Health&life

The Relevance of Common Property Rights

Since the very beginning of humanity, the ownership of property by and among people has been a fundamental question. It is a hotly debated topic which has resulted in bloodshed; a relevant example is the quest for Jerusalem, a place that has been fought over more than sixteen times between Israel, Egypt, Jordan etc.

The property rights legal framework can be used to resolve issues of ownership of resources. It refers to an owner’s right to use a good or asset for consumption and/or income generation (use rights). It can also include the right to transfer it to another party; in the form of a sale, gift or bequest (transfer rights). A property right also typically conveys the right to contract with other parties by renting, pledging, or mortgaging a good or asset, or by allowing other parties to use it, for example, in an employment relationship.

This notion of property rights is used mainly in the context of private ownership, where in owners of property can legally exclude others from using a good or asset. Property rights are not a good explanation for ownership of common goods. Some goods like groundwater, oxygen, roads, do not come under the realm of private property due to their inherent characteristics of non-rivalry and non-exclusivity. These goods are either pure public goods or commons. Pure public goods like oxygen, sunlight are inexhaustible and are used by all. Commons on the other hand are goods that are jointly owned, for use of all. They have characteristics of non-rivalry and non-excludability to a threshold limit. This essay will focus on common property goods using inferences from relevant literature.

Dimensions of common property

Common property are goods like roads, bridges, parks have certain characteristics that are common with pure public goods which make it difficult to allow for private ownership. Oakerson termed two of these features; non exclusion and non-rivalry. By non-exclusion, it means that it is very difficult to prevent someone else from using the good. For example; roads are non-exclusive in nature. Once the road is built anyone can use the road. It is very costly to monitor and enforce restrictions on someone else from using the road. By non-rivalry it means use of the road is not hampered from someone else using the road.

However, with common property goods there is a possibility of degradation with constant use. What this means is that common property goods have a threshold limit. Continuing with the road example, people can freely use the road up until there is congestion. Once there are too many people using the road, the road gets congested and damaged and people using the road are not able to derive the full benefits of the road. As more people use the road the utility of the road is subtracted from others. Thus, common property roads have the characteristic of subtraction. This happens as in a common property arrangement, individuals have use rights, but ownership is very diluted. As a result, there is no proper regulation of the common property and thus individuals will try to maximise their use of the good. Individuals are unique and despite having the same amount of information, it is possible that individuals can arrive to their own unique decisions, this makes it difficult for cooperation among individuals in terms of how to manage shared property.

This uncertainty of cooperation among humans for property can be regulated using institutions. Institutions are better able to regulate common property resources than individuals. Institutions are more eternal and would have a greater purview of resources to monitor and regulate common property goods. It would limit the possibility of free riding. However, people working in institutions can also free ride, which means that the worker could expect the others to do the work and derive the utility of it. It can be possible for someone to have 117% efficiency when he is doing the least work in his team. Thus, free riding is a big issue with common property management as this results in suboptimal outcomes.

Another aspect by which common property is detrimental to final economic output is because of the maximising tendencies of individuals. This is elucidated in the animal gazing on common pasture example cited by Hardin. As each shepherd adds more animals to his herd for grazing in the common pasture, it would result in the eventual ruin of the pasture such that no animal could gaze there anymore, finally resulting in a sub optimal outcome for the herdsmen. This concept can be extended to natural resource degradation; tragedy of the commons, etc.

Empirical evidences

Limited studies have been done to understand the effectiveness of common property ownership and productive output. Most of the work is more theoretical in nature. A study on group owned wells in southern India looked at the effectiveness of common property ownership. With this study, the effect of transaction costs with respect to common property ownership was investigated. The start-up costs revolved around the digging, pump installation, construction of waterways and electricity connection. The operating expenses were the costs of electricity used in pumping, the cost of pump repair and maintenance, and costs associated with periodic removal of silt from the well. There were also periodic investments for the expansion of the wells.

He observed that due to the heterogeneity of the decision makers, it was often difficult for the well owners to come to a consensus about the expansion activities. The villagers had no issue utilising and taking in benefits derived from the well but when it came to investing for expansionary activities, there was large reluctance among the villagers. The villagers preferred having their own well where they would have full autonomy rather than splitting costs and having collective ownership of the wells. Even though owning their own well would cause considerable financial drain to the villagers as opposed to splitting expenses on a communal well, it was a more preferred option to have their own.

Concluding remarks

Common property ownership does not seem to have much benefit, however privatizing the good is not a viable option as it would result in underutilisation of the good or possibility of monopoly creating imperfect economy. Regulation of common property is necessary, and this is where governments can play a role. The benefits obtained from Common Property resources are helpful to the limited income households. To the landless and land poor this is the resource to fall back upon during times of need. The impact of good common property resource management on the poor is not merely economic. It is of a far more profound nature. It is a step forward towards development and upliftment of poor households.

Picture Courtesy- Thwink.org



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