Common-pool resource

Last updated

In economics, a common-pool resource (CPR) is a type of good consisting of a natural or human-made resource system (e.g. an irrigation system or fishing grounds), whose size or characteristics makes it costly, but not impossible, to exclude potential beneficiaries from obtaining benefits from its use. Unlike pure public goods, common pool resources face problems of congestion or overuse, because they are subtractable. A common-pool resource typically consists of a core resource (e.g. water or fish), which defines the stock variable, while providing a limited quantity of extractable fringe units, which defines the flow variable. While the core resource is to be protected or nurtured in order to allow for its continuous exploitation, the fringe units can be harvested or consumed. [1]

Contents

Common property systems

A common property rights regime system (not to be confused with a common-pool resource) is a particular social arrangement regulating the preservation, maintenance, and consumption of a common-pool resource. The use of the term "common property resource" to designate a type of good has been criticized, because common-pool resources are not necessarily governed by common property protocols. Examples of common-pool resources include irrigation systems, fishing grounds, pastures, forests, water or the atmosphere. A pasture, for instance, allows for a certain amount of grazing to occur each year without the core resource being harmed. In the case of excessive grazing, however, the pasture may become more prone to erosion and eventually yield less benefit to its users. Because the core resources are vulnerable, common-pool resources are generally subject to problems of congestion, overuse, pollution, and potential destruction unless harvesting or use limits are devised and enforced. [2]

Management

The use of many common-pool resources, if managed carefully, can be extended because the resource system forms a negative feedback loop, where the stock variable continually regenerates the fringe variable as long as the stock variable is not compromised, providing an optimum amount of consumption. However, consumption exceeding the fringe value reduces the stock variable, which in turn decreases the flow variable. If the stock variable is allowed to regenerate then the fringe and flow variables may also recover to initial levels, but in many cases the loss is irreparable. [2]

Ownership

Common-pool resources may be owned by national, regional or local governments as public goods, by communal groups as common property resources, or by private individuals or corporations as private goods. When they are owned by no one, they are used as open access resources. Having observed a number of common pool resources throughout the world, Elinor Ostrom noticed that a number of them are governed by common property protocols — arrangements different from private property or state administration — based on self-management by a local community. Her observations contradict claims that common-pool resources must be privatized or else face destruction in the long run due to collective action problems leading to the overuse of the core resource [2] (see also Tragedy of the commons ).

Definition matrix

Excludable Non-excludable
Rivalrous Private goods
food, clothing, cars, parking spaces
Common-pool resources
fish stocks, timber, coal
Non-rivalrous Club goods
cinemas, private parks, satellite television
Public goods
free-to-air television, air, national defense

Common property protocols

Common property systems of management arise when users acting independently threaten the total net benefit from common-pool resource. In order to maintain the resources, protocols coordinate strategies to maintain the resource as a common property instead of dividing it up into parcels of private property. Common property systems typically protect the core resource and allocate the fringe resources through complex community norms of consensus decision-making. [3] Common resource management has to face the difficult task of devising rules that limit the amount, timing, and technology used to withdraw various resource units from the resource system. Setting the limits too high would lead to overuse and eventually to the destruction of the core resource while setting the limits too low would unnecessarily reduce the benefits obtained by the users.

In common property systems, access to the resource is not free and common-pool resources are not public goods. While there is relatively free but monitored access to the resource system for community members, there are mechanisms in place which allow the community to exclude outsiders from using its resource. Thus, in a common property state, a common-pool resource appears as a private good to an outsider and as a common good to an insider of the community. The resource units withdrawn from the system are typically owned individually by the appropriators. A common property good is rivaled in consumption.

Analysing the design of long-enduring CPR institutions, Elinor Ostrom identified eight design principles which are prerequisites for a stable CPR arrangement: [4]

  1. Clearly defined boundaries
  2. Congruence between appropriation and provision rules and local conditions
  3. Collective-choice arrangements allowing for the participation of most of the appropriators in the decision making process
  4. Effective monitoring by monitors who are part of or accountable to the appropriators
  5. Graduated sanctions for appropriators who do not respect community rules
  6. Conflict-resolution mechanisms which are cheap and easy to access
  7. Minimal recognition of rights to organize (e.g., by the government)
  8. In case of larger CPRs: Organisation in the form of multiple layers of nested enterprises, with small, local CPRs at their bases.

Common property systems typically function at a local level to prevent the overexploitation of a resource system from which fringe units can be extracted. In some cases, government regulations combined with tradable environmental allowances (TEAs) are used successfully to prevent excessive pollution, whereas in other cases — especially in the absence of a unique government being able to set limits and monitor economic activities — excessive use or pollution continue.

Adaptive governance

The management of common-pool resources is highly dependent upon the type of resource involved. An effective strategy at one location, or of one particular resource, may not be necessarily appropriate for another. In The Challenge of Common-Pool Resources, Ostrom makes the case for adaptive governance as a method for the management of common-pool resources. Adaptive governance is suited to dealing with problems that are complex, uncertain and fragmented, [5] as is the management of common-pool resources. Ostrom outlines five basic protocol requirements for achieving adaptive governance. [6] These include:

Open access resources

In economics, open access resources are, for the most part, rivalrous, non-excludable goods. This makes them similar to common goods during times of prosperity. Unlike many common goods, open access goods require little oversight or may be difficult to restrict access. [2] However, as these resources are first come, first served, they may be affected by the phenomenon of the tragedy of the commons. [7] Two possibilities may follow: a common property or an open access system.

An open access system is set up to continue the ideals of an open access resource in which everything is up for grabs, e.g., land. This occurred during the expansion of the U.S. west where thousands of acres were given away to the first one to claim and work the land. [8]

However, in a different setting, such as fishing, there will be drastically different consequences. Since fish are an open access resource, it is relatively simple to fish and profit. If fishing becomes profitable, there will be more fishers and fewer fish. Fewer fish lead to higher prices which will lead again to more fishers, as well as lower reproduction of fish. This is a negative externality and an example of problems that arise with open access goods. [9]

See also

Related Research Articles

Tragedy of the commons Depletion of a shared resource according to ones self-interests

The tragedy of the commons is a situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users by depleting or spoiling the shared resource through their collective action. The theory originated in an essay written in 1833 by the British economist William Forster Lloyd, who used a hypothetical example of the effects of unregulated grazing on common land in Great Britain and Ireland. The concept became widely known as the "tragedy of the commons" over a century later due to an article written by American biologist and philosopher Garrett Hardin in 1968. In this modern economic context, "commons" is taken to mean any shared and unregulated resource such as atmosphere, oceans, rivers, ocean fish stocks, or even an office refrigerator.

Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental Economics "...undertakes theoretical or empirical studies of the economic effects of national or local environmental policies around the world .... Particular issues include the costs and benefits of alternative environmental policies to deal with air pollution, water quality, toxic substances, solid waste, and global warming."

Public good (economics) Good that is non-excludable and non-rival

In economics, a public good is a good that is both non-excludable and non-rivalrous, in that individuals cannot be excluded from use or could benefit from without paying for it, and where use by one individual does not reduce availability to others or the good can be used simultaneously by more than one person. This is in contrast to a common good such as wild fish stocks in the ocean, which is non-excludable but is rivalrous to a certain degree, as if too many fish are harvested, the stocks will be depleted.

Community management or common-pool resource management is the management of a common resource or issue by a community through the collective action of volunteers and stakeholders. The resource managed can be either material or informational. Examples include the management of common grazing and water rights; fisheries and open-source software. In the case of physical resources, community management strategies are frequently employed to avoid the tragedy of the commons and to encourage sustainability.

Free-market environmentalism argues that the free market, property rights, and tort law provide the best means of preserving the environment, internalizing pollution costs, and conserving resources.

Pastoralism branch of agriculture concerned with raising livestock

Pastoralism is a form of animal husbandry, historically by nomadic people who moved with their herds. The species involved include various herding livestock, including cattle, camels, goats, yaks, llamas, reindeer, horses and sheep.

Private good

A private good is defined in economics as "an item that yields positive benefits to people" that is excludable, i.e. its owners can exercise private property rights, preventing those who have not paid for it from using the good or consuming its benefits; and rivalrous, i.e. consumption by one necessarily prevents that of another. A private good, as an economic resource is scarce, which can cause competition for it. The market demand curve for a private good is a horizontal summation of individual demand curves.

John A. Baden is founder and chairman of the Foundation for Research on Economics and the Environment (FREE) based in Bozeman, Montana.

Social peer-to-peer processes are interactions with a peer-to-peer dynamic. These peers can be humans or computers. Peer-to-peer (P2P) is a term that originated from the popular concept of the P2P distributed computer application architecture which partitions tasks or workloads between peers. This application structure was popularized by file sharing systems like Napster, the first of its kind in the late 1990s.

The commons is the cultural and natural resources accessible to all members of a society, including natural materials such as air, water, and a habitable earth. These resources are held in common, not owned privately. Commons can also be understood as natural resources that groups of people manage for individual and collective benefit. Characteristically, this involves a variety of informal norms and values employed for a governance mechanism. Commons can be also defined as a social practice of governing a resource not by state or market but by a community of users that self-governs the resource through institutions that it creates.

Global commons is a term typically used to describe international, supranational, and global resource domains in which common-pool resources are found. Global commons include the earth's shared natural resources, such as the high oceans, the atmosphere and outer space and the Antarctic in particular. Cyberspace may also meet the definition of a global commons.

Elinor Ostrom American political economist

Elinor Claire "Lin" Ostrom was an American political economist whose work was associated with the New Institutional Economics and the resurgence of political economy. In 2009, she was awarded the Nobel Memorial Prize in Economic Sciences for her "analysis of economic governance, especially the commons", which she shared with Oliver E. Williamson. To date, she remains the first of only two women to win the Nobel Prize in Economics, the other being Esther Duflo.

Common good (economics) economics

Common goods are defined in economics as goods that are rivalrous and non-excludable. Thus, they constitute one of the four main types based on the criteria:

Steven C. Hackett is an American economist, and Professor of Economics at Humboldt State University (HSU), known for his contributions to the fields of environmental and natural resources economics.

Water trading is the process of buying and selling water access entitlements, also often called water rights. The terms of the trade can be either permanent or temporary, depending on the legal status of the water rights. Some of the western states of the United States, Chile, South Africa, Australia, Iran and Spain's Canary Islands have water trading schemes. Some consider Australia's to be the most sophisticated and effective in the world. Some other countries, especially in South Asia, also have informal water trading schemes. Water markets tend to be local and informal, as opposed to more formal schemes.

A collective action problem or social dilemma is a situation in which all individuals would be better off cooperating but fail to do so because of conflicting interests between individuals that discourage joint action. The collective action problem has been addressed in political philosophy for centuries, but was most clearly established in 1965 in Mancur Olson's The Logic of Collective Action.

The Commonize Costs–Privatize Profits Game is a concept developed by the ecologist Garrett Hardin to describe a "game" widely played in matters of resource allocation. The concept is Hardin's interpretation of the closely related phenomenon known as the tragedy of the commons, and is referred to in political discourse as "privatizing profits and socializing losses."

Vincent Alfred Ostrom was an American political economist and the Founding Director of the Ostrom Workshop based at Indiana University and the Arthur F. Bentley Professor Emeritus of Political Science. He and his wife, the economist Elinor Ostrom, made numerous contributions to the field of political science, political economy, and public choice.

The term "knowledge commons" refers to information, data, and content that is collectively owned and managed by a community of users, particularly over the Internet. What distinguishes a knowledge commons from a commons of shared physical resources is that digital resources are non-subtractible; that is, multiple users can access the same digital resources with no effect on their quantity or quality.

The Institutional Analysis and Development framework (IAD) was developed by Elinor Ostrom, an American political scientist, who was the first woman to receive the Nobel Memorial Prize in Economic Sciences in 2009. The IAD relates a set of concepts to help in the analysis of commons, such as fishery stocks, woodlands. Ostrom explored which institutional structures support arrangements that handle those resource stocks in a sustainable way, balancing individuals' use with the interest of a wider public. Under the rational choice models, the IAD was devised in an attempt to explain and predict outcomes by formally exploring and documenting the governance structures, the actors' positions, and the informal and formal rules devised for individuals to extract resources from the commons resource. Thus, the IAD is a systematic method to document policy analysis functions similar to analytic technique commonly used in physical and social sciences and understand how institutions operate and change over a period of time.

References

Citations

  1. Ostrom, Elinor (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge, UK: Cambridge University Press. ISBN   0-521-40599-8.
  2. 1 2 3 4 Environmental Economics Dictionary (2008-04-30). "Open Access Resource definition | Environmental Economics Dictionary". Economics.socialsciencedictionary.com. Archived from the original on 2013-07-03. Retrieved 2014-01-19.
  3. Mandal, B.N. (2009). Global Encyclopaedia of Welfare Economics. Global Vision Publishing House. ISBN   978-8182202597.
  4. Ostrom, Elinor (1990). Governing the commons: the evolution of institutions for collective action. Cambridge University Press.
  5. "UNU-IAS. (2011). "Adaptive Governance". United Nations University". Ias.unu.edu. 2006-08-18. Archived from the original on 2012-08-02. Retrieved 2014-01-19.
  6. Ostrom, Elinor. (2010). "The Challenge of common-pool resources". In: Environment: Science and Policy for Sustainable Development, 50:4, 8-21.
  7. Tietenberg, T. (20 September 2006). "Open access resources". Encyclopedia of Earth . Retrieved 4 July 2017.
  8. Reggio, Michael H. (2009). "Cheyenne-Arapaho Opening". In Everett, Dianna (ed.). Encyclopedia of Oklahoma History and Culture. Oklahoma City, OK: Oklahoma Historical Society. ISBN   9780941498753 . Retrieved 4 July 2017.
  9. Mackenzie, John (2014). "Market Failures: Open-Access Resources, Public Goods, Etc". Archived from the original (lecture notes) on 3 November 2017. Retrieved 4 July 2017.

Bibliography