In Texas, ownership of subsurface resources, such as oil and water, is governed by the “rule of capture.” If an individual or business can “capture” the resource–bring it to the surface–it becomes his property.
The rule of capture has often been called the “law of the biggest pump.” As the website for Texas A&M explains,
Texas courts have consistently ruled that a landowner has a right to pump all the water that he can from beneath his land regardless of the effect on wells of adjacent owners.
Fundamentally, the rule of capture treats resources as a part of “the commons”–a resource available to all. Those who “capture” that resource become the rightful owner. But the inevitable result is the “tragedy of the commons.”
When resources are owned “in common,” users have neither the incentive nor the means to protect the long-term value of the resource. If they don’t capture the resource today someone else will capture it tomorrow. The result is the depletion of the resource .
The traditional solution to this problem is to limit production–the extent to which the resource is captured. That has been the solution in the production of both oil and water, and it has also been the solution for other resources treated as a part of the commons, such as fisheries.
But this solution is flawed, both morally and practically. Morally, it fails to recognize ownership in the resource. Practically, it provides no incentive to expand or grow the resource.
For example, the traditional solution to over fishing has been to limit catches. Regulators seek to stabilize fish populations by placing restrictions on fishermen. In other words, the production of fish is not determined by market forces but by bureaucratic decrees. Fishermen have a motivation and desire to increase their production, but politics prohibits them from doing so.
Fish farms have overcome this problem. Aquaculture provides the means for “fishermen” to increase production without depleting the resource. Aquaculture succeeds because ownership in the resource is recognized and protected. Aquaculture succeeds because the owners of fish farms are freer than fishermen.
The solution to the tragedy of the commons isn’t government regulation. The solution is the recognition and protection of property rights. The alternative to the rule of capture isn’t government regulation. The alternative is the recognition and protection of property rights.