Reviewed by Ryan Griggs

In this pathbreaking tour de force, Professor Walter Block of Loyola University, New Orleans, and Peter Nelson, an engineer out of Colorado specializing in water resources, lay down the case for full-throttle Water Capitalism. In free-flowing, inter-disciplinary form our authors provide a jam-packed foundation (and I do mean jam-packed; the bibliography alone is 35 pages long) for future advocacy of free markets in all things aqua.

Block and Nelson address the moral case for privatization of all things early on:

“Whatever the necessity of violence against innocent taxpayers, in terms of ethics, it is difficult not to give the nod to the private sector. After all, taxpayers are necessarily exploited; they are compelled at the point of a gun [footnote excluded] to pay the amount of money required of them, whether they wish to do so or not. In sharp contrast, while the private sector surely experiences fraud, it is not at all a necessary condition; the overwhelming majority of commercial interactions in the market are voluntary. … So, in terms of sheer morality, privatization is justified as it transfers economic activity from the government towards relatively moral private actors” (16).

The particular problem of government management of resources is known as the “tragedy of the commons.” This means that when a resource is removed from the private domain such that there is no longer a particular owner or group of owners of it, over-consumption abounds. Without private ownership, there is no incentive to preserve a resource for one’s own future consumption. Rather, the incentive under government management is precisely the opposite: consume as much of the resource as possible before it’s all used up, or at least until it’s no longer worth using in the first place.

The tragedy of the commons is the bedrock principle behind current law governing oceans.

“The UN Law of the Seas Treaty (1982, 25) reads in part as follows:

‘… the area of the sea bed (sic) and ocean floor and the subsoil thereof, beyond the limits of national jurisdiction, as well as its resources, are the common heritage of mankind, the exploration and exploitation of which shall be carried out for the benefit of mankind as a whole, irrespective of the geographical location of States…’” (emphasis added, 49).

Our authors rightly point out the absurdity of the collectivist dogma underlying this language. After all, if it works so well for the oceans, “[w]hy not assert that the land, too, is the ‘common heritage of all mankind.’ Of course a scheme of this sort was actually employed in the USSR not only with Sovietized agriculture, but included all basic factors of production” (50). If it didn’t work out for land in the Soviet Union, why is it still the reigning legal paradigm for oceans?

Whatever the answer, it wasn’t always this way. In fact, “admiralty law, also known as maritime law, and the law merchant” was a private legal system under the common law tradition that “held sway for several centuries, mainly during the medieval period” (50-51). Admiralty law was “a distinct subset of overall law that [dealt] with the proper relationship between shippers, dock-owners, marine commerce, transportation by sea, insurance, salvage and other matters affecting those who use bodies of water” (50). Here we find application to present day discussion of the feasibility of order without a central state. A common barb against advocates of free markets is that a private order society absent a coercive government authority has never been tried–the implication being that it therefore could not possibly work. But as we see here, non-state legal institutions were the norm in seafaring activity long before land-based governmental institutions corrupted the natural order.

But what about piracy? Aren’t bodies of water just swaths of rampant chaos without government there to restore proper order? The question is already poorly framed. The problem with piracy in the past, and in current times, was not the legal status of the medium upon which the nefarious pirates floated, but rather the mechanism used to combat them–that is, state-run navies. “For the libertarian, the state navy will not do. The sailors and their political bosses have no real interest in safe-guarding (sic) the property of merchant ship owners. [After all,] [t]hey exist to protect the state and enhance its power” (124). Furthermore,

“[s]tate navies are supported by conscripted funds, or ‘money’ that is created out of thin air by government fiat. So a person living in the middle of Nebraska who has never seen the sea, is forced against his will to pay for a bunch of excessively expensive floating weapons of war. The libertarian disapproves of this kind of violence. Others should too” (125).

Lastly, “there is also the question of personnel. A state navy is manned either by slaves or mercenaries. Conscripted sailors fall into the former category. They ‘serve’ under the threat of sanctions like fines, jail, or worse” (125). In short, one must be careful not to throw out the privatized baby with the pirate-laiden bathwater, especially since it is the morally and economically defective mechanism (state navies) that are truly at fault when it comes to abolishing piracy.

However, it is not in the nature of our authors to merely account for what won’t work, without giving guidance as to what will. Piracy can be dealt with on privatized oceans. Block and Nelson suggest that “[m]ore acceptable is a navy financed and owned by one or more entrepreneurial parties. A shipping company could own warships as well as merchantmen” (127). “Besides the trading a firm, a sea police company could provide constabulary services on a fee basis. There are at least two plausible fee structures: subscription, and fee for service” (128). In any case, “[t]he point of a private navy is that they would be equipped to provide the services required. There would be no aircraft carriers sporting planes with nuclear tipped rockets” (128). Nor, I might add, would the employees of these maritime protection firms be deceived into contractually-bound, years-long service in their formative high school years, the breaking of such an agreement to then be punished by time served in a government cage.

Suppose the UN Law of the Sea Treaty were tossed out though, what would private ocean ownership look like in practice, outside of protection services? For that matter, what about private ownership of other bodies of water, e.g. rivers (potamological ownership), lakes (limnological ownership), and aquifers (hyrdogeological ownership)? Our authors provide a comprehensive overview of three main contemporary views, known as: riparian, in-toto, and prior appropriation.

Let’s deal with the first view, the riparian system, since even our authors disagree on which of the latter two is correct from the libertarian perspective. “The concept is that ownership of the adjacent land includes the riparian zone [the water frontage zone, i.e. shore] … typically to the centerline (unless he has holdings on both sides …) as well as the water [itself]” (34, bracketed comments added). “Pure riparian ownership gives the proprietor the privilege of drawing water … as long as there is any [to draw]” (34). Notably, “this system tended to evolve where water was plentiful” (34).

Where the riparian system begins to break down is under conditions of water scarcity. Since water seeks a level surface, if an owner on one side of a body of water has a riparian property right, then he can continually draw water from the given source. This will deplete the amount of water on the other side, which in cases where property owners are sufficiently close to each other would be owned by someone else. In short, because the riparian system gives nearby property owners of a given body of water an absolute right in the amount of water contained in one half of the body of water in front of him, conflict over allegedly owned water is inevitable. Since the purpose of property rights is to eradicate conflict over scarce resources, rather than set the stage for it, “neither author subscribes to the riparian concept” (34).

Nelson comes down in favor of the Prior Appropriation conception of rights in water resources. This view combines the Lockean notion of “mixing one’s labor” with a given resource in order to establish ownership of it, and the first-user principle, which states that the first to homestead (establish ownership over) a given unowned resource is the legitimate owner of it. As our authors (likely Nelson) explain:

“This type of ownership both involves the water and measures it. The first user constructed the device(s) necessary to utilize and/or divert what he needed [footnote excluded]. In so doing, he mixed his labor with a natural resource. But what exactly does he own? It is not geometric in nature. The flow of water is what he possesses” (33, emphasis added).

Regardless of its merit when held to a strict libertarian standard, this is an ingenious conception–a property right in a rate of flow! Who would have thought? Yet to the present writer, it seems that a rate per se cannot be owned, and thus, the prior appropriation conception of water rights, despite its Lockean and first-user bonafides does not hold water, so to speak. After all, a rate is simply a ratio. My hunch is that Nelson, who in Chapter 14 presents a worthy argument in favor of prior appropriation, has confused a usage right with a property right. The difficulty becomes apparent when we inquire as to who owns the resource that the given ratio concerns. Consider a truck that moves at 60 miles per hour; does the property owner in this case own 60 miles-travelled-by-truck per hour, or does he own the truck? Well, the truck itself, of course!

Professor Block comes down in favor of the in toto conception of property rights in water resources. “Here, control would be over the physical components that direct and contain the water molecules as well as the aqueous resource itself” (32). Relying heavily, and justly, on Professor Murray Rothbard’s elaboration of the technological unit as set forth his 1982 Cato Journal article entitled “Law, Property Rights, and Air Pollution,” Block explains that the relevant technological unit in aqueous resources will vary case to case. However, the central thesis seems to be that independent, stand-alone bodies of water (e.g. a river, a lake, an aquifer) must be owned by one, and only one entity. Of course, as with large infrastructure projects on land, this single entity may consist of more than one owner or shareholder. Thus, for Block, the appropriate conception of water rights does not consist of rate-ownership, despite the flowing nature of water.

Applied to oceans, in toto ownership becomes less clear, but so too do all rights conceptions of oceanic ownership. The issue here is scarcity. Recall that the purpose of property rights is to solve the problem of scarcity. In other words, without scarcity, there is no need for property rights. Even in modern times, the ocean remains so vast that conceiving of potential conflicts, e.g. of mineral miners on the ocean floor versus fishers at the surface, is difficult from the outset.

Yet for those considering a future of human occupation of oceans, fear not, for our authors have something in store for you too. “[A]s indicated by commercial and recreational choke-points, [the ocean] is being filled up with people, boats, oil rigs, etc., more and more; and soon conflicts over its usage will abound” (61). What to do in such a case? I consider this to be the most fascinating and insightful part of the text. First, a classification of the strata of the ocean itself:

“The oceans are composed of four aspects: the surface (for shipping, whales, and other air-breathing aquatic mammals), the water below the surface (fish, submarines, scuba divers), material on the ocean floor (manganese nodules, [footnote excluded] methane clathrate crystals), [footnote excluded] and the resources under the ocean floor such as oil” (62).

Second, consider the various economic activities that may take place in these four areas:

“[Each] initiative would involve a certain expanse, depth, and/or path to implement. In developing [the] enterprise, the value, now a ‘resource,’ would become an extension of the [proprietor’s] personhood. It would become ‘his.’ Starting with the current unoccupied seas, at first there would be no concern about delineating the exact extent of his possession.

As increasing activity of such creators impinge on neighbors, boundary definitions would necessarily become imperative. Methods for demarcation would evolve [footnote excluded]” (64-65).

Notice how only once scarcity comes into play is the notion of establishing property rights, and therefore boundaries, a concern. Under relatively light usage, where proprietors are spaced far enough away from each other such that conflict does not arise (a condition of non-scarcity), the ocean is essentially an open frontier. Thus, the third step:

“However, should the usage become intense, priority in terms of initial time of homesteading would take effect. [For example,] if the shipper was there first, the fishermen would have to yield. If multiple shippers found themselves in conflict, specific paths would necessarily be staked out with the better routes going to the earliest homesteaders. Without limiting the possibility of future improvements, routes can even today be accurately identified using global positioning. In earlier times, [Long Range Navigation], lighthouses, and marker buoys ascertained locations. In the future, technologies only dreamed about at present will become a reality” (65).

In other words, when ocean usage ramps up to the point of scarcity, the first-user principle of homesteading would apply in order to allow people to discern who owns what.

Finally, our authors compare this progression of open frontier to well-demarcated private property to the development of land itself:

“Only when the land became so intensely used did precise property lines develop. For an example from the relatively recent past, the reader is referred to the historical map of the Arabian Peninsula and Vicinity (Undated). On it, he will see nations, but except very close to the coast, he will find dashed, indistinct or non-existent borders. We, the authors, envision a similar process, not of countries, but of homesteaders gradually filling in the oceanic territory with ever more detailed and exacting definitions of proprietorship” (66).

Of course, in order for humankind to extend his domain over the oceans in such an orderly fashion, the barbaric UN Law of the Sea Treaty, which drowns prosperity founded on private ownership before it has a chance to breath, must either be repealed or ignored–with haste.

Continue: San Francisco Review of Books: Water Capitalism: The Case for Privatizing Oceans, Rivers, Lakes, and Aquifers