Common Property Resources

Abstract

The concept of common property has become famous in economics since Garett Hardin (1968) wrote his celebrated article on ‘The Tragedy of the Commons’. In this article, common property is taken to mean the absence of property rights in a resource, or what is equivalently known as a regime of ‘open access’. Under such a regime, where a right of inclusion is granted to anyone who wants to use the resource, Hardin argued, inefficiency inevitably arises in the form of over-exploitation of the resource accompanied by an over-application of the variable inputs. Open access leads to efficiency losses because ‘the average product of the variable input, not its marginal product, is equated to the input’s rental rate when access is free and the number of exploiters is large’ (Cornes and Sandler 1983, p. 787). The root of the problem lies in the fact that the average product rule does not enable the users to internalize the external cost which their decisions impose on the users already operating in the resource domain. Of course, the efficiency losses are conceivable only in a world of resource scarcity, implying that the variable input is subject to decreasing returns. Such losses are considerable since they amount to the dissipation of the whole resource rent. Here is the crucial intuition behind the open access regime: when no property right is attached to a resource, the value of this resource is zero in spite of its scarcity.