PRIVATE AND COMMON PROPERTY RIGHTS
Arthur F. Bentley Professor of Political Science; Co-director, Workshop inPolitical Theory and Policy Analysis, and Center for the Study ofInstitutions, Population, and Environmental Change, Indiana University
© Copyright 1997 Elinor Ostrom
The relative advantages of private property and common property for theefficiency, equity, and sustainability of natural resource use patterns havebeen debated in legal and economic literatures for several centuries. Thedebate has been clouded by a troika of confusions that relate to thedifference between (1) common property and open-access regimes, (2)common-pool resources and common property regimes, and (3) a resourcesystem and the flow of resource units. A property right is an enforceableauthority to undertake particular actions in specific domains. The rights ofaccess, withdrawal, management, exclusion, and alienation can be separatelyassigned to different individuals as well as being viewed as a cumulativescale moving from the minimal right of access through possessing fullownership rights. All of these rights may be held by single individuals or bycollectivities. Some attributes of common-pool resources are conducive to theuse of communal proprietorship or ownership and others are conducive toindividual rights to withdrawal, management, exclusion, and alienation. Manyof the lessons learned from the operation of communal property regimesrelated to natural resource systems are theoretically relevant to theunderstanding of a wide diversity of property regimes that are extensivelyused in modern societies.
JEL classification: K1, Q2, H4, D7
Keywords: Common Property, Private Property, Common-pool Resources,Governance
The issue of the relationship between private property and common propertyhas engaged both legal and economic scholars in a long series ofcontroversies over the meaning, the sequence of development, and thesuperiority of private vs. common property. The issues debated relate to theefficiency, equity, and sustainability of private property as contrasted tocommon property. The scholarship in both professions has beencharacterized by formulations that are adopted by each generation of scholarswithout much effort to examine their foundations or to test them by empiricalresearch. Both have their doctrinal aspects. And, the dominant view in bothdisciplines has been that private property is clearly superior to commonproperty. Many scholars think of contemporary examples of commonproperty as remnants of the past, likely to disappear as we enter thetwenty-first century (see Atran, 1986, 1993). Recent research, however, haschallenged the presumption that private property is necessarily superior tocommon property.
Prior to the publication in 1861 of Ancient Law by the distinguished Englishjurist, Henry Sumner Maine, the accepted view among Western jurists wasthat the origin of the concept of property in ancient times was the occupationof land by a single proprietor and his family (Grossi, 1981). Further, thesuperiority of individual property holdings was so well accepted in the legalliterature of the early nineteenth century that the possibility of other forms ofproperty existing on the European continent threatened juridical views aboutthe origins of social order. Maine drew not only on his own extensiveresearch in India but also on the work of Georg Ludwig von Maurer (1854,1856) on the primitive Germanic village communities, the Mark, and of thepioneering work of William Blackstone (1766). Maine concluded that: "It ismore than likely that joint-ownership, and not separate ownership, is thereally archaic institution, and that the forms of property that will afford usinstruction will be those that are associated with the rights of families and ofgroups of kindred"(Maine,  1963, p.252). This set off a flurry ofpublications challenging and supporting his conclusion (see extensivebibliographic citations in Grossi, 1981). The great debate had much more thanacademic importance, as major political struggles continued throughout thenineteenth century over the status of the many remaining forms of commonproperty on the European continent. A legal and political belief system thatsaw the origin of property itself in the efforts of individual proprietors tooccupy land gave the landed proprietor a special role in society. Thesebeliefs helped to justify the passage of legislation to eliminate collectivelandholding rights and to authorize enclosures and the takeover of communalproperties by individual proprietors.
The meaning of private property in comparison to common propertyremains a contested issue in modern legal scholarship. Ellickson, Rose, andAckerman (1995), for example, start their recent textbook on property law witha first chapter devoted to "The Debate over Private Property." The secondchapter addresses "The Problem of the Commons." In the latter chapter, theyinclude parts of the famous article by Garrett Hardin (1968) on "The Tragedyof the Commons," but then ask students the following questions: "Privateproperty is often said to avert the tragedy of the commons. But does it? Whoenforces property limitations? Does another kind of "commons" problem lurkin the organization and maintenance of a property regime?"(Ellickson, Rose,and Ackerman, 1995, p.141). In an earlier volume, Rose (1994, p.37) points tothe "kicker" in a sharp distinction between private and common propertywhen she stresses that a private-property regime as a system "has the samestructure as a common property" (see also Epstein, 1979, 1985 and Dukeminierand Krier, 1993).
Economists tend to view common property institutions as having a longerhistory than private-property institutions and to explain the growth ofmodern, Western societies in part as the result of changing from commonproperty to private property (North and Thomas, 1976; North, Anderson, andHill, 1983). Private property is considered by most economists to be anessential ingredient in economic development due to the incentivesassociated with diverse kinds of property relationships (see, for example,Welch, 1983). A farmer who owns his own labor, land, and other factorinputs, for example, is likely to see a direct relationship between investmentsand the level of benefit achieved over the long-term. A farmer who belongs toan agricultural production cooperative, on the other hand, may see only aloose connection between personal contributions and benefits. The moreindividuals in a society whose work is only loosely connected to theirbenefits, the more pervasive an attitude of free riding can become. If everyonetends to free ride on the work of others, overall economic productivity will below.
Private-property rights, however, cannot simply emerge spontaneouslyfrom a common property system. Private-property rights depend upon theexistence and enforcement of a set of rules that define who has a right toundertake which activities on their own initiative and how the returns fromthat activity will be allocated (V. Ostrom, 1989). In other words, rules andrulers are required to establish, monitor, and enforce a property system. Whilesome rules generate incentives that greatly increase the welfare of mostparticipants in an economy, there are always individuals who resist changesbecause of benefits they receive from a prior system or propose changes thatparticularly benefit themselves. Rulers may also receive substantial returnsfrom making rules that benefit some to the detriment of others. Thus,rent-seeking behavior is expected on the part of both entrepreneurs andrulers.
Common property regimes are, therefore, presumed by many economiststo be inefficient. There are three sources of inefficiency. One is rentdissipation, because no one owns the products of a resource until they arecaptured, and everyone engages in an unproductive race to capture theseproducts before others do (Knight, 1924; Gordon, 1954; Scott, 1955; Schaefer,1957; Cheung, 1970; C. Clark, 1976, 1980; Dasgupta and Heal, 1979). Thesecond is the high transaction and enforcement costs expected if communalowners were to try to devise rules to reduce the externalities of their mutualoveruse (Demsetz, 1967; Coase, 1960). The third is low productivity, becauseno one has an incentive to work hard in order to increase their private returns(North, 1990; Yang, 1987). Common property regimes are presumably retainedby rulers who do not understand the enhancement in overall economicwelfare that will result from a change to private property or who are supportedby those who benefit from these "archaic" regimes. A common policyprescription is articulated by R. Smith (1981, p.467) when he states that "theonly way to avoid the tragedy of the commons in natural resources andwildlife is to end the common property system by creating a system of privateproperty rights."
The debate about the relative merits of private and common property hasbeen clouded by a troika of confusions that hinder scholarly communication.Different meanings are assigned to terms without clarifying how multipleaspects relate to one another. The source of confusion relates to thedifferences between (1) common property and open-access regimes, (2)common-pool resources and common property regimes, and (3) a resourcesystem and the flow of resource units. All three sources of confusion reduceclarity in assigning meaning to terms and retard theoretical and empiricalprogress.
The Confusion between Common Property and Open-Access Regimes
In a now classic article, Ciriacy-Wantrup and Bishop (1975) clearly demarkedthe difference between property regimes that are open access, where no onehas the legal right to exclude anyone from using a resource, from commonproperty, where the members of a clearly demarked group have a legal right toexclude nonmembers of that group from using a resource (see also Bromley,1991a, 1992ab). Open-access regimes (res nullius)--including the classic casesof the open seas and the atmosphere--have long been considered in legaldoctrine as involving no limits on who is authorized to use a resource. Ifanyone can use a resource, no one has an incentive to conserve their use orto invest in improvements. If such a resource generates highly valuedproducts, then one can expect that the lack of rules regarding authorized usewill lead to misuse and overconsumption. Some local grazing areas, inshorefisheries, and forests are effectively open-access resources, but many fewerthan presumed in the literature.
Some open-access regimes lack effective rules defining property rights bydefault (Dales, 1968). Either the resources affected by these open-accessregimes are not contained within a nation-state or no entity has successfullylaid claim to legitimate ownership. Other open-access regimes are theconsequence of conscious public policies to guarantee the access of allcitizens to the use of a resource within a political jurisdiction. The concept ofjus publicum applies to their formal status, but effectively these resources areopen access. The state governments of Oregon and Washington intervenedin the early twentieth century to prevent local salmon fishermen fromdevising rules that would have limited entry and established harvesting limits(Higgs, 1982, 1996). Fishing unions along the U.S. coastal areas tried toorganize inshore fisheries so as to limit entry and establish harvesting limitsduring the 1950s. Even though their efforts could not have had a seriousimpact on prices due to the presence of an active international market for fish,the fishing unions were prosecuted by the U.S. Department of Justice andfound in violation of the Sherman Antitrust Act (Johnson and Libecap, 1982).Thus, U.S. inshore fisheries have effectively been open-access resourcesduring much of the twentieth century as a result of governmental action toprevent local fishing groups from establishing forms of common propertyregimes within those political jurisdictions. In more recent times, however,both the national and state governments have reversed their prior stands andhave actively sought ways of creating forms of co-management in inshorefisheries (see Pinkerton 1992, 1994; J. Wilson, 1995).
A third type of open-access regime results from the ineffective exclusionof nonowners by the entity assigned formal rights of ownership. In manydeveloping countries, the earlier confusion between open-access andcommon property regimes paradoxically led to an increase in the number andextent of local resources that are effectively open access. Common propertyregimes controlling access and harvesting from local streams, forests, grazingareas, and inshore fisheries had evolved over long periods of time in all partsof the world, but were rarely given formal status in the legal codes of newlyindependent countries.
As concern for the protection of natural resources mounted during the1960s, many developing countries nationalized all land and water resourcesthat had not yet been recorded as private property. The institutionalarrangements that local users had devised to limit entry and use lost theirlegal standing, but the national governments lacked monetary resources andpersonnel to monitor the use of these resources effectively. Thus, resourcesthat had been under a de facto common property regime enforced by localusers were converted to a de jure government-property regime, but revertedto a de facto open-access regime. When resources that were previouslycontrolled by local participants have been nationalized, state control hasusually proved to be less effective and efficient than control by those directlyaffected, if not disastrous in its consequences (Hilton, 1992; Curtis, 1991;Panayotou and Ashton, 1992; Ascher, 1995). The harmful effects ofnationalizing forests that had earlier been governed by local user-groupshave been well documented for Thailand (Feeny, 1988), Niger (Thomson,1977; Thomson, Feeny, and Oakerson, 1992), Nepal (Arnold and Campbell,1986; Messerschmidt, 1986), and India (Gadgil and Iyer, 1989; Jodha, 1990,1996). Similar results have occurred in regard to inshore fisheries taken overby state or national agencies from local control by the inshore fishermenthemselves (Cordell and McKean, 1992; Cruz, 1986; Dasgupta, 1982; Higgs,1996; Panayotou, 1982; Pinkerton, 1989).
The Confusion between a Resource System and a Property Regime
The problems resulting from confusing open-access regimes with commonproperty regimes are particularly difficult to overcome due to a secondterminological problem. The term "common property resource" is frequentlyused to describe a type of economic good that is better referred to as a"common-pool resource." All common-pool resources share two attributes ofimportance for economic activities: (1) it is costly to exclude individuals fromusing the good either through physical barriers or legal instruments and (2)the benefits consumed by one individual subtract from the benefits availableto others (V. and E. Ostrom, 1977b; E. Ostrom, Gardner, and Walker, 1994). Recognizing a class of goods that shares these two attributes enablesscholars to identify the core theoretical problems facing individuals whenevermore than one individual or group utilizes such resources for an extendedperiod of time. Using "property" in the term used to refer to a type of good,reinforces the impression that goods sharing these attributes tendeverywhere to share the same property regime.
Common-pool resources share with public goods the difficulty ofdeveloping physical or institutional means of excluding beneficiaries. Unlessmeans are devised to keep nonauthorized users from benefiting, the strongtemptation to free ride on the efforts of others will lead to a suboptimalinvestment in improving the resource, monitoring use, and sanctioningrule-breaking behavior. Second, the products or resource units fromcommon-pool resources share with private goods the attribute that oneperson's consumption subtracts from the quantity available to others. Thus,common-pool resources are subject to problems of congestion, overuse, andpotential destruction unless harvesting or use limits are devised andenforced. In addition to sharing these two attributes, particular common-poolresources differ on many other attributes that affect their economicusefulness including their size, shape, and productivity and the value, timing,and regularity of the resource units produced.
Common-pool resources may be owned by national, regional, or localgovernments; by communal groups; by private individuals or corporations;or used as open access resources by whomever can gain access. Each of thebroad types of property regimes has different sets of advantages anddisadvantages, but at times may rely upon similar operational rules regardingaccess and use of a resource (Feeny et al., 1990). Examples exist of bothsuccessful and unsuccessful efforts to govern and manage common-poolresources by governments, communal groups, cooperatives, voluntaryassociations, and private individuals or firms (Bromley et al., 1992; K. Singh,1994; K. Singh and Ballabh, 1996). Thus, as discussed below, there is noautomatic association of common-pool resources with common propertyregimes--or, with any other particular type of property regime. Further,common property arrangements are essentially share contracts (Lueck, 1994;Eggertsson, 1990, 1992, 1993ab) and, as such, face similar problems ofpotential opportunistic behavior and moral hazard problems.
The Confusion between the Resource and the Flow of Resource Units
Common-pool resources are composed of resource systems and a flow ofresource units or benefits from these systems (Blomquist and Ostrom, 1985).The resource system (or alternatively, the stock or the facility) is whatgenerates a flow of resource units or benefits over time (Lueck, 1995).Examples of typical common-pool resource systems include lakes, rivers,irrigation systems, groundwater basins, forests, fishery stocks, and grazingareas. Common-pool resources may also be facilities that are constructed forjoint use, such as mainframe computers and the Internet. The resource unitsor benefits from a common-pool resource include water, timber, medicinalplants, fish, fodder, central processing units, and connection time. Devisingproperty regimes that effectively allow sustainable use of a common-poolresource requires rules that limit access to the resource system and otherrules that limit the amount, timing, and technology used to withdraw diverseresource units from the resource system.
A property right is an enforceable authority to undertake particular actions ina specific domain (Commons, 1968). Property rights define actions thatindividuals can take in relation to other individuals regarding some "thing." Ifone individual has a right, someone else has a commensurate duty to observethat right. Schlager and Ostrom (1992) identify five property rights that aremost relevant for the use of common-pool resources, including access,withdrawal, management, exclusion, and alienation. These are defined as:
Access: The right to enter a defined physical area and enjoy nonsubtractivebenefits (e.g., hike, canoe, sit in the sun).
Withdrawal: The right to obtain resource units or products of a resourcesystem (e.g., catch fish, divert water).
Management: The right to regulate internal use patterns and transform theresource by making improvements.
Exclusion: The right to determine who will have access rights andwithdrawal rights, and how those rights may be transferred.
Alienation: The right to sell or lease management and exclusion rights(Schlager and Ostrom, 1992).
In much of the economics literature, private property is defined asequivalent to alienation. Property-rights systems that do not contain the rightof alienation are considered to be ill-defined. Further, they are presumed tolead to inefficiency since property-rights holders cannot trade their interest inan improved resource system for other resources, nor can someone who has amore efficient use of a resource system purchase that system in whole or inpart (Demsetz, 1967). Consequently, it is assumed that property-rightssystems that include the right to alienation will be transferred to their highestvalued use. Larson and Bromley (1990) challenge this commonly held viewand show that much more information must be known about the specificvalues of a large number of parameters before judgements can be madeconcerning the efficiency of a particular type of property right.
Instead of focusing on one right, it is more useful to define five classes ofproperty-rights holders as shown in Table 1. In this view, individuals orcollectivities may hold well-defined property rights that include or do notinclude all five of the rights defined above. This approach separates thequestion of whether a particular right is well-defined from the question of theeffect of having a particular set of rights. "Authorized entrants" include mostrecreational users of national parks who purchase an operational right toenter and enjoy the natural beauty of the park, but do not have a right toharvest forest products. Those who have both entry and withdrawal use-rightunits are "authorized users." The presence or absence of constraints uponthe timing, technology used, purpose of use, and quantity of resource unitsharvested are determined by operational rules devised by those holding thecollective-choice rights (or authority) of management and exclusion. Theoperational rights of entry and use may be finely divided into quite specific"tenure niches" (Bruce, 1995) that vary by season, by use, by technology,and by space. Tenure niches may overlap when one set of users owns theright to harvest fruits from trees, another set of users owns the right to thetimber in these trees, and the trees may be located on land owned by stillothers (Bruce, Fortmann, and Nhira, 1993). Operational rules may allowauthorized users to transfer access and withdrawal rights either temporarilythrough a rental agreement, or permanently when these rights are assigned orsold to others (see Adasiak, 1979, for a description of the rights of authorizedusers of the Alaskan salmon and herring fisheries).
Bundles of Rights Associated with Positions
Source: E. Ostrom and Schlager (1996, p. 133).
"Claimants" possess the operational rights of access and withdrawal plusa collective-choice right of managing a resource that includes decisionsconcerning the construction and maintenance of facilities and the authority todevise limits on withdrawal rights. The net fishers of Jambudwip, India, forexample, annually regulate the positioning of nets so as to avoid interference,but do not have the right to determine who may fish along the coast(Raychaudhuri, 1980). Fishing territories are a frequent form of property forindigenous, inshore fishers (Durrenberger and Palsson, 1987). Farmers onlarge-scale government irrigation systems frequently devise rotation schemesfor allocating water on a branch canal (Benjamin et al., 1994).
"Proprietors" hold the same rights as claimants with the addition of theright to determine who may access and harvest from a resource. Most of theproperty systems that are called "common property" regimes involveparticipants who are proprietors and have four of the above rights, but do notpossess the right to sell their management and exclusion rights even thoughthey most frequently have the right to bequeath it to members of their familyand to earn income from the resource (see Berkes, 1989; Bromley et al., 1992;K. Martin, 1979; McCay and Acheson, 1987).
Empirical studies have found that some proprietors have sufficient rightsto make decisions that promote long-term investment and harvesting from aresource. Place and Hazell (1993) conducted surveys in Ghana, Kenya, andRwanda to ascertain if indigenous land-right systems were a constraint onagricultural productivity. They found that having the rights of a proprietor ascontrasted to an owner in these settings did not affect investment decisionsand productivity. Other studies conducted in Africa (Migot-Adholla et al.,1991; Bruce and Migot-Adholla, 1994) also found little difference inproductivity, investment levels, or access to credit. In densely settledregions, however, proprietorship over agricultural land may not be sufficient(Feder et al. 1988; Feder and Feeny, 1991; Anderson and Lueck, 1992). Asland is densely settled, the absence of a title reduces the options for farmersto sell their land and reap a return on this asset. Further, without a title,farmers lack collateral to obtain credit to invest more intensively in theproductive potential of their land (see Alston, Libecap, and Schneider, 1996).Thus, a key finding from an overview of many studies is that no type ofproperty-rights regime works equivalently in all types of settings. Forprivate-property systems in land to make a difference in productivity gains,one probably needs (1) a somewhat dense population so competition for useis present and (2) the existence of effective markets related to credit, inputs,and the sale of commodities (see further discussion in Section 7). In a seriesof studies of inshore fisheries, self-organized irrigation systems, forest usergroups, and groundwater institutions, proprietors tended to develop strictboundary rules to exclude noncontributors; established authority rules toallocate withdrawal rights; devised methods for monitoring conformance; andused graduated sanctions against those who do not conform to these rules(Agrawal, 1994; Blomquist, 1992; Schlager, 1994; Tang, 1994; Lam, 1998).
"Owners" possess the right of alienation--the right to transfer a good inany way the owner wishes that does not harm the physical attributes or usesof other owners--in addition to the bundle of rights held by a proprietor. Anindividual, a private corporation, a government, or a communal group maypossess full ownership rights to any kind of good including a common-poolresource (Montias, 1976; Dahl and Lindblom, 1963). The rights of owners,however, are never absolute. Even private owners have responsibilities not togenerate particular kinds of harms for others (Demsetz, 1967).
What should be obvious by now is that the world of property rights is farmore complex than simply government, private and common property. Theseterms better reflect the status and organization of the holder of a particularright than the bundle of property rights held. All of the above rights can beheld by single individuals or by collectivities. Some communal fishingsystems grant their members all five of the above rights, including the right ofalienation (Miller, 1989). Members in these communal fishing systems havefull ownership rights. Similarly, farmer-managed irrigation systems in Nepal,the Phillippines, and Spain have established transferable shares to thesystems. Access, withdrawal, voting, and maintenance responsibilities areallocated by the amount of shares owned (Martin and Yoder, 1983abc; E.Martin, 1986; Siy, 1982; Maass and Anderson, 1986). On the other hand, someproposals to "privatize" inshore fisheries through the devise of an IndividualTransferable Quota (ITQ), allocate transferable use rights to authorizedfishers but do not allocate rights related to the management of the fisheries,the determination of who is a participant, nor the transfer of management andexclusion rights. Thus, proposals to establish ITQ systems, which arefrequently referred to as forms of "privatization," do not involve fullownership.
The next two sections are devoted to a discussion of the attributes ofcommon-pool resources that are conducive to communal proprietorship orcommunal ownership as contrasted to individual ownership. Groups ofindividuals are considered to share communal property rights when theyhave formed an organization that exercises at least the collective-choice rightsof management and exclusion in relationship to some defined resource systemand the resource units produced by that system. In other words, allcommunal groups have established some means of governing themselves inrelationship to a resource (E. Ostrom, 1990). Where communal groups are fullowners, members of the group have the further right to sell their access, use,exclusion, and management rights to others, subject in many systems to theapproval of the other members of the group. Some communal proprietorshipsare formally organized and recognized by legal authorities as having acorporate existence that entails the right to sue and be sued, the right to holdfinancial assets in a common bank account, and to make decisions that arebinding on members. Other communal proprietorships are less formallyorganized and may exercise de facto property rights that may or may not besupported by legal authorities if challenged by nonmembers. Obviously, suchgroups hold less well-defined bundles of property rights than those who aresecure in their de jure rights even though the latter may not hold thecomplete set of property rights defined as full ownership. In other words,well-defined and secure property rights may not involve the right toalienation.
Even though all common-pool resources share the difficulty of devisingmethods to achieve exclusion and the subtractability of resource units, thevariability of common-pool resources is immense in regard to other attributesthat affect the incentives of resource users and the likelihood of achievingoutcomes that approach optimality. Further, whether it is difficult or costly todevelop physical or institutional means to exclude nonbeneficiaries dependsboth on the availability and cost of technical and institutional solutions tothe problem of exclusion and the relationship of the cost of these solutions tothe expected benefits of achieving exclusion from a particular resource.
Let us start initially with a discussion of land as a resource system. Wherepopulation density is extremely low, land is abundant, and land generates arich diversity of plant and animal products without much husbandry, theexpected costs of establishing and defending boundaries to a parcel of landof any size may be greater than the expected benefits of enclosure (Demsetz,1967; Feeny, 1993). Settlers moving into a new terrain characterized by highrisk due to danger from others, from a harsh environment, or from lack ofappropriate knowledge, may decide to develop one large, common parcelprior to any divisions into smaller parcels (Ellickson, 1993). Once landbecomes scarce, conflict over who has the rights to invest in improvementsand reap the results of their efforts can lead individuals to want to encloseland through fencing or institutional means to protect their investments.There are tradeoffs in costs to be considered, however. The more landincluded within one enclosure, the lower the costs of defending all theboundaries, but the higher the costs of regulating the use of the enclosedparcel.
The decision to enclose need not be taken in one step from anopen-access terrain to a series of private plots owned exclusively by singlefamilies (Field, 1984, 1985, 1989; Ellickson, 1993). The benefits of enclosingland depend on the scale of productive activity involved. For someagricultural activities, as discussed below, there may be considerable benefitsassociated with smaller parcels fully owned by a family enterprise. For otheractivities, the benefits may not be substantial. Moving all the way to privateplots is an efficient move when the expected marginal returns from enclosingnumerous plots exceed the expected marginal costs of defending a much moreextended system of boundaries and the reduced transaction costs of makingdecisions about use patterns (Nugent and Sanchez, 1995).
In a classic study of the diversity of property-rights systems used formany centuries by Swiss peasants, Robert Netting (1976, 1981) observed thatthe same individuals fully divided their agricultural land into separatefamily-owned parcels, but that grazing lands located on the Alpine hillsideswere organized into communal property systems. In these mountain valleys,the same individuals used different property-rights systems side-by-side formultiple centuries. Each local community had considerable autonomy tochange local rules, so there was no problem of someone else imposing aninefficient set of rules on them. Netting argued that attributes of the resourceaffected which property-rights systems were most likely for diverse purposes.Netting identified five attributes that he considered to be most conducive tothe development of communal property rights:
1. low value of production per unit of area;
2. high variance in the availability of resource units on any one parcel;
3. low returns from intensification of investment;
4. substantial economies of scale by utilizing a large area; and
5. substantial economies of scale in building infrastructures to utilize the largearea.
Steep land where rainfall is scattered may not be suitable for mostagricultural purposes, but can be excellent land for pasture and forests ifaggregated into sufficiently large parcels. By developing communal propertyrights to large parcels of such land, those who are members of the communityare able to share environmental risks due to the unpredictability ofrain-induced growth of grasses within any smaller region. Further, herdingand processing of milk products is subject to substantial economies of scale.If individual families develop means to share these reduced costs, all can savesubstantially. Building the appropriate roads, retaining walls, and processingfacilities may also be done more economically if these efforts are shared.
While the Swiss peasants were able to devote these harsh lands toproductive activities, they had to invest time and effort in the development ofrules that would reduce the incentives to overgraze and would ensure thatinvestments in shared infrastructure were maintained over time. In manySwiss villages, rights to common pasturage were distributed according to thenumber of cows that could be carried over the winter using hay suppliesproduced on the owners' private parcels. In all cases, the village determinedwho would be allowed to use, the specific access and withdrawal rights to beused, how investment and maintenance costs were to be shared, and how theannual returns from common processing activities were to be shared. All ofthese systems included at least village proprietorship rights, but some Swissvillages developed full ownership rights by incorporating and authorizing thebuying and selling of shares (usually with the approval of the village).Netting's findings are strongly supported by studies of mountain villages inJapan, where thousands of rural villages have held communal property rightsto extensive forests and grazing areas located in the steep mountainousregions located above their private agricultural plots (McKean, 1982, 1992ab).Similar systems have existed in Norway for centuries (Sandberg, 1993,Örebech, 1993).
The importance of sharing risk is stressed in other theoretical andempirical studies of communal proprietorships (Nugent and Sanchez, 1993;Gupta, 1986; Antilla and Torp, 1996). Unpredictability and risk are increased insystems where resource units are mobile and where storage facilities, such asdams, do not exist (Schlager, Blomquist, and Tang, 1994). Institutionalfacilities for sharing risk, such as formal insurance systems or institutionalizedmechanisms for reciprocal obligations in times of plenty, also affect the kindsof property-rights systems that individuals can devise. When no physical orinstitutional mechanisms exist for sharing risk, communal propertyarrangements may enable individuals to adopt productive activities notfeasible under individual property rights. A recent study has demonstratedthat the variance in the productivity of land over space--due largely to thevariance in rainfall from year to year--is strongly associated with the size ofcommunally held parcels allocated to grazing in the Sudan (Nugent andSanchez, 1995). Ellickson (1993) compares the types of environmental andpersonal security risks faced by new settlers in New England, in Bermuda,and in Utah to explain the variance in the speed of converting jointly heldland to individually held land in each of these settlements.
A consistent finding across many studies of communal property-rightssystems is that these systems do not exist in isolation and are usually used inconjunction with individual ownership. In most irrigation systems that arebuilt and managed by the farmers themselves, for example, each farmer ownshis or her own plot(s) while participating as a joint proprietor or owner in acommunally organized irrigation system (Tang, 1992; Sengupta, 1991, 1993;Vincent, 1995; Wade, 1992; Coward, 1980). Water is allocated to individualparticipants using a variety of individually tailored rules, but those irrigationsystems that have survived for long periods of time tend to allocate water andresponsibilities for joint costs using a similar metric--frequently the amount ofland owned by a farmer (E. Ostrom, 1990, 1992). In other words, benefits areroughly proportional to the costs of investing and maintaining the systemitself.
Further, formally recognized communal systems are usually nested into aseries of governance units that complement the organizational skills andknowledge of those involved in making collective-choice decisions in smallerunits (O. Johnson, 1972). Since the Middle Ages, most of the Alpine systemsin both Switzerland and Italy have been nested in a series of self-governingcommunities that respectively governed villages, valleys, and federations ofvalleys (Merlo, 1989). In modern times, cantonal authorities in Switzerlandhave assumed an added responsibility to make periodic, careful monitoringvisits to each alp on a rotating basis and to provide professional assessmentsand recommendations to local villages, thereby greatly enhancing the qualityof knowledge and information about the sustainability of these resources(Glaser, 1987).
Contrary to the expectation that communal property systems lacking theright to alienate ownership shares are markedly less efficient thanproperty-rights systems involving full ownership, substantial evidence existsthat many communal proprietorships effectively solve a wide diversity oflocal problems with relatively low transaction costs (Hanna and Munasinghe,1995a, 1995c; J. Wilson, 1995; Sandberg, 1993, 1996ab; Gaffney, 1992; Kaul,1996). Obtaining valid and reliable measures of outputs and costs for a largenumber of property-rights systems covering similar activities in matchedenvironmental settings is extremely difficult. In regard to irrigation, a series ofcareful studies of the performance of communal proprietorship systems ascontrasted to government-owned and managed systems, clearlydemonstrates the higher productivity of the communal systems controllingfor relevant variables (Tang, 1992; Benjamin et al., 1994; E. Ostrom, 1996; Lam,1998). Schlager's (1990) studies of inshore fisheries demonstrate that fisherswho have clearly defined proprietorship are able to solve difficult assignmentproblems and assign the use of space and technology so as to increase boththe efficiency and equity of their systems. James A. Wilson's (1995) studiesalso demonstrate that communal proprietorship systems are more efficientthan frequently thought.
Performance of communal property-rights systems varies substantially,however, as do the performance of all property-rights systems. Somecommunal systems fail or limp along at the margin of effectiveness just asprivate firms fail or barely hang on to profitability over long periods of time.In addition to the environmental variables discussed above that areconducive in the first place to the use of communal proprietorship orownership, the following variables related to the attributes of participants areconducive to their selection of norms, rules, and property rights that enhancethe performance of communal property-rights systems (E. Ostrom, 1993):
2. Participants share a common understanding about the potential benefitsand risks associated with the continuance of the status quo as contrastedwith changes in norms and rules that they could feasibly adopt (E. Ostrom,1990; Sethi and Somanathan, 1996).
3. Participants share generalized norms of reciprocity and trust that can beused as initial social capital (Cordell and McKean, 1992).
4. The group using the resource is relatively stable (Seabright, 1993).
5. Participants plan to live and work in the same area for a long time (and insome cases, expect their offspring to live there as well) and, thus, do notheavily discount the future (Grima and Berkes, 1989).
6. Participants use collective-choice rules that fall between the extremes ofunanimity or control by a few (or even bare majority) and, thus, avoid hightransaction or high deprivation costs (E. Ostrom, 1990).
7. Participants can develop relatively accurate and low-cost monitoring andsanctioning arrangements (Berkes, 1992).
Many of these variables are, in turn, affected by the type of larger regimein which users are embedded. If the larger regime recognizes the legitimacy ofcommunal systems, and is facilitative of local self-organization by providingaccurate information about natural resource systems, providing arenas inwhich participants can engage in discovery and conflict-resolutionprocesses, and providing mechanisms to back up local monitoring andsanctioning efforts, the probability of participants adapting more effectiverules over time is higher than in regimes that ignore resource problems orpresume that all decisions about governance and management need to bemade by central authorities.
Two additional variables--the size of a group and its homogeneity--havebeen noted as conducive to the initial organization of communal resourcesand to their successful performance over time (E. Ostrom, 1992; Libecap,1989ab; Kanbur, 1991). As more research has been conducted, however, it isobvious that much more theoretical and empirical work is needed since bothvariables appear to have complex effects. Changing the size of a group, forexample, always involves changing some of the other variables likely to affectthe performance of a system. Increasing the size of a group is likely to beassociated with at least the following changes: (1) an increase in thetransaction costs of reaching agreements; (2) a reduction of the burden borneby each participant for meeting joint costs such as guarding a system, andmaintenance; and (3) an increase in the amount of assets held by the groupthat could be used in times of emergency. Libecap (1995) found that it wasparticularly hard to get agreements to oil unitization with groups greater thanfour. Blomquist (1992), on the other hand, documents processes conducted inthe shadow of an equity court that involved up to 750 participants inagreeing to common rules to allocate rights to withdraw water fromgroundwater basins in southern California. The processes took a relativelylong period of time, but they have now also survived with little administrativecosts for half a century. Agrawal (1996) has shown that communal forestryinstitutions in India that are moderate in size are more likely to reduceoverharvesting than are smaller groups because they tend to utilize a higherlevel of guarding than smaller groups.
Group heterogeneity is also multifaceted in its basic causal processes andeffects. Groups can differ along many dimensions including their assets, theirinformation, their valuation of final products, their production technologies,their time horizons, their exposure to risk (e.g., headenders versus tailenderson irrigation systems), as well as their cultural belief systems. Libecap's(1989b) research on inshore fisheries has shown that when fishers havedistinctively different production technologies and skills, all potential rulesfor sharing withdrawal rights have substantial distributional consequencesand are the source of conflict that may not easily be overcome. Libecap andWiggins' (1984) studies of the prorationing of crude oil production reveal aninteresting relationship between the levels and type of information availableto participants and the likelihood of agreement at various stages in abargaining process. In the early stages of negotiation, all oil producers sharea relatively equal level of ignorance about the relative claims that each mightbe able to make under private-property arrangements. This is the most likelytime for oil unitization agreements to be reached successfully. If agreement isnot reached early, each participant gains asymmetric information about theirown claims as more and more investment is made in private information.Agreements are unlikely at this stage. If producers then aggressively pumpfrom a common oil pool, all tend to be harmed by the overproduction and arewilling late in the process to recognize their joint interests. Libecap's (1995)study of marketing agreements among orange growers also shows a strongnegative impact of heterogeneity. The theoretical work of Mancur Olson(1965) on privileged groups, on the other hand, predicts that when someparticipants have substantial assets and whose interests are aligned withachieving an agreement, such groups are more likely to be organized. Theempirical support for this proposition comes more from studies of globalcommons (Mitchell, 1995; Oye and Maxwell, 1995).
Heterogeneity in the knowledge and acceptance of local common propertyregimes is likely to lead to their undoing. In frontier regions, new migrantsincrease the number of people sharing the return from a common-poolresource. Further, migrants are unlikely to recognize the legitimacy of extant,de facto, property-rights systems (see Alston, Libecap, and Schneider, 1996).Thus, the common agreement necessary for the sustenance of anyproperty-rights system may rapidly disappear if settlement patterns undergo arapid change. Similarly, common property systems related to inshore fisherieshave also proved to be unstable when trawlers from other locations start tovisit on a regular basis without recognizing the de facto property rights oflocal fishers.
The advantage of individual ownership of strictly private goods--where thecost of exclusion is relatively low and one person's consumption issubtractive from what is available to others--is so well established that it doesnot merit attention here. Industrial and agricultural commodities clearly fit thedefinition of private goods. Individual rights to exclusion and to transferringcontrol over these goods generate incentives that lead to higher levels ofproductivity than other forms of property arrangements.
It has frequently been assumed that land also is clearly always a privategood and therefore best allocated using market mechanisms based onindividual ownership rights. Agricultural land in densely settled regions isusually best allocated by a system of individual property rights. Gainingformal title to land, however, may or may not increase efficiency. Feder et al.(1988) conducted an important econometric study that showed thatagricultural land in Thailand without a formal title was worth only one-half totwo-thirds of land with a formal title. Further, increasing the security ofprivate-property rights also led to an increased value of the crops produced(between one-tenth and one-fourth higher than those without secure title).More secure titling also provided better access to credit and led to greaterinvestments in improved land productivity (see also Feder and Feeny, 1991).Insecure property rights may lead potential users to arm and engage inviolent conflict so as to gain control over land through force or bynegotiation to avoid force. Several types of economic losses result fromconflict over ownership (Skaperdas and Syropoulos, 1995; Umbeck, 1981ab).
Title insurance is another mechanism used to reduce the risk ofsuccessful challenges to ownership of land. Registering brands is stillanother technique used to increase the security of ownership over resourceunits in the form of cattle that may range freely over a large area until there isa communal effort to undertake a round-up. Gaining formal titles is, however,costly. In societies that do not yet have high population densities and wherecustomary rights are still commonly understood and accepted, formal titlingmay be an expensive method of increasing the security of a title that is notassociated with a sufficiently higher return to be worth the economicinvestment (see Migot-Adholla et al., 1991). In addition, it should now beclear that the cost of fencing land by physical and/or institutional means isnontrivial and that there are types of land and land uses that may be moreefficiently governed by groups of individuals rather than single individuals.
A commonly recommended solution to problems associated with thegovernance and management of mobile resource units, such as water andfish, is their "privatization" (Christy, 1973; C. Clark, 1980). What privateownership usually means in regard to mobile resource units, however, isindividual ownership of withdrawal rights. Water rights are normallyassociated with the allocation of a particular quantity of water per unit of timeor the allocation of a right to take water for a particular period of time or at aparticular location. Fishing rights are similarly associated with quantity, time,or location. These rights are typically "withdrawal" rights that are tied toresource units and not to a resource system. In addition to the individualwater rights that farmers hold in an irrigation system, they may also jointlyown--and, therefore, govern and manage--the irrigation facilities themselves(Tang, 1992). In addition to the quotas or "fishing units" that individualfishers may own, no one owns the fishing stock and governmental units mayexercise various types of management rights in relationship to these stocks(Schlager, 1990). In groundwater basins that have been successfully litigated,individual pumpers own a defined quantity of water that they can produce,rent, or sell, but the groundwater basins themselves may be managed by acombination of general-purpose and special-purpose governmental units andprivate associations (Blomquist, 1992).
Implementing operational and efficient individual withdrawal rights tomobile resources is far more difficult in practice than demonstrating theeconomic efficiency of hypothetical systems. Simply gaining valid andaccurate measurements of "sustainable yield" is a scientifically difficult task.In systems where resource units are stored naturally or by constructingfacilities such as a dam, the availability of a defined quantity of the resourceunits can be ascertained with considerable accuracy, and buying, selling, andleasing rights to known quantities is relatively easy to effectuate in practice.Many mobile resource systems do not have natural or constructed storagefacilities and gaining accurate information about the stock and reproductionrates is very costly and involves considerable uncertainty (Allen andMcGlade, 1987; J. Wilson et al., 1991). Further, as Copes (1986) has clearlyarticulated, appropriators from such resources can engage in a wide diversityof evasive strategies that can destabilize the efforts of government agenciestrying to manage these systems. Further, once such systems have allocatedindividual withdrawal rights, efforts to further regulate patterns of withdrawalmay be very difficult and involve expensive buy-back schemes (Örebech,1982). Experience with these individual withdrawal-rights systems has variedgreatly in practice (see Pinkerton, 1992, 1994; McCay, 1992; McCay et al.1996; Wilson and Dickie, 1995).
Exactly which attributes of both physical and social systems are mostimportant to the success of individual withdrawal rights from common-poolresources is not as well established as the attributes of common-poolresource systems conducive to group proprietorship or ownership. On thephysical side, gaining accurate measurements of the key variables (quantity,space, technology) that are to be involved in management efforts is essential.Resource systems that are naturally well-bounded facilitate measurement aswell as ease of observing appropriation behavior. Storage also facilitatesmeasurement. Where resource units move over vast terrain, the cost ofmeasurement is higher than when they are contained (e.g., it is easier todevelop effective withdrawal-rights systems for lobsters than for whales).
Considerable recent research has also stressed the importance ofinvolving participants in the design and implementation of suchproperty-rights systems. When participants do not look upon such rules aslegitimate, effective, and fair, the capacity to invent evasive strategies issubstantial (Seabright, 1993; J. Wilson, 1995). The size of the group involvedand the heterogeneity of participants also affect the costs of maintainingwithdrawal-rights systems (Edwards, 1994). And, the very process ofallocating quantitative and transferable rights to resource units may undosome of the common understandings and norms that allowed communalownership systems to operate at lower day-to-day administrative costs.
The focus of this entry has been primarily on natural resources. Many of thelessons learned from the operation of communal property regimes in thesesectors, however, are quite relevant for a wide diversity of similar propertyregimes that are currently in wide use and likely to have a substantialpresence in the next century. A very large number of housingdevelopments--both apartment houses and individual familydwellings--involve individual property to the housing unit itself combinedwith communal property to the grounds, recreational facilities, and other jointfacilities. While individuals can buy and sell their individual housing units, atthe time of purchase, they assume a set of duties in respect to the closelyrelated communal properties. Monthly assessments for the repair andmaintenance of these common facilities are not unlike the assessments madeby a community of irrigators on themselves for the maintenance of their ownsystem. Further, purchase and sales frequently require the permission ofother members of the group. Similarly, many sports clubs allocate use quotasto members and assess members regular fees for the maintenance of thecommonly owned facilities.
The modern corporation is frequently thought of as the epitome of privateproperty. While buying and selling shares of corporate stock is a clearexample of the rights of alienation at work, relationships within a firm are farfrom being "individual" ownership rights. Since the income that will beshared among stockholders, management, and employees is itself a commonpool to be shared, all of the incentives leading to free riding (shirking) andoveruse (padding the budget) are found within the structure of a moderncorporation (Putterman, 1995; Seabright, 1993; Ghoshal and Moran, 1996).Thus, where many individuals will work, live, and play in the next century willbe governed and managed by mixed systems of communal and individualproperty rights.
Support from the National Science Foundation (Grant Nos. SBR-9319835 andSBR-95 21918) and the Ford Foundation is gratefully acknowledged.Comments on an initial draft of this entry by Arun Agrawal, David Feeny,Vincent Ostrom, Peter Örebech, and Jimmy Walker are gratefullyacknowledged. The comments of two anonymous reviewers were ofconsiderable value. The editing skills of Patty Dalecki have been, as usual, ofimmense assistance--particularly in a paper involving such an extensivebibliography as Charlotte Hess and I have prepared for this entry.
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