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

Examples of a Common-Pool Resource

Common-pool goods are typically regulated and nurtured in order to prevent demand from overwhelming supply and allow for their continued exploitation. Examples of common-pool resources include forests, man-made irrigation systems, fishing grounds, and groundwater basins. For instance, fishermen have an incentive to harvest as many fish as possible because if they do not, someone else will—so without management and regulation, fish stocks soon become depleted. And while a river might supply many cities with drinking water, manufacturing plants might be tempted to pollute the river if they were not prohibited from doing so by law because someone else would bear the costs. In California, where there is a huge demand for surface water but supplies are limited, common pool problems are exacerbated because the state does not manage groundwater basins at the state level. [2] During the 2012-2016 drought, farmers with senior water rights dating back to the 19th century could use as much water as they wanted, while cities and towns had to make drastic cutbacks to water use. [3]

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. [4]

Resource systems like pastoral areas, fishing grounds, forest areas are storage variables. [5] Under favorable conditions, they can maximize the flow without harming the total storage volume and the entire resource system. Different from the resource system, the resource unit is the amount that an individual occupies or uses from the resource system, such as the total amount of fish caught in a fishing ground, the amount of feed consumed by livestock in pastoral areas. [6] A resource system allows multiple people or enterprise to produce at the same time, and the process of using common-pool resources can be performed simultaneously by multiple occupants. However, the resource unit cannot be used by multiple people or enterprises at the same time. [5]

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. [4]

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 [4] (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, free public transport
Non-rivalrous Club goods
cinemas, private parks, satellite television, public transport
Public goods
free-to-air television, air, national defense, free and open-source software

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. [7] 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: [8]

  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, [9] as is the management of common-pool resources. Ostrom outlines five basic protocol requirements for achieving adaptive governance. [10] These include:

Influential factors in the management of common-pool resources

A new proposal of the management of CPR is to develop autonomous organizations that are not completely privatized and controlled by government power, which led and supervised by the community to manage common-pool resources in addition to directly through the government and the free market. [11] There are many factors that may affect the formation and development of these kinds of autonomous organizations. [12] Effectively identifying the influencing factors of the autonomous management system of CPRs increasing the feasibility of the system, and it is more conducive to the sustainable use of resources as well. [13]

In general, there are four variables that are very important for local common-pool resource management: (1) characteristics of the resource; (2) characteristics of the resource-dependent group; (3) institutional model of resource management; (4) the relationship between groups, external forces, and authorities. [12]

The government, market and interest groups are all considered as external forces that have an impact on CPR management system. Changes in market demand for CPR, in particular, technological innovation increases productivity and lowers costs, which undermines the sustainability of the management system. [11] In order to develop more resources, resource owners may seek to change the ownership of resources in the form of cooperation with the government, privatize CPR or even cancel the protection of CPR ownership by regulations. Such institutional changes prevent the implementation of policies that are beneficial to the majority of the population, while the power of the government and bureaucracy can be abused. [12]

The community is responsible for supervising and administering CPR under an autonomous management system, the characteristics of a community can affect how CPR is managed. [14] (1) the size of the community. The level of cooperation decreases as the number of community members grows; (2) Allocation mechanism for CPR. Encouraging the exploitation of the least used resources and reducing the exploitation of the most used resources will effectively increase the rate of resource supply and reduce the rate of resource consumption and individual demand. (3) Group identity. When people in a community have a strong sense of group identity, it helps to manage CPR within the community. [15]

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. [4] However, as these resources are first come, first served, they may be affected by the phenomenon of the tragedy of the commons. [16] 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. [17]

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. [18]

See also

Related Research Articles

Tragedy of the commons Self-interests causing depletion of a shared resource

In economic science, the tragedy of the commons is a situation in which individual users, who have open access to a resource unhampered by shared social structures or formal rules that govern access and use, act independently according to their own self-interest and, contrary to the common good of all users, cause depletion of the resource through their uncoordinated action. The concept 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 after an article written by Garrett Hardin in 1968.

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. For such goods, users cannot be barred from accessing or using them for failing to pay for them. Also, use by one person neither prevents access of other people nor does it reduce availability to others. Therefore, 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 rivalrous to a certain degree. If too many fish were harvested, the stocks would deplete, limiting the access of fish for others. A public good must be valuable to more than one user, otherwise, the fact that it can be used simultaneously by more than one person would be economically irrelevant.

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.

Rivalry (economics) Property of economic goods

In economics, a good is said to be rivalrous or a rival if its consumption by one consumer prevents simultaneous consumption by other consumers, or if consumption by one party reduces the ability of another party to consume it. A good is considered non-rivalrous or non-rival if, for any level of production, the cost of providing it to a marginal (additional) individual is zero. A good is "anti-rivalrous" and "inclusive" if each person benefits more when other people consume it.

John A. Baden is founder and chairman of the Foundation for Research on Economics and the Environment (FREE) based in Bozeman, Montana. In addition to FREE. he cofounded the Property and Environment Research Center (PERC), the Environmental Management MBA program at the University of Washington, and Warriors and Quiet Waters. He has taught at Indiana University, Montana State University, Utah State University, and the University of Washington. Baden and his wife, Ramona Marotz-Badem, own a ranch in Gallatin Gateway, outside 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 also be 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.

Excludability

In economics, a good, service or resource are broadly assigned two fundamental characteristics; a degree of excludability and a degree of rivalry. Excludability is defined as the degree to which a good, service or resource can be limited to only paying customers, or conversely, the degree to which a supplier, producer or other managing body can prevent "free" consumption of a good.

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. She was the first woman to win the Nobel Prize in Economics.

Common good (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:

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."

Property rights are constructs in economics for determining how a resource or economic good is used and owned. Resources can be owned by individuals, associations, collectives, or governments. Property rights can be viewed as an attribute of an economic good. This attribute has three broad components and is often referred to as a bundle of rights in the United States:

  1. the right to use the good
  2. the right to earn income from the good
  3. the right to transfer the good to others, alter it, abandon it, or destroy it

Catch share is a fishery management system that allocates a secure privilege to harvest a specific area or percentage of a fishery's total catch to individuals, communities, or associations. Examples of catch shares are individual transferable quota (ITQs), individual fishing quota (IFQs), territorial use rights for fishing (TURFs), limited access privileges (LAPs), sectors, and dedicated access privileges (DAPs).

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 political 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.

Fishery cooperative

A Fishery cooperative, or fishing co-op, is a cooperative in which the people involved in the fishing industry pool resources, in their certain activities from farming, catching, distribution, and marketing of fish.

Kuhls are traditional systems of community managed, interconnected gravity flow irrigation systems of Kangra Valley in the western Himachal Pradesh region of India. The Kangra Valley is composed of forested alluvial plains sloping away from the base of the Dhauladhar mountain range falling largely within the sub districts of Kangra and Palampur. It is crisscrossed by small streams called nalas and perennial rivers fed by glacial melts called khad, that originate in the Dhauladhar and eventually join the Beas River. The Kuls of Spiti and Guls of Kashmir are similar water management systems. 

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. "Sustainable Groundwater Management Act (SGMA)".
  3. https://water.ca.gov/-/media/DWR-Website/Web-Pages/Water-Basics/Drought/Files/Publications-And-Reports/CNRA-Drought-Report-final-March-2021.pdf
  4. 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.
  5. 1 2 Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action (Canto Classics). Cambridge: Cambridge University Press. doi:10.1017/CBO9781316423936
  6. Ostrom, Elinor (1977). Public Goods and Public Choices. Alternatives for Delivering Public Services. ISBN   9780429047978.
  7. Mandal, B.N. (2009). Global Encyclopaedia of Welfare Economics. Global Vision Publishing House. ISBN   978-8182202597.
  8. Ostrom, Elinor (1990). Governing the commons: the evolution of institutions for collective action. Cambridge University Press.[ page needed ]
  9. "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.
  10. Ostrom, Elinor. (2010). "The Challenge of common-pool resources". In: Environment: Science and Policy for Sustainable Development, 50:4, 8-21.
  11. 1 2 Ostrom, Elinor; Gardner, Roy; Walker, James; Walker, James M.; Walker, Jimmy (1994). Rules, Games, and Common-pool Resources. University of Michigan Press. ISBN   978-0-472-06546-2.
  12. 1 2 3 Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action (Canto Classics). Cambridge: Cambridge University Press. doi:10.1017/CBO9781316423936
  13. Castilla-Rho J.C., Holley C., Castilla J.C. (2020) Groundwater as a Common Pool Resource: Modelling, Management and the Complicity Ethic in a Non-collective World. In: Valera L., Castilla J. (eds) Global Changes. Ethics of Science and Technology Assessment, vol 46. Springer, Cham.
  14. Ostrom, Elinor (1977). Public Goods and Public Choices. Alternatives for Delivering Public Services. ISBN   9780429047978.
  15. Ostrom, Elinor (2008-07-01). "The Challenge of Common-Pool Resources". Environment: Science and Policy for Sustainable Development. 50 (4): 8–21. doi:10.3200/ENVT.50.4.8-21. ISSN   0013-9157. S2CID   154884533.
  16. Tietenberg, T. (20 September 2006). "Open access resources". Encyclopedia of Earth . Retrieved 4 July 2017.
  17. 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.
  18. 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