Why Study the Commons?

Four basic types of goods Source: Anderies, J. and Janssen, M., 2016. Sustaining the commons. Arizona State University.

Source: Anderies, J. and Janssen, M. , 2016. Sustaining the commons Source: Anderies, J. and Janssen, M., 2016. Sustaining the commons. Arizona State University.

There are no property rights established over the resource. The term commons refer to a broad set of resources, natural and cultural, that are shared by many people Examples: forests, fisheries, groundwater resources. The key term here is “shared.”: There are no property rights established over the resource.

Characteristics of property rights Source: Asafu-Adjaye, J., 2005. Environmental economics for non-economists: techniques and policies for sustainable development. World scientific. Well-defined: You have title to the car in the form of a motor vehicle registration certificate and or a purchase receipt. In some cases the entitlement may be informal and may have been institutionalised by social or cultural norms.

Characteristics of property rights Exclusive: You are the only one who has the right to use the car, although you may choose who else may use it and under what conditions. It is important to note that restrictions accompany ownership rights. Transferable: You may transfer permanent rights to the car to someone else by selling it, or you may transfer temporary rights by renting it.

Effective enforcement involves: Characteristics of property rights Secure and enforceable: Your title to the car is secure and enforceable because if someone steals it, you have the right to notify the police and have the person arrested. Effective enforcement involves: effective detection apprehension of violators application of an appropriate penalty (the penalty must exceed the actual or anticipated benefits of violation)

There is a big challenge associated with sustaining the commons.

Hardin, G. 1968. “The Tragedy of the Commons.” Science, 162: 1243-1248. Population, as Malthus said, naturally tends to grow "geometrically," or, as we would now say, exponentially. In a finite world this means that the per capita share of the world's goods must steadily decrease. Is ours a finite world? A finite world can support only a finite population; therefore, population growth must eventually equal zero.

Estimated World Population Growth Source: Todaro, M. and Smith, S. C. (2012). Economic development, Addison-Wesley, 11th ed., Boston, MA.

World Population Growth, 1750-2050 Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

World Population Growth Rates and Doubling Times

Picture a pasture open to all Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. When people share a resource they will overharvest it because it is in their individual interest to take as much as possible.

Hardin concluded that there were only two options to avoid the depletion of the commons: Give the herders private property rights. If each herder owned a piece of the common land and the herder’s sheep caused overgrazing and erosion, the costs would be felt by the individual herder only. For this reason, the rational herder would choose to put an appropriate number of sheep to graze on the land in order to maximize her long-term earnings.

2- The other possible option is for a government body to restrict the amount of grass that can be consumed. However, in order to enforce the restriction, the government would have to monitor the amount of grass consumed by each herder—a costly exercise. An alternative would be for the government to require that herders pay a tax per head of sheep, which the government would use to hire a guard to monitor whether the herders follow the rules.

The importance of Hardin’s argument is its conclusion that people are not able to self-govern common resources. Lack of clear rules of use and mechanisms to monitor and enforce those rules

Appropriation (flow) Provision (stock) CLASSIFYING THE ASSORTMENT OF PROBLEMS FACED BY APPROPRIATORS IN CPRS Source: Ostrom, E., Gardner, R. and Walker, J., 1994. Rules, games, and common-pool resources. University of Michigan Press. Appropriation (flow) excluding potential beneficiaries and allocating the subtractable flow, level of appropriation and the method for appropriation Provision (stock) creating a resource, maintaining or improving the production capabilities of the resource, or avoiding the destruction of the resource

Appropriation Problems 1- Appropriation externalities The production relationship by which one user's increased appropriation re­duces the yield obtained by other users for any given level of appropriation activity (decreasing the average return, the suboptimal allocation, ignoring the impact of their own increased appropriation on overall returns from appropriation, overinvestment of resources into the appropriation process) 2- Assignment problems Changing the assumption of homogeneity in the spatial distribution of resource units, how to make assignments to beneficiaries in better or worse locations , frequent conflict occurs over access to the good patches 3- Technological externalities The presence of a homogeneous technol­ogy

Source: Ostrom, E. , Gardner, R. and Walker, J. , 1994 Source: Ostrom, E., Gardner, R. and Walker, J., 1994. Rules, games, and common-pool resources. University of Michigan Press

Provision Problems 1- Demand Side 2- Supply Side The way in which appropria­tion impacts on the productive capacity of the resource (when water withdrawn exceeded the average safe yield of the basin, salt water intruded, destroying the capacity of the basin to hold potable water , discount rate used is sufficiently large 2- Supply Side The social benefits accruing from a public good exceed the cost of supply, but individual members of the group would prefer to enjoy the good without shouldering a share of the cost. The individual incentives to free ride on the provision activities of others(maintenance or provision of a CPR facility may suffer from free riding because it is difficult to monitor or prevent access.

Source: Ostrom, E. , Gardner, R. and Walker, J. , 1994 Source: Ostrom, E., Gardner, R. and Walker, J., 1994. Rules, games, and common-pool resources. University of Michigan Press

How to effectively govern the commons? The traditional approaches to solving the commons problem through privatization or state regulation have been challenged. Communal property, or common-property governance regimes do provide exclusive and effective rights, which are often used to govern the commons.

How can we make sure that the commons are used wisely and fairly? Who should regulate the use of the commons? Who should make the rules?