the solution is better protection of property rights and the rehabilitation of common law remedies for environmental protection. Simple.
But there’s a problem. In fact, there's two problems -- caused not by dirty dairying, but by dirty government:
  1. The Resource Management Act (RMA) has successfully buried almost all avenues for common law environmental protection. Despite common law's proven effectiveness over eight-hundred years, common law measures to protect against pollution are buried under the statutory framework of bureaucratic control set up by the RMA. To bring back common law environmental protection requires the RMA to be scrapped, and replaced by a 'codification' of rational common law principles of environmental protection.
  1. Even with the codification of common law, without clear ownership there is still no protection. To work effectively, property rights-based environmental protection needs an owner to stand up for his property, yet nearly half of this beautiful country and most of the seabed, foreshore and waterways still have no property rights attached. Most of it is essentially un-owned, leaving a government department as the conservator of record of much of the country's waterways. The Environment Report should be regarded as a report card of how well they've carried out the role.

Whatever the real news about the release, non-release or pseudo-release of the last chapter of the five-yearly Environment Report, the report suggests that water quality in some places is going to get worse, and that it will be "non-point sources" such as agricultural runoff (those that command-and-control resource management can't so easily control) that will play a large part in that diminution.
The answer is to give greater power to those who value the resources under threat, and there is no greater power in law than the protection of property rights and the legacy of common law -- if only these were allowed to function as they should.


  1. "Under common law for example, those with recreational or water rights along the Waikato or with rights to fish the lakes of Rotorua or the headwaters of the Tarawera River would have recourse against farmers or pulp and paper mills who polluted the fishery"

    In that example this principle works. You have a known point source for the pollution, and the effects of any pollution will be almost immediately obvious. But there are two difficulties when trying to apply it to the effects of dairying:

    1. The effects can be very long term. Excessive nitrogen for instance builds up in the soil profile and gradually extends deeper down over a long period. It could be say a century between the excessive nitrogen use commencing on a farm, and it reaching the groundwater to have a noticeable effects on drinking water quality downstream. By then the damage is done (or not) and it's too late.

    2. The downstream effects can rarely be attributed to a point source - every farm upstream could conceivably be contributing (and in Canterbury that's typically a lot of farms). Even when the effects do become known in the longer term, and can be attributed specifically to dairying, how do you hold anyone in particular to account when there's so many potential pollutters, particular when it relates to what was happening on the farm decades earlier?

    I suspect there may well be a free market/common law solution to this problem, but I don't know what it is. We'd be a lot more convincing if we were able to apply the general principle of what you're saying (which I support) to the specific problem of dairying - given that's the subject matter of this post.

    1. Interesting. But I'm not sure that it's such a problem as you might think.

      David Parker is applying a top-down solution to (excuse me) a bottom-up problem — trying to force change on farmers to what he thinks farmers should be doing (growng apricots rather than cows) in the way of central planners everywhere. Because from the top down, when change needs to happen at the margins, effecting that change always look too difficult when you're looking at it from the top down.

      But it isn’t necessary, as a few of those older articles I link to point out. And more recently, Elizabeth Brubaker’s book ‘Greener Pastures’ focusses more directly on this problem, and discusses the common law solutions that can work, if given legal power by the removal of failing statute law.

      The aim, as always with common law, is to devolve legal power to those on the ground, to those with genuine interests in resolving the problem(s), rather than to those in the political firmament whose self-interests are radically different.

      Non-point sources needn’t be a problem if they're broken down, since essentially these are just point sources on a smaller scale, i.e., a scale too big for the central planners to contemplate solutions. But these are precisely the cases in which its most important to devolve legal power to those on the ground who have genuine interest in each and every point source — which is precisely what common law does. In this case, I’d suggest four things to get this going:

      1. Removal, as a matter of urgency, of any “right to pollute” granted by the RMA. This would give common law the power to breathe again.
      2. Set up Small Pollution Tribunals along the lines of inexpensive Disputes Tribunals, to which anyone with legal standing has access to make a claim, all of these Tribunals held by precedent to the prior decisions of higher courts.
      2. Recognise greater legal power in those with riparian rights, giving them standing to sue for pollution in these tribunals in either nuisance (which recognises that some pollution will always happen) or trespass (which is essentially zero tolerance to every molecule), such suits setting precedents allowing (for example) writs to be issued for other obvious situations out in the wild.

    2. 3. Setting up of land trusts, water trusts and conservancies, which would have similar legal rights and standing in the water quality, and even greater common law interests in protecting waterways. They could sue, as above, but if properly backed by government (with the power to offer tax incentives for example for cleaner behaviour) they could also negotiate conservation easements with farmers. “"Conservation easements are essentially agreements which set out conservation obligations for a property that are then registered on the land title. As a result, landowners agree to be legally bound to these land use and conservation obligations, which can then be enforced against current and future landowners by the holder. For example, an easement might restrict the development of land, the cutting of trees, or require the maintenance of fences to keep livestock out of a stream".75 "Easements are like a bundle of rights... different types of property rights are transferred to the land trust… originally broad rights like right to develop or clear land... but easements are getting very sophisticated... including language limiting use of pesticides, types of farming etc.".76 Basically, the landowner gives up certain rights or agrees to certain practices in exchange for tax benefits.”
      4. And in the end, as one means of transition from the bullying of statute to something better, there is still a means by which the power of law can be used to encourage the growth of a market of tradeable rights — it could still allow a minister to look “active,” which all politicians like, but it would still require some humility from his regulators. Bruce Yandle explains: “But, we can get a force that deals with the non-point source pollution problem. We got it on the Tar River in North Carolina, where the EPA said “Look, the approach we are taking is not going to solve your problem. Eighty percent of the problem in this river and in this sound is from non-point sources, and we can’t solve it [with statute]. But if you don’t do it, we will lay some regulatory concrete on you like none you have ever seen.” And so those people formed a not-for-profit corporation, called the Tar-Pamlico River Basin Association. They defined property rights and they have markets and they have trading and they are relying on common law contracts. But there was a gun put to their heads!
      “So maybe you can have a force that elicits a response. I’m not suggesting that we have arrived with
      this. But it does show, in a way, how markets can emerge from under the regulatory concrete.”
      [PS: Oops, I've written five points rather than four. But there you go.]

    3. Peters response here , is better than his original article... for me.
      I think I get it... and pretty much agree with it all.. makes alot of sense to me.
      I have a problem with the cost of taking cases to court , for ordinary people, ...but having small pollution tribunals nicely solves that issue.

    4. Thanks Peter. I still don't have a definite idea on how dirty dairying could be specifically addressed - taking into account both the non-point source nature, and the potential time lag between excessive nitrogen use and any negative effects. But your elaboration does give me an inkling, and a starting point for where a solution probably lies. Given the complexity of the issue, a lot of detailed work would be required to come up with something that works, and convince others who aren't predisposed to non-regulatory solutions.

  2. My own view is that both common law and regulatory oversight have their place.

    I am thankful that most markets that I trade have regulatory oversight.
    ( I would never have the resources to ever take a Broker or counterparty to a trade, thru a court process )
    In its purest sense, a regulator keeps the playing field level, by making sure the players are playing BY THE RULES. The rules being, maybe, those things that are enshrined in property rights and tested and evolved thru common law, as well as laws enacted by Govt. ( which is another story )

    In rugby it is vastly more efficient to have a referee than to have individual players going thru some kind of adjudication process.

    The videos' example of the EPA shows how a regulatory body can evolve and mutate into some kind of egoic bureaucratic monster.

    Surely, there is a "sweet spot", where a regulator plays a vital role in helping to make sure property rights are respected, and is more efficient than having many individuals fighting things out in court ( which can be expensive )..??

    Peter, I'd be interested to hear your point of view on this video/story.
    The old guy is straightforward, honest, and principled.
    He had no satisfaction thru the "common law process".

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