Rem 100 Institutions: property rights Incentives: co-operation and self-interest Ownership of property: own = "have as property, possess"

several tests: property has value (implies scarcity), property definable or controllable, others can be excluded from its use or enjoyment. Ownership of property implies: rights to use or 'enjoy' the property. Right to control who else may use property. Right to sell, rent, dispose of property to another. Right to abandon/relinquish property. Property rights (ownership) exist through their recognition by others, usually incorporated in cultural and/or legal system. Property rights = institution. Ways acquire/transmit property rights: market sales/purchases inheritance, gifts labor, investment in improving resource use over time (squatter's rights) receiving rights from state membership in communal group Four forms of property rights: private, state, common (communal), open access Private: owned by individuals or corp. includes land, objects, etc. established/controlled by cultural/legal systems access is by permission others must respect owner's rights Forms of property rights--STATE owned by gov't or gov't corp on behalf of citizens; usually in the public interest. access by permission (rules/regulations) may be sold/rented to contribute to revenue may be given away, sometimes w/ subsidies. may include commerical/non-commercial properties. Common Property owned by group of ppl whose membership defined members control access by communal decision non-members must respect rights of members Open access may be owned by state but ownership not enforced may not be owned by anyone (open ocean) key point--access free to all--no one excluded Right of capture Tragedy of the Commons: common lands open to all. Individual better off by putting extra animal to graze on common. Common is degraded, whole community may be worse off Ea. person can improve their lot by adding more animals Brings ruin to all Problem of open access: rational self-interest doesn't always maximize community welfare Open access often leads to overuse and degradation

Over-capacity: many fisheries unregulated "common property" or open access, so new harvesters can enter at will. capacity of fishing fleets to catch fish increases untili nobody makes profit. Solutions to Open Access? Centralized control (state property rights) privatization Problems abound: nationalization of forest land, privatization of Tibetan grazing land Collective Action: fencing. Privatization to stop overgrazing. Hardin: no mention of common property arrangements (confuses w/ open access) Collective action. Lester Brown: building environmentally sustainable future depends on restructuring global economy, major shifts in human reproductive behaviour, and dramatic changes in values and lifestyles. Ridley and Low: more sensible approach to tap boundless and renewable resource: human propensity for thinking mainly of short-term self-interest. Conditions for successful collective action: communal property managed sustainably if Characteristics of resource: small and clearly defined resource boundaries high costs of exclusion tech (ex. fencing) Relationship btw resource and users: overlap btw location of resource and user resource vital for survival users know about sustainable management Characteristics of the users: small number clearly defined group boundaries (membership) powerful individuals benefits from co-operation existing arrangements for resolving problems people concerned about their reputations Enforcement issues: cheating agreements noticeable state ineffectual if in conflict Problem of market failure: when private means contradict social ends of efficient allocation of resources 3 problems: global commons and open access global public goods and free riders global externalities or spillovers Global commons: natural resources and vital life-support services belong to all humankind rather than to any one country. subject to open access global resources thus are over-harvested/depleted Public good: good/service consumed by everyone and from which nobody can be excluded public goods non-depletable, non-rival, non-excludable global environmental public goods: ozone layer protection, aspects of biodiversity

Free rider problem: little incentive for individual/country supply or protect public good-->market failure Free rider is somebody who benefits from good/service w/o paying for it. Free Rider: country declines to preserve large forest. As result, plan found that contains cure for cancer. Only forest country paid cost of preserving forest, but all countries share in benefits as free riders. Public bads: good that produces socially undesirable rsults, externalizes harms on future and current generations. ex. pollution/deforestation/pesticide use/excess water consumption 3. Global Externalities/spill overs a neg. externality: costs of production/consumption exprienced by people other than producer/consumer no compensation paid consumer not paying full cost to society of producing goods. Pirce too low, goods overproduced = market failure. Acid pppt (Acid rain) Burning of fossil fuels power plants ore smelting petroleum refineries motor vehicles sulfur and nitrogen oxide release (acid fog) sensitive areas and long dist. transport of acids Global ex.: acid rain from power plants 2 issues: externality aspect transboundary aspect too many polluting goods produced, leading to excessive resource use and damage across borders. Market failures at the Global level 1. Global commons and open access-potential over-harvesting and resource depletion 2. Global public goods under protected (services provided by ozone layer) 3. Global externalities transboundary resource damage (from pollution) Perverse subsidies: net effect reduces public welfare. (in fishing industry/agriculture)