For most of the past week a private surfing contest has closed off Steamer Lane - one of California's most popular waves - while paying only a few hundred dollars in permit fees. I think this is far too cheap.
Consider the following thought experiment: If somebody were to set up at the beach and offer \$1 to each surfer who stays out of water they'd all decline. However, if the amount were upped to \$100, several would accept. To me this indicates that the price to close off the beach should be tens of thousands of dollars rather than a few hundred.
Is this a reasonable way to price externalities? Is there some other model where it would make sense to charge only a few hundred dollars for beach closures?