Abstract
If we believe the environmental literature on property rights, then, open-access resources are most susceptible to the tragedy of the commons. Any reduction in open-access resources, therefore, should lead to an improvement in environmental stewardship. This appears to present an opportunity for governments to intervene. Taking a transaction cost based approach, it is possible to show that the provision of assurance of property rights by governments allows a reduction in the extent and number of open-access resources. In sum, in so far as we can assume that open-access resources bear the worst environmental fate, improvements in the assurance of property rights increase the potential for environmental stewardship.
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In traditional tight-knit communities, assurance may be provided by the community as such, in other words by a government of the people.
An illustration of such a case is the existence of private armies hired by drug lords to protect their villas.
As pointed out above, assurance generally facilitates the security of property rights or lowers the costs of achieving that security. If the “rights” in question are not perceived as legitimate by the authority providing assurance, however, the opposite is the case.
After all, enforcement is a necessary condition for security of property rights (monitoring being the other), if these rights are desirable to anybody besides the owner.
According to Coase (1960), internalization will automatically take place if in the presence of specified property rights and absence of transaction costs, parties are allowed to transact. Coase (1960) even argues that in the absence of transaction costs the outcome of the internalization will be efficient and maximize overall returns independent of which party holds the property right/liability. The impact of a change in the rule of liability then would be limited to wealth distribution, which, however, could result in different demands (Demsetz, 1975a). Furthermore, Bromley shows that Coase’s argument only applies for producer-producer transactions, as in producer-consumer “income effects become important” and “current endowments and entitlements dominate the outcome” (Bromley, 1978: 51). In addition, Coase’s identification of the market forces that would bring private and social costs into equality (without the use of a Pigouvian tax) is limited to a world free of transaction costs: “without transaction costs the contractual stipulations will be so designed that they are consistent with the equimarginal principle” (Cheung, 1975: 438 ). In the presence of transaction costs, externalities always exist and if private costs of transacting outweigh the gain, externalities will not be internalized and the solution to externality problems may depend on the government. Government intervention, in turn, is usually associated with significant costs itself and does not necessarily increase efficiency. If both the costs of government intervention and the costs of establishing a market (private interaction between individuals) are too high, externalities continue to exist. The government, of course, can choose to ignore the cost-benefit ratio of intervention in terms of efficiency, and choose to intervene for political reasons, independently of the associated costs.
Specifically, open-access resources will exist as long as the increase in costs associated with the definition and enforcement of property rights to additional attributes of a resource outweighs the decrease in transaction costs associated with the better definition of property rights overall. In other words, if the cost curve associated with rights to the attributes of an individual good is steeper than the curve associated with the overall relationship between property rights and transaction costs, a rational decision-maker will leave rights to at least some of the attributes of a good undefined.
In addition, some externalities will be particularly difficult to internalize at `true’ prices, even if property rights are defined, because markets for them might be too `thin’ or external diseconomies might be present (Dasgupta and Maler, 1994: 28).
For an interesting comparative study of today’s fate of state owned common property forests in Nepal and common property forests see Chakraborty (2001).
This “norms of conduct” argument has often been used by critics of the collective action argument to show that secure property rights are not necessary for a sustainable outcome. What these critics did not recognize, however, is that the argument can also support the positive influence of secure property rights in cases in which they cannot be defined or enforced.
Any political scientist will eagerly point to political legitimacy as a precursor of assurance, which then opens up a series of related questions, such as what creates political legitimacy. If we wanted to address the issue of political legitimacy then, we would need to trace the question back further. While an extremely interesting endeavor, this question will therefore not be pursued further in this analysis. Rather I intersect the causal chain at the level of political assurance, and move from there towards the political outcome in the form of environmental quality.
Furthermore, Feeny links the supply to the cost of institutional innovation, which depends on the stock of existing knowledge, as well as on private benefits and costs of providing the change that agents in the position to provide the change face (1988: 273í).
Even in developed countries with sufficient resources for the enforcement of property rights, the change in the definition of the latter necessary for the environment might not be politically feasible. Schelbert-Syfrig and Zimmermann (1988), for instance, argue that the vested interests in the Swiss timber industry are too powerful to allow a change in property rights which would bring about an internalization of the costs and benefits associated with the forest industry and forests as such.
For a description of the change in state legislation that is taking place because of increasing numbers of court rulings in favor of property owners, see Emerson and Wise (1995).
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© 2003 Springer Science+Business Media Dordrecht
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Fuchs, D.A. (2003). Assurance of property rights and environmental stewardship. In: An Institutional Basis for Environmental Stewardship. Environment & Policy, vol 35. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-0709-1_4
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DOI: https://doi.org/10.1007/978-94-017-0709-1_4
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