Economics on the Beach

A busy beach offers an interesting economic case study.

I recently spent a few days on holiday with my family in Barcelona.  The weather was fine and each day we spent an hour or so on the beach.  I observed the scene: the crashing of waves; blue sky; white sails; larger ships in the distance; some people swimming; many more stretched out on the sand; occasional calls from itinerant drinks sellers; a life guard on a high chair.  I also began to ponder some economic questions …

What property rights apply to the beach?  This beach, like many beaches around the world, was clearly de facto open access.  No barrier restricted entry, and no payment was demanded for being on the beach.  Formally, I ascertained later, beaches and other coastal land in Spain belong to the state under laws intended to ensure public access and to limit coastal erosion or excessive urbanisation (1).

Beach at Barcelona Aug 2014

Looking at the matter from another perspective, what rights do people have in respect of the beach?  They have a right to enter and move about the beach, but this right is attenuated by the other people on the beach.  Once an individual or group has settled at a certain place, perhaps laying down a towel or a bag, others recognise that they have staked their (temporary) claim to that small area of beach, and generally will not dispute their claim.  This is unlikely to be a matter of formal law, but can be explained partly as a social norm, and partly in terms of the transaction costs (time and effort) that would probably be incurred by anyone disputing such a claim.

A beach could be so crowded that the attenuation of people’s rights would be severe, with groups uncomfortably close together and movement impeded (if so there might be a case for a congestion charge).  This was not the case in Barcelona, which has many fine beaches, so that if one becomes crowded people can simply go to another a little further from the city centre.

Given my interest in the travel cost method for valuing non-market goods, I wondered whether the evident demand for the services of drinks sellers offered a means of estimating the value of the beach to its users.  The argument would go as follows.  Barcelona has plenty of stationary drinks vendors (cafes, bars and shops) not far from the beach.  Anyone buying a drink from an itinerant seller on the beach is effectively paying a premium to avoid a few minutes’ walk to and from the nearest such vendor.  The premium provides a lower limit on that person’s value of time spent on the beach.  Averaging the values over people and grossing up by total annual hours on the beach should yield a minimum annual use value for the beach.

I doubt whether this could be developed into a practical valuation method, although it is an interesting thought experiment.  One limitation is that the base price against which premiums would be measured would be hard to specify since prices charged by cafes and bars will reflect the costs of their buildings, furnishing and décor.  Another is that time saved by not walking to buy a drink might be used to reduce total visit time, rather than increase time spent on the beach.  Furthermore, the value of time spent on the beach may be subject to diminishing returns, in which case the marginal value would be less than the average value.  Other limitations may occur to the reader.  More generally, the parallel with conventional travel cost method applications, which attempt to estimate a demand curve and consumer surplus, is far from perfect.

The question that occurred to me about the life-guard is whether the service that he provides (with any back-up support he may have) is a public good.  Considering first the condition of non-exclusivity, would it be possible to operate a service for rescuing people at risk of drowning and to limit it to paying customers?  One approach might be for customers to be issued with a coloured arm-band to be worn when in the water.  However, such an arm-band would be easy to imitate, and would not be visible at all times.  Moreover, any requirement for a life-guard to judge whether a person is entitled to service would conflict with the imperative of urgent action in a life-or-death situation.   On the other hand it seems conceivable that a solution could one day be found via tiny water-proof electronic devices a swimmer could wear that could sense if he or she was in difficulty, and alert a life-guard by wireless.

What about the other condition: non-rivalness?  If individuals rarely get into difficulty, and the timing of incidents is random, then it is indeed unlikely that assistance to one person would prevent assistance to another.  But there are other possible scenarios.  A group of people might venture together further into the water than is safe, given their competence as swimmers.  Sudden freak tidal conditions might jeopardise many swimmers at the same time.  In such circumstances, a life-guard might be unable to assist everyone at risk.

The conclusion to be drawn is that economic goods cannot always be neatly classified as private or public.  There are borderline cases, and the service provided by a life-guard is one.

Notes and references

1.  The relevant Spanish law is the Ley de Costas (Law 22 / 1988), as amended by Law 2 / 2013.  Useful sources are:
a) Spanish Property Insight
b) Wikipedia – Coastal Act of Spain

This entry was posted in Recreation and tagged , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s