4-pages economics paper

4-page paper (typed, double spaced, 12 Arial font, 1” margins) discussing the possible use of common property to address the commons problem. Please develop your discussion within the context of either (1) Acheson and the lobster fiefs or (2) Cinner and customary marine tenure in the Indo-Pacific. Note: you don’t have to read Acheson if you read Cinner and vice versa, but in either case you should show evidence of having read Hardin and either Wade or Seabright.
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Required Assignment 1
Due Date
Conceptual Background
Friday of Week 3, January 22
Read Hardin and either (1) Wade or (2) Seabright (more
theoretical than Wade; Seabright uses theory of repeating
cooperative and noncooperative games).
Read either (1) Acheson or (2) Cinner
Application.
Either one is required of all
students.
Conceptual Assignment
Hardin, G. 1968. “Tragedy of the Commons.” Science, 162: 1243Reading.
1248.
Required of all students.
Conceptual Assignment
Wade, R. 1987. “The Management of Common Property
Reading.
Resources: Finding a Cooperative Solution.” World Bank
Read this or Seabright.
Research Observer 2(2): 219-234.
• pdf file is available on class website.
Conceptual Assignment
Seabright, P. “Managing Local Commons: Theoretical Issues in
Reading.
Incentive Design.” Journal of Economic Perspectives 7(4): 113Read this or Wade.
134.
Application Assignment
Acheson J. 1975. “The Lobster Fiefs: Economic and Ecological
Reading.
Effects of Territoriality in the Marine Lobster Industry.” Human
Read this or Cinner.
Ecology 3:183-207.
Application Assignment
Reading.
Read this or Acheson.
Assignment
Cinner, J. 2005. “Socio-Economic Factors Influencing Customary
Marine Tenure in the Indo-Pacific. Ecology and Society 10(1):1-36.
4-page paper (typed, double spaced, 12 Arial font, 1” margins)
discussing the possible use of common property to address the
commons problem.
Please develop your discussion within the context of either (1)
Acheson and the lobster fiefs or (2) Cinner and customary marine
tenure in the Indo-Pacific. Note: you don’t have to read Acheson if
you read Cinner and vice versa, but in either case you should
show evidence of having read Hardin and either Wade or
Seabright.
THE MANAGEMENT
OF COMMON PROPERTY
RESOURCES:
Finding a Cooperative Solution
Robert
hen will villagers come together to produce goods and services that they all need but cannot provide individually? In
what circumstances will those who face a potential “tragedy
of the commons” be able to formulate rules by which the tragedy is
averted?
Many writers on collective action are inclined to think that the
circumstances are very limited. They argue that people in a situation
in which all could benefit from cooperation will be unlikely to cooperate without an external agent to enforce agreements. Likewise,
many theorists on property rights argue that common property resources will be overexploited as demand rises, so only private enclosure or state regulation stands a chance of preventing such a result.1
This article offers a critique of some of the analytical arguments used
to reach these conclusions and argues that they have been inappropriately applied to certain types of village resources. It then discusses
how to judge whether villagers will be able to sustain local rules of
restrained access to common property resources and interprets the
evidence from a study of forty-one villages in South India.
Clearly there can be no general presumption that collective action
rather than privatization or state regulation will work: witness the
frequency of degraded grazing commons, despoiled forests, overexploited groundwater, and depleted fisheries. But there are many examples of villagers collectively managing property for long periods. Privatization or state regulation is therefore not always essential. A third
option—local collective action—needs to be taken seriously. Because
W
©1987 The International Bank for Reconstruction and Development/The World Bank
219
less public money is likely to be needed for local collective action than
for either privatization or state regulation, it makes financial sense to
establish local rules where circumstances permit.
Common
Property
and
Common-Pool
Resources
220
On a continuum of property rights, exclusive possession (freehold)
is at one end. At the other is no property, as in ocean fisheries or the
atmosphere. In between lies common property, where the rights to
exploit a resource are held by people in conjunction with each other.
These rights may take several forms: they may allow unlimited exploitation for those within a specified group (as happened in commercial
fisheries under national jurisdiction) or they may stipulate limits for
each user (as in most commercial fisheries today or as in “stinting” of
a grazing commons).
Of course, the same type of resource may be exploited under a
variety of property rights. This article deals with those resources that
might be called “common-pool” resources—a subset of public goods,
as that term is used in economics. All public goods have the property
that many people can use them at once, because exclusion is difficult.
But some public goods yield infinite benefits, in the sense that if A
uses more there is not less available for others (lighthouses and weather forecasts, for example). Common-pool resources, by contrast, are
public goods with finite, or subtractive, benefits: if A uses more, less
remains for others. Common-pool resources are therefore potentially
subject to congestion, depletion, or degradation (Blomquist and Ostrom 1985; Randall 1983).
Groundwater is an obvious example of a common-pool resource. It
can be used jointly, but use is subtractive. So when water is scarce,
the groundwater table is likely to be depleted. Canal irrigation water,
unfenced grazing land, and unfenced forest all meet the same criteria.
These three resources—water, grazing, and trees—are vital to the
livelihoods of millions of people in developing countries; the question
of how to prevent their overexploitation as population grows is important for development policy.
The prevailing answer runs as follows: when people are in a situation where they could mutually benefit if all of them restrained their
use of a common-pool resource, they will not do so unless an external
agency enforces a suitable rule. Each individual has an incentive to
ignore the social costs of his behavior for fear that others will exploit
the resource before he does. As a result, the rate of aggregate use
exceeds the physical or biological rate at which the resource renews
itself (Ostrom 1985b).
This argument has been used to justify far-reaching proposals for
changing the way that common-pool resources are managed (Ostrom
1985a; Runge 1986). According to one school, full private property
Research Observer 2, no. 2 (July 1987)
rights over the commons are a necessary condition for avoiding overexploitation (Demsetz 1967; North and Thomas 1977; Johnson 1972;
Picardi and Siefert 1976). According to another, it is essential to give
an external agency—usually the state—full authority to regulate the
commons (Carruthers and Stoner 1981; Hardin 1968). For both
schools, the policy issue is simply how to achieve the desired change
with the least opposition from those involved.
Defining the conditions under which users of common-pool resources may voluntarily restrain their use can be considered as a
subproblem of the theory of collective action, also known as the
theory of public goods. Collective action is action by more than one
person intended to achieve a common goal or satisfy a common
interest (that is, a goal or interest that cannot be obtained by an
individual alone). Achievement means that a public or collective good
has been provided. The collective action might be setting and observing a rule of restrained access to a common-pool resource, and the
public good might be the sustainable exploitation that results.
One of the theories that has generated pessimism about the viability
of collective action is Mancur Olson’s “logic of collective action”
(which might better be called the illogic of collective action, or the
logic of collective inaction). His core proposition is this: “unless there
is coercion or some other special device to make individuals act in
their common interest, rational, self-interested individuals will not act
to achieve their common or group interests” (Olson 1971, emphasis
added). In other words, the theorem says that (a) voluntary collective
action will not produce public goods, and (b) collective action based
on selective (that is, excludable) penalties or rewards may produce
public goods. Existing cases of common interest groups are thus to be
explained by selective punishments or inducements.
My findings question this argument.
Theories
of Collective
Action
The conventional view of Indian villages is that they lack any real
public realm. A number of men are regarded as “big men,” in some
sense first in the village. But there is no clearly defined social domain
or institution separate from state authority where activities of a public
nature are carried out, no center of community management other
than the lowest levels of the state apparatus itself, and no machinery
for raising resources for public (village) purposes other than through
state-sanctioned taxation.
I analyzed forty-one villages in South India (Kurnool district, Andhra Pradesh), thirty-one of which are irrigated from one or another
of two large canal systems, while the other ten are dry. Despite the
Indian
Villages
Robert Wade
221
conventional view to the contrary, a significant number of these villages do provide public goods and services through local arrangements that have nothing to do with outside bodies, whether government or voluntary agencies.
The Public
Realm
222
Kurnool district is semiarid; rainfall averages 620 millimeters a year
o d a l distribution. Population density averages 105 people a
square kilometer (1971), up from 53 in 1870. Seventy percent of
the cultivated area is under foodcrops; only 12 percent is irrigated.
Thirty-four percent of villages are supplied with electricity (1971).
There is one tractor for every one or two irrigated villages, and many
fewer in rainfed villages (1980). Most variation in real wage rates is
contained within the range of 1.5 to 4.5 kilograms of foodgrain a day.
In those villages that have a public realm, it consists of four main
institutions: a village council (distinct from the statutory Panchayat,
which is moribund in all the forty-one villages); a village standing
fund (distinct from local government moneys); a group of village
guards, employed by the council to protect crops from livestock and
thieves; and a group of “common irrigators,” employed by the council
to distribute water to the rice fields and to help get more water to the
village through the government-run canal. The council, and through it
the field guards and common irrigators, are loosely accountable to an
annual meeting of all the village’s farmers.
The council also organizes the supply of many other public goods
and services, such as repairing wells, ridding the village of monkeys,
and making donations for a new primary school or a building where
sick animals can be treated, and so on. All these services except water
distribution are financed from the village standing fund, for which the
council raises money in a variety of ways.
Take K village as an example. Its population is just over 3,000. The
council has about nine members (the number is fixed for any one year,
but varies slightly from year to year). It has authority to make decisions affecting all the village. The village’s standing fund spends about
Rs 10,000 a year (in an economy where a male agricultural laborer
gets Rs 4 a day outside of seasonal peaks). The standing fund pays the
salaries of the field guards. Four are employed full-time for most of
the year, and another two to four are added as the harvest approaches. About twelve common irrigators are employed for up to two and a
half months, for about 1,200 acres of first-season rice. At harvest
the common irrigators supplement the field guards in protecting the
crops.
In the sample of thirty-one canal-irrigated villages, eight have all
four of the main corporate institutions—council, fund, field guards,
and common irrigators; eleven have some but not all; and twelve have
m a umm
Research Observer 2, no. 2 (July 1987)
none. These proportions are not necessarily typical of the whole area,
since the sample was drawn not randomly but with an eye to ease of
access and a representative range of water arrangements. Among the
ten dry villages, eight have field guards; six have a village council; and
six have a village fund.
The impetus for central (village) control comes primarily from two
distinct sources of social conflict and production loss. Trespassing
animals and thieves are one. Unrestrained use of irrigation water is
the other. These are discussed in turn, using K village as an example.
K has a population density of 159 people a square kilometer. With
this density goes a farming system of annual cropping (at least one
crop on each plot each year) and multiple cropping where irrigation
permits. Little waste or yearly fallow land is left; the village has no
common, in the sense of a large area available for common grazing
for a year or more. But oxen and buffalo are needed for traction, and
they must be fed. During the growing season they graze close to the
crops, on the verges or on small areas of fallow, which are treated as
commons. Because fields are not fenced, the animals must be tethered
or shepherded. But the incentives for careful shepherding or tethering
are asymmetrical—I may not be unhappy to see my animals get fat on
your grain. The rationale of the field guards is to make the incentives
less asymmetrical. During the medieval and early modern period in
Europe, the open-field system solved the problem primarily by regulating the cropping; these Indian villagers solve it mainly by regulating
the livestock.
If the field guards catch an animal grazing a standing crop, they
take it to the village pound, where it remains until its owner pays a
fine. If just a few animals are involved, the fine is a flat rate—Rs 2 per
animal during the day, Rs 4 at night. The rate is set by the council;
the field guards collect and keep the fine, dividing it equally among
themselves. If many animals are involved, the council uses its discretion. The fine may run into hundreds of rupees. The field guards
collect it, keep 25 percent, and hand the rest over to the standing
fund. (In most villages the owner of the damaged crop is not compensated.) The field guards do not enforce a stinting. The decision about
how many animals to own and graze is left to each individual.
After the harvest of most of the rainfed crops in February, large
areas of stubble become available for grazing. (Even in irrigated villages, the area under rainfed crops is generally greater than the irrigated area.) Each landowner could reserve his stubble for his own
animals or those he chose to allow. He could do so by posting guards
around each field or by fencing. But the cost of either method—the
cost of privatizing the stubble—is very high; all the more so as each
Robert Wade
The
Management
of Grazing
223
landowner tends to have his holding divided into several scattered
plots (McCloskey 1975). So, as in the open-field system of Europe, the
stubble is put in common; private rights to the product of the land
extend only to the crop, not to the crop residues.
How, in the “corporate” villages, is this commons managed? Since
the village’s own stock of animals is adjusted to the availability of
year-round grazing, after the harvest it has some surplus grazing,
which it could rent out to herdsmen from drier parts of the district.
The market for grazing and manure is organized in two ways. In
one system, a small group of herders bargains with the council for
exclusive access to the village’s grazing. The bargain states how many
sheep and goats they will bring, when they will come, how long they
will stay, and how much they will pay for the franchise. Once the
bargain is made, those herders have exclusive claim to the village’s
grazing, and others can enter only as some leave. Their flocks graze
over the stubble by day. By night, when the animals drop most of
their manure, they are put on the plots of particular landowners, who
pay them an agreed nightly rate per animal. So the herders as a group
pay the village a lump sum for access to the commons; and they
individually get back part of what they pay through the sale of
manure.
The second method (used in K, among others) is more complex.
Again, a group of herders obtains exclusive access. But instead of a
group rent, an auction is held regularly (every four days in K) to
decide who will have each flock on his land at night up to the next
auction. The auction is arranged by the village council. Half the
winning bid (for each flock) is then paid to the herder, and half goes
to the village fund. In K, some 9,000 to 13,000 animals commonly
enter the village for about six weeks, and the village fund gets about
Rs 5,000 in return.
Such a large number of animals entering the village when some
crops (mainly the irrigated ones) are still standing poses a serious risk
of loss for those crop owners. The response is to tighten the regulation of the livestock in two ways. One is to stipulate rules for both
herder and landowner. These rules are read out at the first auction of
the year and may be read out again if infringed. They are worth
repeating here because they do not fit easily with the view that Indian
villagers cannot, so to speak, get their act together (although they
may seem unremarkable compared with the elaborate by-laws of
open-field villages in medieval England cited in Ault 1973).
For the herder:
• He must take the flock to the designated field by 6:30 p.m. and keep
it there until 8:00 a.m.
• He must not allow the flock to graze standing crops.
224
Research Observer 2, no. 2 (July 1987)
• He must deposit with the council half the money paid to him for
the first “turn” (four nights); if he leaves before completing four
turns (sixteen nights), he forfeits his deposit to the village fund.
(This is to discourage herders from leaving before the farmers have
had their fields manured and cleared of stubble.)
• He must stay within the village boundary; if the farmer asks him to
go to a field outside he must refuse.
For the farmer:
• He must keep the flock within the village boundary.
• If he prefers to pay the fund or the herder in kind rather than cash,
he must make the conversion at the rate (in early 1980) of Rs 1.25
per measure of hybrid sorghum or Rs 1.50 of “local” sorghum.
• To help the herder guard the flock at night, he must provide two
men for each 2,000 head. Hired guards must be paid Rs 3 a night,
or the equivalent in grain. (This is to prevent the farmer from
sending nonablebodied men, who could be paid less.)
Such rules are not self-enforcing. Any one farmer would have an
incentive to cheat, by not providing the stipulated number of guards
or by bringing the flock to a field outside the village boundary.
So joint regulation is carried further by means of village-appointed guards.
To pay the guards, it would be possible for the council to set a flat
rate—so much per cultivated acre—which each landowner had to
pay. But such an arrangement would be vulnerable to free riding: a
farmer could delay payment indefinitely, expecting that others would
not similarly delay. In most villages this free rider problem is avoided
by raising the money for the guards’ salaries from a collective source.
The chief source is the money received from the sale of the grazing
franchise, which is generally enough to pay for a semipermanent team
of field guards.
The “corporate” irrigated villages tend to have several other
sources of revenue for the standing fund, based mostly on the sale of
council-sanctioned franchises. In addition to the grazing franchise, a
franchise to sell liquor is a valuable source of revenue. By law the
franchise is sold in a government-run auction. However, the corporate
villages usually send just one person from their village, thus acquiring
the franchise at t …
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