I love this quote from New Zealand First’s Shane Jones here: https://www.newsroom.co.nz/tourism-nears-summer-of-uncertainty. This “can-do” optimistic attitude breaks down because of the the concept of public and private tourism goods and services.
About Goods… and Bads
“Goods” are things which people want. “Private” goods are things people want and can be made to pay for. “Public” goods are similarly things people want, but they differ from private goods in fundamental ways which hinder the operation of markets.
“Goods” may (or may not) be marketable. Love is a good – people want love. And kindness is a good. Everyone wants love and kindness. Don’t they? Some people even pay for love because love is a private good, and it can be sold in a market.
I and others also want world peace. World peace is therefore a good. However, unfortunately, no one’s figured out how to supply world peace at a price I, or others collectively, are prepared to pay (note for future blog: world peace and the political process as markets – a topic for another time). Despite world peace being a good, there is no market for it.
Other private goods are homes, cars and tonight’s dinner. And each of these private goods has a market which has evolved around it, where these “private” goods are be bought and sold for value between willing participants.
Market for the Absence of Bads
Bads are things you don’t want. Nobody wants them. They’re Bads. Like a big hard punch in the arm. Nobody wants a big ‘ol punch in the arm. Booom! Ouch! Hurts!
Importantly, no one’s going to pay for a “bad” – there are no markets in “bads”. No one’s going to sell you (nor will you normally pay) for a big ‘ol hard punch in the arm.
But “the absense of bads” are (conversely) “goods”. The mafia has made a solid living selling the absense of a punch in the arm. Ok, we call that line of business ‘extortion’ or ‘protection’. Not all markets for goods (or the absence of bads) are legal markets.
… But they exist. They are the basis for a “Black Market”
Other “absence of bads” which are legitamate marketable goods are things like:
- The absence of pollution – we call it the “Emission Trading Scheme”, where the right to pollute the atmosphere is “sold” for $25 per carbon tonne.
- The absence of competition – the basis of intellectual property rights and patients, which are a reward for clever ideas that benefit the world.
Public and Private Goods
Public goods are things which:
- Your enjoyment of the good does not exclude someone else’s enjoyment of the good. Your consumption doesn’t “deplete” the good or service, and other people can enjoy (or consume) the public good in the same quantity and at the same time as you.
- You can’t stop someone else enjoying the good. You might want to. But you can’t. Prevention is either impossible or prohibitively expensive.
Traditional public goods are things like the air – you can’t stop people breathing air. Nor does their air-breathing impact on your ability to breath air. They – or you – can take as large a gulp of the air as you both want without impacting on the other person.
You can prevent them breathing air, but the law takes a dim view on this. The costs of stopping someone breathing air are a prohibitively expensive jail time to you. Its also called murder.
Other public goods include ideas and software. My learning the General Theory of Relativity does not stop you from learning the General Theory of Relativity. Nor can you stop me learning the General Theory of Relativity.
Software is the same: my copying and playing a version of Doom (…yes I’m that old), does not prevent you enjoying your copy of Doom. And, unless you go to the added cost of installing copy protection, you can’t stop me playing Doom.
Intellectual property laws were created to transform public goods into private goods so Shane Jones’s advice applies and Microsoft or other developers become rich.
Tourism: A Public or Private Good?
I used to work at the Ministry for Business, Innovation and Employment in the Tourism data team, and we used to go out to the regions and chat with tourism operators.
The most successful operators sold private tourism goods.The most successful business charged visitors for a monopoly experience unobtainable elsewhere. Private tourism, in these areas, generated real wealth for those regions, over and above the cost from tourism.
In New Zealand, think the Shotover River Jet, or the Albatross Colony, or the Queenstown Gondola. Their monopoly experience are the adrenaline of the Shotover jet experience, the unique experience of Albatrosses nesting in one of two places in the world, and the unique scenic views of the Southern Alp and Lake Wakatipu from the gondola.
Public Tourism Goods
The worst tourism areas were endowed with public tourism assets. Areas with public tourism assets attracted people who couldn’t be stopped from consuming the local attractions. Nor could they be charged for their tourism experience. These regions received all of the costs of tourism to their local infrastructure and environment, but no one was receiving a direct return on the tourism asset.
Napier, Paris and the South Island West Coast have this problem: they’re so damned nice that people want to visit them and go there. Napier, for its post-1930’s earthquake Art Deco architecture; Paris for its romantic atmosphere and historic buildings, and the West Coast for its deep natural stunningly great environment.
However, no one can be excluded from Napier, Paris or the West Coast, and no one can be charged to “drinking in the ambiance” of the location.
Indirect benefits accrued to restaurants and hotels in those areas, through higher occupancy levels. But each of these local business were paying occupancy-related input costs and receiving compensation for the food or accommodation services they provided. In short – they were receiving a competitive reward for their services, not for their art deco-ness, nor the fine dining around them, nor their robust windswept rain forest surroundings.
Everyone wants to go to locations with public tourism assets, and experience the natural environment, but in none of these places can visitors be either charged for their experience they’re experiencing, nor excluded from turning up and experiencing that experience.
Privatising Public Tourism
The way regional New Zealand has commercialise public tourism assets is through “adding something else” into the mix which excentuates the tourism experience and capitalises on the tourism population.
Napier’s Art Deco Week, the West Coast’s Wine and Food Festival are two external events designed to bring in tourists for the public tourism experience in a way that capitalises on the tourism asset, but commercialises its value.
Each one of these events requires the assistance of the local Council to overcome the Free Rider problem which hampers public goods generally: without the ability to charge or exclude the consumption of a public good, its in no single individual person’s interest to promote the consumption of the good when all persons benefit from the individual effort.
Collective effort and co-ordination is needed to “transform location into goods and services that people are willing to pay for” where those tourism assets are public goods in nature. Where those tourism assets are private goods – like access to the Sky Tower, or the albatross colony viewing platform – the market will sort out how best to commercialise the operation.
In summary
Shane’s optimistic view depends on the nature of the tourism assets he’s thinking about. Some can be left to the market to sort out – the private tourism assets. Some need local coordination from either a local council, or a local tourism body.
In a tourism climate staved of customers, its not that easy for some regions to “pony up” customers and commercialise their beauty as Shane may suggest.