Rationing access to beaches, in a time of physical distancing

Last week, my ECONS102 class covered common resources and the Tragedy of the Commons. Common resources are rival (one person's consumption reduces the amount of the good available for everyone else), and non-excludable (if the good is available to anyone, it is available to everyone, and you can't easily prevent people from having access to it). The problem with common resources is that, because they are non-excludable (and therefore open access), they are over-consumed relative to the socially efficient quantity. Essentially, there is a difference between the private incentives (to consume as much of the good as you want to), and the social incentives (to ensure that the good is shared in some fair and equitable way).

Now consider public parks and beaches. In normal times, parks and beaches are non-rival (and non-excludable), because there is plenty of space available for everyone. However, in peak season they are clearly rival, and because they are non-excludable as well, they are common resources and so they are subject to the common resource problem outlined above. Everyone wants to be at the beach (the private incentive), but by everyone being at the beach, the beach becomes overcrowded and everyone's experience is all the worse for it. Fortunately, this is only a problem at times of peak demand.

However, what constitutes peak demand at beaches is redefined when physical distancing is important, as Time reported back in May:

Last weekend, images and reports of glutted beaches and parks have spurred several governors to roll back access to parks and shorelines for fear of a surge in new COVID-19 infections. At a certain point, it becomes physically impossible to pack so many people into six-foot intervals.

As summer approaches, and demand for outdoor recreation skyrockets even further, public space stands to become what economists call a “common resource” — something that belongs to no one, like fish in a lake, but can be depleted without a form of rationing. Already, New York City Mayor Bill de Blasio said Thursday that the virus-stricken city may limit entry to some parks.

“Space is now a resource that, in the foreseeable future, we’re going to have to ration in a way we’ve never had to ration before,” says Clemson University economist Michael D. Makowsky. “The outdoors used to be an inexhaustible resource. Human beings now require a lot more volume than they used to.”

The solution to a common resource problem is to make the good excludable, rather than non-excludable - essentially, to move from a resources that is open access, to one that is closed access (or where access is restricted). In the case of parks or beaches, the government can achieve this by rationing access to the resource. In the case of parks and beaches, the Time article notes three potential options:

The first and simplest approach would be to limit access to public places, like parks and beaches, based on some form of lottery. On Mondays, for example, Yosemite National Park might be closed to families in which the head of household had a driver’s license number ending in a 1 or a 2. On Tuesdays, on 3 or 4, and so forth — effectively reducing the potential crowd by 20%...

A second strategy could involve issuing permits for controlled spaces with discrete access points that can be sold or exchanged. It’s another idea that has already been tested in environmental policy — specifically, the “cap and trade” system, which created a marketplace for companies to buy and sell emissions permits while attempting to incentivize emissions reductions.

In the case of space rationing, an analogous policy would aspire less to incentivize isolation than to fairly distribute the limited resource of open areas. Under such a framework, cities would issue free permits to all residents to be used for access to the most popular parks, beaches and other coveted public areas. A person could choose to sell unwanted permits, or trade them for a different kind of permit (to a different park, or for a different day, and so forth.)...

A third option would be to impose new taxes on certain privileges that are currently shut down in many parts of the country, like dining in at a restaurant. “If ever there was a time for a dine-in tax, it’s now,” Makowsky says. Such a tax could be proportional to demand, with higher levies on weekends and other peak times, he says.

The first option is clearly open to abuse, since households with multiple vehicles (with difference licence plates) could skirt around the restriction quite easily. The third option doesn't regulate the number of people going to the beach directly, but simply makes it more expensive to do so (in essence, this potential solution isn't about making the good excludable, but about making it non-rival). Unless the tax varies based on beach-going demand, the tax would be too high on bad weather days, discouraging beach-going on days when people don't want to go to the beach, while simultaneously being too low on good weather days, where people would be more willing to pay the tax and still go to the beach. It likely wouldn't solve the common property problem at all.

The second option seems most feasible from an economic standpoint, and is quite similar to the tradeable quotas that are used to manage fisheries (another common resource). It encodes a property right for everyone (the right to go to the beach on a particular day), and then lets people trade between themselves to determine who actually takes up the right. The number of permits can easily be limited to ensure the 'right' number are available to ensure physical distancing can be maintained each day.

To be efficient (welfare-maximising), a property rights system needs to have four features:

1. Universal - In this case, everyone who wants to go to the beach must have a permit;
2. Exclusive - Only permit-holders are allowed to go to the beach, and all the costs and benefits of beach-going must accrue to the permit-holder;
3. Transferable - Permits must be able to be transferred in a voluntary exchange; and
4. Enforceable - There must be penalties in place that are sufficient to deter people without permits from attempting to go to the beach.

If those four features are in place, then the permit-based system is an efficient solution to the common property problem of how to make the beach (or park) closed access. The big problem then becomes, how do you allocate the permits in the first place? And of course, how do you administer the system? Those problems would first need to be solved in order for this system to be workable.

[HT: Marginal Revolution]