In a new article published in the journal Contemporary Economic Policy (ungated earlier version here), Paul Hallwood and Thomas Miceli (both University of Connecticut) discuss the law and economics of paleontological discovery - that is, fossil hunting. Hallwood and Miceli note that there are three groups of fossil collectors that have different incentives, in terms of the search for fossils and/or the recovery of scientific knowledge (the public value) from those fossils:
...professional paleontologists, commercial collectors who look to sell finds for a profit, and amateur collectors who do it out of interest rather than profit.
One important point is that recovering fossils leads to both public and private value:
Private good value is realized when the pecuniary value of a fossil is realized, or if it enters directly into a private collection; public good values are created when a fossil-type and the information associated with it are added to the stock of scientific knowledge in the field of paleontology.
In other words, there are positive externalities associated with recovering some (but not all) fossils. The problem with goods that have positive externalities is that, because the social benefit (what Hallwood and Miceli term the public good value) of recovery exceeds the private benefit (private value), private fossil hunters would engage in too little fossil hunting relative to the socially efficient (welfare maximising) amount of search. So, too few fossils would be discovered. On top of that, commercial collectors have little incentive to care about the scientific value of their finds, and so would not protect them in a way that preserves knowledge.
As a policy-maker, it may be tempting to try and capture the maximum public benefit by mandating that fossils must be given to museums or public academic institutions. However, that approach actually makes the problem of under-discovery worse, because then there is no chance of a private reward for recovery. On the other hand, having no restrictions on what happens to fossils after they are found would lead to more search and more fossils being found and excavated, but an inefficiently small amount of scientific knowledge being generated (because uncareful and low-cost excavation of fossils destroys much of the scientific value, which comes from their careful preservation in context). An example of this that I use in my ECONS102 class is when early palentologists paid Chinese peasants for each fragment of fossil they found. Unsurprisingly, the peasants found large fossils and then broke them up into smaller fragments, in order to earn a greater reward.
The article works through the various incentives mathematically and graphically, then looks at the current state of the law in the U.S., which could do with some improvement. Hallwood and Miceli conclude that:
Our analysis has shown that laws protecting scientific value are warranted based on the public good nature of fossil values, but this factor potentially creates an offsetting disincentive for profit-motivated collectors to engage in search, which is an essential prerequisite to recovery. Thus, if the scientific community needs to rely at least to some extent on private collectors to locate important fossils, there must be some recognition of the incentives that those searchers face. Federal legislation in fact pays little regard to this factor.
Their solution is interesting, but fairly intuitive:
...we believe there are lessons to be learned from the common law and state legislation pertaining to recovery of historic shipwrecks, which present many of the same economic issues.
As they note in one of the footnotes to the paper, in relation to the recovery of shipwrecks:
...the admiralty courts aim to balance the recovery of private (treasure) values and public (scientific archaeological) values from sunken wrecks. Neither is prioritized over the other. Second, property rights to work over sunken wrecks are granted to private companies working on federal (submerged) lands. Third, the admiralty courts promote the collection of sound archaeological knowledge from a historic shipwreck through two devices: (1) there is variation in the percentage of treasure value retained by a salvage company depending on the quality of work performed; and, (2) in cases of poor or nonexistent archeological work, applications for permits in the future can be denied.
So, it seems that, in theory at least, we possibly should treat fossils like shipwrecks, if we want both the optimal amount of search for fossils and the recovery of the optimal amount of scientific knowledge.
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