Academic journal article Contemporary Economic Policy

Common Property as an Institutional Response to Environmental Variability

Academic journal article Contemporary Economic Policy

Common Property as an Institutional Response to Environmental Variability

Article excerpt

I. INTRODUCTION

The debate surrounding the efficacy of common property regimes shows that a continuum of property regimes exists. Additionally, an ebb and flow between regimes occurs as societies change. Open access, state, common, and private property represent the major categories along this property continuum. One can differentiate each by decision unit, benefit incidence, and regulations. (i) Open access is a free-for-all where benefits accrue to the agent that can exploit the resource first. No institutional rules limit the agent's behavior. (ii) Government agencies manage state property in such a manner that benefits accrue to agents with permits authorizing access and regulating resource use. (iii) Common property provides for co-equal rights to a bounded resource where group-established rules govern resource use. (iv) Private property empowers owners, who experience the private costs and benefits from their actions subject to broad societal guidelines or constraints.

Economic models stress the management of rules that are established to ensure economically viable common property regimes (Wade, 1987; Stevenson, 1991). Cooperative arrangements in these models, where rules exist to discourage shirking by individuals in the group, can produce a sustainable economic environment. However, these institutional arrangements alone may not give a complete picture of the incentives confronting the individual in a common property regime.

Environmental conditions can play an equally important role in the determination of optimal property regimes. Environmental uncertainty in the form of extreme rainfall variability across time and space produces an incentive to develop cooperative rules that ensure access to widely dispersed fields or grazing areas.

As Jackson (1978, p. 284) observes:

A whole village may depend on rainfall conditions within a single square kilometer. Under such circumstances, spatial variations in rainfall for individual days are perhaps more important than is generally realized, except by the peasant farmer. Since a large proportion of the rain occurs in a few days, whether or not a single heavy storm 'hits' an individual small area, particularly at the start of the rainy season or at certain short, critical periods in a crop life cycle, could mean the difference between success and failure.

The analysis here reformulates Bromley's (1989, p. 15) equation relating property rights to economic yield to read,

(1) Property Regime = f([[Mu].sub.p], [Mathematical Expression Omitted])

where [[Mu].sub.p] and [Mathematical Expression Omitted] are the mean and variance of physical yields, respectively. (Bromley argues that the functional relationship may be written as: Property Right = f[Economic Yield].) One can directly relate the first two moments of the probability distribution for yields to economic welfare through an expected profit equation. One also could include higher order moments. The hypothesis here is that environmental variability is particularly relevant on land at the extensive margin--that is, land in the semi-arid and arid-regions of the world where low mean productivity and high yield variability predominate (Bromley and Cernea, 1989). Other authors have recognized the importance of the second moment in this functional relationship but have failed to verify variability in rainfall with meteorological evidence (Sandford, 1983; Runge, 1986).

The analysis here focuses on environmental variability across space. For subsistence ranchers or farmers with high discount rates, the intertemporal aspects of variability probably are less important than the area distribution of rain within one growing season. The analysis relates the meteorological literature on rainfall variability emphasizing correlation-distance relationships to two risk-spreading models in the economics literature. The analysis here postulates that common property can be a rational response to environmental variability. …

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