Property Rights Essay

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Property rights determine who is entitled to use and dispose of resources, both natural and man-made. They profoundly affect the decisions people make regarding the use of resources, and hence the magnitude of human impacts on the environment.

Property rights entitle one or more people to use a resource (usufruct), to exclude others from its use, to transfer ownership to someone else (e.g., by sale, inheritance, or gift), or to allow someone else to use the property temporarily (e.g., for rent). Property rights may also allow the owner to destroy the property. These rights are conferred by social institutions (e.g., by government) and are subject to renegotiation. Hence, property rights consist of “bundles of rights” that vary in time and place.

The environmental implications of property rights depend on the kind of property as well as on the type of resource, and the uses that people make of that resource. Important kinds of property include open access (no one owns the resource), common property (owned by a defined group of people), state property (owned by the state), and private property (owned by an individual, or a corporation treated as a legal person). Important characteristics of the resource include whether it is renewable or not, whether it requires human effort to maintain its quantity or quality, and whether it is “excludable” or not. An excludable resource is one from which all others can be excluded; for example, land is an excludable resource but the atmosphere is not. Important characteristics of resource uses are whether they are liable to degrade or deplete the resource. For example, logging can deplete a forest and degrade its soils and is thus a “rivalrous” resource use, while breathing the air or walking on a sidewalk is nonrivalrous. Some resource uses improve the resource, for example, the utilization of knowledge typically adds to the existing knowledge base of society, and nobody loses knowledge when somebody learns.

Open Access

An open access regime is appropriate if the main resource uses are nonrivalrous, especially if little or no human effort is required in order to maintain that resource (for example, air to breathe or sunlight). Patent rights (a kind of private property) are intended to provide economic incentives to create new technical knowledge, even though that knowledge is nonrivalrous. Hence, many patents are controversial, especially if they are extended to living things such as genetically modified organisms (GMOs) or are used to appropriate knowledge that was previously in the public domain, that is, open access.

Open access can also be appropriate in the case of rivalrous resource uses, if those resource uses are kept within limits by other factors. For example, at a time when the human population was much lower than it is now, market incentives to overfish were limited and industrial fishing methods had not yet been developed, and it was therefore safe to leave most oceanic fisheries under an open access regime. However, once such limits are removed, there may be a competitive rush to exploit a resource before others do, leading to Garret Hardin’s Tragedy of the Commons (which would be better termed a “tragedy of open access”). Nowadays, open access is not an environmentally sustainable option for most rivalrous resource uses.

Common Property

Common property regimes are especially suited to nonexcludable resources that are being used in rivalrous ways. The costs of trying to impose private property in such cases are enormous, and can lead to serious inequities. For example, if the water in a large aquifer with slow rates of replenishment (such as the Ogallala Aquifer in the United States) is treated as private property, the aquifer as a whole is treated as an open access resource, encouraging landowners to appropriate as much water as possible before it is tapped by their neighbors. Conservationist users of the water lose out because the groundwater table under their own land declines as a result of others’ use of that water. In such cases, some form of common property in the aquifer needs to be established in order to provide the incentives required for sustainable rates of use.

Common property may also be established in man-made assets that require a common effort to maintain. For example, irrigation structures that serve numerous farmers may best be maintained as common property in order to ensure that both upstream and downstream farmers devote similar amounts of labor and capital to maintaining the structures and reap similar benefits. If such common ownership institutions decline, the resource will be degraded.

Finally, common property may also be established in excludable resources that can be managed as private property, for the sake of social objectives such as equity. For example, most nomadic herders did not have private property in grazing lands until private property regimes were forced upon them. Common property in grazing lands allows the flexible management of livestock, taking them wherever forage is seasonally available in an unpredictable environment, while assuring that everybody’s herds are likely to survive. Private property in ranching land in semiarid areas is only feasible if land holdings are large, and may thus require the exclusion of large numbers of people from land ownership (as happened in Spain, the Americas, Australia, and southern Africa).

In order to perform well, common property requires effective management institutions that are able to formulate rules of resource use acceptable by the great majority of members, that effectively involve members in decision making, and that are able to enforce rules reliably.

State Property

States claim property in resources they find particularly important, such as unclaimed land, forests, and coastal waters. State property also usually includes man-made infrastructures that cannot be effectively managed as private property, such as the road network. In theory, these resources are to be managed for the public good; for example, stateowned forests are supposed to serve multiple uses including timber harvesting, watershed protection, wildlife conservation, and recreation.

Private management of such forests may lead to environmentally unsustainable outcomes, because the time horizons of individual owners may be limited to their own lifetimes, encouraging the destruction of resources that take centuries to replenish. However, the time horizons of governments may also be short, particularly if government officials are corruptible by major resource users. For state property to deliver on its promises, a high degree of democratic accountability must be assured. Otherwise, this property form, which de jure is a form of common property, de facto becomes a form of open access or private property.

Private Property

Private property is most appropriate in the case of excludable resources used in rivalrous ways, such as land used for crop agriculture. In theory, the landowner suffers the full impact of any destructive uses of his property, which is sufficient incentive to use that land in an environmentally sustainable way. However, this form of property by no means guarantees positive environmental outcomes even in situations to which it is best suited.

Bibliography:

  1. Terry Anderson and Fred S. McChesney, Property Rights: Cooperation, Conflict, and Law (Princeton University Press, 2003);
  2. David Bollier, Silent Theft: The Private Plunder of Our Common Wealth (Routledge, 2003);
  3. David Feeny, Fikret Berkes, Bonnie McKay, and James M. Acheson, “The Tragedy of the Commons: Twenty-Two Years Later,” Human Ecology (v.18/1, 1990);
  4. Susan Hanna, “Property Rights, People, and the Environment,” in Robert Costanza, Olman Segura, and Juan Martinez-Alier, eds., Getting Down to Earth: Practical Applications of Ecological Economics (Island Press, 1996);
  5. Bruce Larson, ed., Property Rights and Environmental Problems (Ashgate, 2003);
  6. John F. Richards, , Land, Property, and the Environment (Institute for Contemporary Studies Press, 2002).

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