Common-pool resource

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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]

In James Bay, Quebec, the beaver was an important species for food and later commerce when the fur trade started in 1670. Amerindian groups in the area have traditionally used resources communally and have a heritage of customary laws to regulate hunting. However, in the 1920s the railroads caused a large influx of non-native trappers who took advantage of the high fur prices and the indigenous people losing control of their territories. Both non-native and native trappers contributed to the decline of the beaver population, prompting conservation laws to be enacted after 1930 and outsiders being banned from trapping in James Bay. Eventually, Amerindian communities and family territories were legally recognized, and customary laws became enforceable. This restoration of local control allowed for the beaver population to recover. [4]

Since 1947, the Maine lobster catch has been remarkably stable despite predictions of resource collapse. The state government has regulations in place but does not limit the number of licenses. The exclusion to this CPR is done through a system of traditional fishing rights which makes it so that one needs to be accepted by the community to be able to go lobster fishing. Those in a community are restricted to fishing in the territory held by that community. This is enforced by surreptitious violence towards interlopers. Fishermen in these exclusive territories catch significantly more and larger lobsters with less effort than those in areas where territories overlap. [4]

In the New York Bight region, a cooperative of trawl fishermen that specializes in harvesting whiting limits entry into the local fishery and establishes catch quotas among members. These quotas are based on regional market sales estimations and attempt to encourage initiative while discouraging “free-riding.” They limit entry to the whiting grounds and markets through a closed membership policy and by controlling the dock space. Due to these methods, they have access to the best whiting grounds, dominate the market during winter, and can maintain relatively high prices through supply management. The fishermen consider this type of self-regulation both flexible and effective in maintaining sustainable use. [4]

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. [5]

Resource systems like pastoral areas, fishing grounds, forest areas are storage variables. [6] 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. [7] 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. [6]

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. [5]

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 [5] (see also Tragedy of the commons ).

Definition matrix

Excludable Non-excludable
Rivalrous Private goods
eg. food, clothing, parking spaces 		Common-pool resources
eg. fish stocks, timber
Non-rivalrous Club goods
eg. cinemas, software, private parks		 Public goods
eg. 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. [8] 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: [9]

  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, [10] as is the management of common-pool resources. Ostrom outlines five basic protocol requirements for achieving adaptive governance. [11] 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. [12] There are many factors that may affect the formation and development of these kinds of autonomous organizations. [6] 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. [6]

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. [12] 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. [6]

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. [7] (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. [14]

Experimental Studies on Common Pool Resource Games

Common Pool Resource (CPR) games have been a focal point in experimental research, providing insights into the dynamics and dilemmas associated with communal resource management. A foundational work introduced a conceptual framework that elucidates the strategic content of CPR dilemmas, demonstrating how theoretical constructs, such as the Prisoner's Dilemma and coordination games, apply to these behavioral challenges. [15] Further, field experiments involving specific ecological features of CPRs, such as water irrigation, forestry, and fisheries, have revealed the impact of various resource-specific dynamics on collective action and resource management. [16] Additionally, a study explored the external validity of CPR laboratory experiments within the context of artisanal benthic fisheries in Chile, revealing a correlation between cooperative behaviors exhibited in laboratory settings and those in real-world co-managed and open-access fisheries. [17] These studies collectively underscore the complexity of CPR dilemmas and highlight the nuanced interplay between individual strategies, collective action, and resource sustainability, providing a multifaceted understanding of cooperation and norm internalization in the management of communal resources.

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. [5] However, as these resources are first come, first served, they may be affected by the phenomenon of the tragedy of the commons. [18] Two possibilities may follow: a common property or an open access system.

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. [19]

See also

Related Research Articles

<span class="mw-page-title-main">Tragedy of the commons</span> Self-interests causing depletion of a shared resource

The tragedy of the commons is a metaphoric label for a concept that is widely discussed, and criticised, in economics, ecology and other sciences. According to the concept, should a number of people enjoy unfettered access to a finite, valuable resource such as a pasture, they will tend to over-use it, and may end up destroying its value altogether. Even if some users exercised voluntary restraint, the other users would merely supplant them, the predictable result being a tragedy for all.

<span class="mw-page-title-main">Environmental economics</span> Sub-field of economics

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."

In economics, the free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods and common pool resources do not pay for them or under-pay. Examples of such goods are public roads or public libraries or services or other goods of a communal nature. Free riders are a problem for common pool resources because they may overuse it by not paying for the good. Consequently, the common pool resource may be under-produced, overused, or degraded. Additionally, it has been shown that despite evidence that people tend to be cooperative by nature, the presence of free-riders causes cooperation to deteriorate, perpetuating the free-rider problem.

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.

<span class="mw-page-title-main">Goods</span> Tangible or intangible things that satisfy human wants and can be transferred

In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not transferable.

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.

<span class="mw-page-title-main">Commons</span> Shared resources

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 even when owned privately or publicly. 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.

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.

<span class="mw-page-title-main">Elinor Ostrom</span> American political economist (1933–2012)

Elinor Claire "Lin" Ostrom was an American political scientist and political economist whose work was associated with 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 prize.

<span class="mw-page-title-main">Common good (economics)</span> One of the four main types of goods

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:

Individual fishing quotas (IFQs), also known as "individual transferable quotas" (ITQs), are one kind of catch share, a means by which many governments regulate fishing. The regulator sets a species-specific total allowable catch (TAC), typically by weight and for a given time period. A dedicated portion of the TAC, called quota shares, is then allocated to individuals. Quotas can typically be bought, sold and leased, a feature called transferability. As of 2008, 148 major fisheries around the world had adopted some variant of this approach, along with approximately 100 smaller fisheries in individual countries. Approximately 10% of the marine harvest was managed by ITQs as of 2008. The first countries to adopt individual fishing quotas were the Netherlands, Iceland and Canada in the late 1970s, and the most recent is the United States Scallop General Category IFQ Program in 2010. The first country to adopt individual transferable quotas as a national policy was New Zealand in 1986.

Steven C. Hackett is an American economist, and Professor Emeritus of Economics at Cal Poly Humboldt, 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.

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."

The Alaska Department of Fish and Game (ADF&G) is a department within the government of Alaska. ADF&G's mission is to protect, maintain, and improve the fish, game, and aquatic plant resources of the state, and manage their use and development in the best interest of the economy and the well-being of the people of the state, consistent with the sustained yield principle. ADF&G manages approximately 750 active fisheries, 26 game management units, and 32 special areas. From resource policy to public education, the department considers public involvement essential to its mission and goals. The department is committed to working with tribes in Alaska and with a diverse group of State and Federal agencies. The department works cooperatively with various universities and nongovernmental organizations in formal and informal partnership arrangements, and assists local research or baseline environmental monitoring through citizen science programs.

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).

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The Institutional Analysis and Development framework (IAD) is a theoretical framework for investigating how people ("actors") interact with common-pool resources (CPRs). CPRs are economic goods which are rivalrous and non-excludable - examples include forests as a source of timber, or fields as a source of pasture.

<span class="mw-page-title-main">Fishery cooperative</span>

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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 [ bare URL PDF ]
  4. 1 2 3 Berkes, F.; Feeny, D.; McCay, B. J.; Acheson, J. M. (July 1989). "The benefits of the commons". Nature. 340 (6229): 91–93. Bibcode:1989Natur.340...91B. doi:10.1038/340091a0. ISSN   0028-0836. S2CID   4310769.
  5. 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.
  6. 1 2 3 4 5 Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action (Canto Classics). Cambridge: Cambridge University Press. doi:10.1017/CBO9781316423936
  7. 1 2 Ostrom, Elinor (1977). Public Goods and Public Choices. Alternatives for Delivering Public Services. ISBN   9780429047978.
  8. ↑ Mandal, B.N. (2009). Global Encyclopaedia of Welfare Economics. Global Vision Publishing House. ISBN   978-8182202597.
  9. ↑ Ostrom, Elinor (1990). Governing the commons: the evolution of institutions for collective action. Cambridge University Press. pp. 90, 91–102.[ page needed ]
  10. ↑ "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.
  11. ↑ Ostrom, Elinor. (2010). "The Challenge of common-pool resources". In: Environment: Science and Policy for Sustainable Development, 50:4, 8-21.
  12. 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.
  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 (2008-07-01). "The Challenge of Common-Pool Resources". Environment: Science and Policy for Sustainable Development. 50 (4): 8–21. Bibcode:2008ESPSD..50d...8O. doi:10.3200/ENVT.50.4.8-21. ISSN   0013-9157. S2CID   154884533.
  15. ↑ Gardner, R., Ostrom, E., & Walker, J. M. (1990). The Nature of Common-Pool Resource Problems. DOI
  16. ↑ Cárdenas, J., Janssen, M., & Bousquet, F. (2013). Dynamics of rules and resources: three new field experiments on water, forests and fisheries. DOI
  17. ↑ Gelcich, S., Guzman, R., Rodríguez-Sickert, C., Castilla, J. C., & Cárdenas, J. C. (2013). Exploring external validity of common pool resource experiments: insights from artisanal benthic fisheries in Chile. Ecology and Society, 18(3).
  18. ↑ Tietenberg, T. (20 September 2006). "Open access resources". Encyclopedia of Earth . Retrieved 4 July 2017.
  19. ↑ 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

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