1 Chen Ping-An Annie Chen A07413761 Econ 145 Professor Squires HW 1 18 April 2008 Common Property and Property Rights The founding of every great nation is inspired by the need for ownership or possession of certain rights. Herein lays an issue with the use of common property to certain individuals. Common property includes a variety of resources that need a kind of allocation management. Following gives an introduction of this issue of common property by examining the definitions of common property, public goods, externalities, and tragedy of commons. The problem with commons is addressed in the theory known as the tragedy of commons. In the tragedy of commons, the theory addresses the negative externalize of consumption as an issue because of the finite characteristic of common goods. The need to regulate common resources is an action that is undertaken through the use of property rights. Examining tragedy of commons as the fundamental negative consequence that results from common property produces the need to observe property rights, their main characteristics and their effect on tragedy of commons. Hardin's observation on the evolution of regulation and the trade offs between fair verses efficient regulation. On the contrary, when studying indigenous villages Wade finds that certain indigenous populations naturally regulated their common resources. Cinner observes forces that are related to regulation and their correlation with extensive or decreased regulation. Examining assertions about the management of common goods in the theory of tragedy of commons utilizing the tool of property rights from Hardin, Wade, and Cinner, proposes a comprehensive analysis and study of addressing problem with tragedy of commons through the utilization of property rights and regulation of utilization. The use of common property is an issue of finite resources. The definition of local common property resources "must do two things: first defined common property resources, and secondly,
Chen 2 distinguish local from other kinds of common property resources" (Seabright 1). Common property is a type of public good, which is a good that is rivalrous but non-excludable. Rivalrious is a resource that is found unavailable once it is used by another individual, therefore making it a resource that is subject to competition for consumption. A good is excludable when an individual can exclude others from using a certain good. A major issue in public goods is the lack of excludability that protects the resource from being depleted. For example, stalk flow production renews itself in a natural process of birth and disease where it is harvested from stalk but if it is over harvested then the flow of stalk with decline over time. Another issue with a common resource is the issue of congestion or crowding, which is a form of technical externality where the problem of public good and common resources occurs when if there is too much demand for a good there is an increase in the marginal cost of harvesting the good. When addressing goods, there are four types of goods: private, public, common, and collective. A public good is a good that is non-rival and anon excludable. For example, a public good like the army protects an individual as well as the nation, therefore the rest of the individuals in the nation are not competing for the benefit of protection. The difference between common resources and public goods is both are non-excludable but common resources are rivalrious and public resources are non-rival. With common resources and public goods, there is an issue of overpopulation. The negative result of these issues with common resources and public goods is known as the tragedy of commons. The tragedy of commons is a negative externality of consumption that occurs when free access with no excludability results in overexploitation of resources. Tragedy of common results when benefits accrue to private individuals and each individual maximizes his or her return to the resource but the cost is distributed to all to whom the resource is available. This results in a tendency for each individual to over use the commons and eventually destroys the commons. The private marginal cost is less than the social marginal cost because the individual does not face the consequence of depleting the resource at the cost of the community. In the tragedy of commons two externalities arise: congestion and stock.
Chen 3 Congestion is an asymmetric externality and occurs when, for example, there are too many boats and they bump into one another. Stock is a symmetric externality that occurs when there is a common resource stock and there is less available to others. In these two externalities there lies the free rider problem where economic agents receive benefits of a good but avoids paying for it. The suboptimal provision for the pubic good is not achieved because there are individuals who do not have to pay for the benefit of that common good. The natural resources, the result of over consumption of these common resources that are naturally in the cycle of regenerating themselves results in the eventual destruction of these common resources. Common property is a resource that can be used by the collective and is owned by the entire population. The issue with this is that because it is a common property, there is not recognition of specific responsibility to harm or negative externalities that result from abusing or over consumption of the common resource. The following articles address this issue and examine different methods and situations where groups try to control the access and enforce excludability to a resource in order to prevent over consumption, congestion, and stock. Property rights have the characteristic of universality, exclusivity and durability, transferability and divisibility, and security. Property rights allow for all resources to be privately or collectively owned with the requirement to specify ownership and entitlements through the characteristic of zoning or universality. Exclusivity are all the benefits and costs from use of a resource accrued to the owner. Durability is an important feature of exclusivity in which the duration of the property right is the length of entitlement. Divisibility is an important feature of transferability in which it indicates the ability of the holder of the right to divide up the asset. Security rights give assurance to individuals and the confidence to invest or purchase a resource. Well structured property rights retain all these characteristics. The five types of property rights are private property, state property, open access, common property, and hybrid. A property right is a "bundle of characteristics that convey certain powers to the owner of that right" (Lecture 4/9/08). Open access and common resources are resources
Chen that 4 are open to every individual where the individual has no economic incentive to conserve the resource, which includes the issue of tragedy of commons. Distinction of open access and unfettered open access is a resource that is managed by a regulator and when access is not only limited, but there are rules of membership and use. There is an existence of monitoring and sanctioning procedures so that these laws are effectively enforced (Lecture 4/11/08). If an individual has ownership of a good, they have the incentive to care for and be responsible for that good. The tragedy of commons is addressed in Hardin's article where he mentions that the tragedy of commons occurs when each man is locked into a system that drives the individual to increase his or her consumption of a finite resource where each individual is pursuing his or her best interest at the cost of the finite resource and society. The face there is "freedom in a commons brings ruin to all" (Hardin 1244). Hardin asserts that society needs to learn how to control its consumption of these resources, which is a process. Regulation is costly, unpleasant, and takes time to enforce. Society does not act to regulate a resource until the resource is scarce and once the resource is scarce, the resource must be strictly regulated through efficient and fair practices. Hardin believed that the only way to "preserve and nurture other and more precious freedoms is by relinquishing the freedom to breed and that very soon. Only so can we put an end to this aspect of tragedy of the commons" (Hardin 1248). In other words, the injustice that is required to control the consumption of a common good is worth saving the resource. Wade studies indigenous cultures and found that their cultures did not develop ways of regulating common resources. He studied 41 villages in South India and examines how they regulate the use of water and common grazing land. Wade found that villagers naturally regulated their resources by alternating days in which the locals use water from the canal and punish individuals who graze on other people's property. There were five lessons learned from studying these villages that observed organizational design to protect property rights in the name of controlling common goods.
Chen 5 This study can be correlated to that of Hardin's where he mentions that as human population increases commons must be abandoned but the use of commons is justifiable "only under conditions of low population density" (Hardin 1248). The population of these villages was not to such a large proportion as most common goods. First, the villagers only follow rules that could not be achieved by individual action. Corporate organizations should be based on existing structures of authority to be effective with a council that is lead by local elite. The local elites are concerned with non- privatized benefits and take on less vital functions when it is good at core activities. The last lesson was to keep the techniques of calculation and control simple. There is "no presumption that collective action will generally work but where circumstances look promising for collective action government officials should treat this option seriously" (Wade 229). Government can help by providing a stable legal framework for these lessons of organizational design to protect property rights and ensure the control of common resources. Joshua Cinner studied 21 communities in the Western Pacific with a study of the CMT, customary marine tenure, because it is the "legal and cultural foundation for localized control over marine resources" (Cinner 1). The socioeconomic characteristic of communities found that integration to markets depended on immigration, higher dependence on fishing and conflicts over marine resources, and distance from markets and the percentage of fish sold to the markets. It was found that positively correlated with more extensive restriction on the resource but negatively correlated with less immigration. The resource was positively correlated with distance from the market because the market seems to have the ability to destroy the ability to regulate the marine resources. The positive relation with dependence on fishing implies that as the fishers become more dependent on fish they have more of an incentive to regulate the resource so that it is not depleted and abused. Understanding the definition of common property as a public good that is rivalrious but nonexcludable, public goods as a non-rival and non-excludable good, the externalities of congestion and stock, the negative result of consumption through the tragedy of commons, and the definition of
Chen 6 property rights gives a framework of understanding the complicated, multilayer attempt to tackle the issue of common property. Hardin found that through the evolution of regulation that occasionally the sacrifice of justice is necessary in order to enforce efficient regulation of a resource that could disappear due to negative externalities of over consumption. Wade studied many villages that displayed the occurrence of natural regulations due or organizational design. He found five lessons that contributed to this organizational design and control of their water and grazing land. Cinner found through the observation of 21 communities offered the extensive regulation is positively correlated to distance from the market, low immigration, dependency on fishing and conflicts over marine resources. These authors advocated the use of property rights and the natural establishment of these rights in order to ensure the fair and controlled consumption of common goods. In reflect it is found that in order to protect society from personal, private desires, there is a need for regulation. Property rights provided through a stable government is a manner in which the issue of consuming common resource can be protected and sustained.
Chen 7 Works Cited Cinner, Joshua. "Socioeconomic Factors Influencing Customary Marine Tenure in the Indo-Pacific." Ecology and Society. 10(1):36. <http://www.economyandsociety.org/vol10/iss1/art36/>. Hardin, Garrett. "Tragedy of the Commons." Science, New Series, Volume 162, Issue 3859 (Dec. 13, 1968), 1243-1248. <http://links.jstor.org/sici?sici=0036-8075%281968123%3A162%3A3859%3C1243%3A>. Seabright, Paul. "Managing Local Commons: Theoretical Issues in Incentive Design." Journal of Economic Perspectives, Volume 7, No. 4, (Fall 1993), 113-134. <http://www.econ.ucsd.edu/~jlarivie/pdfs_Ocean_resource/Seabright_93.pdf>. Wade, Robert. "The Management of Common Property Resources: Finding a Cooperative Solution." Research Observer 2, No. 2 (July 1987). <http://www.econ.ucsd.edu/~jlarivie/pdfs_Ocean_resource/Wade_87.pdf>.