53 
j in the short run—both by the users of the minerals and the pro- 
eat alternative sources of supply. There will also be difficulties in arriv- 
ing at a rate of development that is not self-destructive to the exploiters them- 
ae short-run situation will be limited to a relatively few exploiters who will 
have difficulty in controlling the rate of output with respect to the market for 
their products. Competition for exclusive rights to particular sites is likely to 
be severe because of the large size of holding and great variety in value. 
THE CRITERIA FOR RULES 
Three criteria are suggested for evaluating alternative rules for governing the 
exploitation of the sea floor minerals—economic efficiency in production ; non- 
arbitrary allocation of exclusive rights; and acceptability. These criteria overlap 
and are, to an extent, interdependent. a 
1. Economic efficiency in production will require, first of all, the ability of the 
entrepreneur to acquire security of investment. He must be able to obtain exclu- 
sive rights to a sufficiently large area for a sufficient length of time in order to 
capture a fair return on his investment. While it is conceivable that an entre- 
preneur could undertake such an investment and operate it effectively in the 
absence of rules guaranteeing tenure of rights, most writers believe that the risk 
would be too high to do so. Therefore, the search is for the regime or jurisdiction 
that can provide the best protection to the entrepreneur. 
Economic efficiency may also call for a set of rules that would control the rate 
of output. In a free-enterprise economy, the market generally serves this func 
tion and is preferable to an oligopoly. But in this situation, the magnitude of 
output is so great that some form of control may be desirable in the short run. 
At the least, the rules should avoid creating incentives that would stimulate 
marginal producers to enter the industry. 
In addition, social costs and benefits should be considered within the criterion 
of economic efficiency. Society should receive some return from the exploiters 
to cover the costs of protecting and administering exclusive rights. External 
costs, such as pollution, should be avoided, or paid for by the exploiter. It would 
be desirable to avoid “high-grading” of manganese nodules. This might occur 
if there were little or no incentive for the exploiter to sweep the nodules from the 
floor in an efficient pattern, thereby making ultimate recovery of the nodules 
more difficult and costly.** Society would also want to reduce, insofar as possible, 
incentives that would lead to the inefficient allocation of capital and labor 
resources.” 
2. The non-arbitrary allocation of exclusive rights may not be relevant to the 
Pioneer exploitation effort, and may seem to be of little importance in the short 
run, but over the long run, there must be some system for making rational choices 
among competing claimants. 
Property (in this case, an exclusive right to exploit a given area) can be 
allocated by a number of means—by force or power; by some concept of national 
or international interest; on a first come, first served basis; or through the 
market place. Any system can make use of several of these, but it is desirable to 
reduce, insofar as possible, the degree of arbitrariness. 
Most people would abjure the use of power or force in the allocation of exclusive 
rights to the minerals of the sea floor. But the more arbitrary the means for 
allocation, the more chance there is that power will become important. Initially, 
allocation by power may work to the advantage of the big nations, but if deci- 
sions are made in some international arena the advantage may lie with the less- 
developed nations. 
14The “rule of capture” that prevailed for the exploitation of oil in the early 1900’s 
stimulated excessively rapid rates of output that wasted natural pressure and increased 
the costs of recovery. 
15 In fisheries, the principle of the freedom of the seas has led to great inefficiencies in 
the allocation of capital and labor. Since the property is common to all and there are 
no controls on the number of producers, any shareable profit (or economic rent) be- 
comes dissipated. The industry tends to operate where total costs and revenues are equal 
rather than where marginal costs and revenues are equal. For example, it has been found 
in the Georges Bank haddock fishery, that 25% fewer vessels would produce the same 
eatch and 50% fewer vessels would produce the maximum net economic revenue. See 
Christy, “The Distribution of the Seas’ Wealth in Fisheries”, op. cit. Since minerals are 
not fugitive but geographically fixed, the same dissipation of economic rent is not likely 
to occur (although it could in the absence of controls). However, misallocation of capital 
and labor can occur if the exploiters do not pay a fair price for their rights, and are 
thereby given an advantage over the developers of land minerals. 
