Common Property

1
Common Property

• Resource unit defined
• Well-delineated user group
• Multiple users
• Explicit rules of extraction

2
Why Common Property?

• Nature of resource
• Economies of scale
• Maintenance or capital demands
• Enforcement

3
The Example of water

• Common good aspects
• Competitive use
• Particular spatial distribution creates
  asymmetries
• Upstream-downstream
• Common pool technology differences lead to
  differential access
• Unequal political power
• International aspects compound problems

4
Debates about water

• Debate over nature of resource
• Symbolic aspects natural right
• Water as economic good
• Debate about most effective management strategies

5
Nature of resource debate

• Symbolic aspects natural right
• Open access?
• BUT
• Demographic growth
• Urbanization concentration of demand
• Agricultural intensification
• 70 of water used for irrigation
• Changing demands economic development
• Quality/quantity
• Health issues water borne diseases
• Pollution overuse and salinization

6
Nature of resource debate

• Water as commodity evaluate costs
• Supply costs exploitation, maintenance,
  investments
• Opportunity costs
• Externalities
• Goal promote efficiency and avoid "tragedy of
  commons" type outcome

7
Management problems

• How to balance equity issues raised by "right to
  water" approach with efficiency aspects raised by
  "water as commodity" view?

8
Example Central Asia
9
A view of the problem
Aral Sea 1985
Aral Sea 1997
10
Causes of shrinking Aral Sea

• Since 19e century, Russia, and later Soviet Union
  emphasized cash crops cotton and rice
• Reduce dependence on imports
• Acquire hard currency
• After 1960, consequence of policy was reduction
  in volume of water flowing to Aral Sea

11
Soviet system

• Quotas specifying quantities of water available
  for each region
• Exchange fossil fuels and energy for water
• Coordination by central government

12
Present context

• Water allocation is no longer a domestic issue
  within a centralized state but has become an
  international problem
• New source of conflict

13
Current management structure

• Almaty Agreement 1992
• Based on former Soviet allocation system
• Creation of interstate commission where decisions
  taken by consensus
• Establish quotas
• Assure their implementation

14
Management problems

• Maintenance of old Soviet system
• Not all states accept previous allocation
  criteria
• Favors richer downstream countries
• Enforcement problems quotas not respected
• Exchanges between energy and water have been
  maintained but also not always respected

15
Persisting common good problems

• Lack of information on quantities really
  available
• Thus cannot determine sustainable rate of use
• Costs of water use not distributed fairly
• Downstream users of Toktogul dam do not
  contribute to maintenance costs

16
Reaction

• After independence , Uzbekistan and Kazakstan
  introduced market prices for gas and coal.
• Kyrgyzstan couldn't pay increased electricity
  production to increase revenues
• But then the amount of water available for
  downstream irrigation in Uzbekistan and Kazakstan
  was also reduced

17
Response

• 2001 Kyrgyzstan passed law to regulate
  transborder water use
• Water belongs to state
• Has economic value
• Kyrgyzstan owns water "created" within it borders
• Users must pay

18
Water International efforts

• Dublin Conference and Rio Summit, 1992
• Broad often contradictory principles
• Slow definition of international water law UN
  Convention 1997 on non-navigational uses

19
Relevance of different property regimes to other
current environmental issues

• Confrontation of regimes is occurring
• South/North
• Common property characteristics of environmental
  resources
• Institutional solutions that adopt common
  property arrangements

20
Efficiency, the Environment and Property Rights

• What is efficiency in economic, social,
  environmental, and technical terms?
• Are they equivalent?
• What is the relation with property rights?
• Is the problem simple to solve?

21
Efficiency

• Economic and social efficiency use resources in
  such a way that they minimize costs and maximize
  profits
• Technical efficiency minimizing inputs with
  respect to outputs ? minimizing energy use
• There should not be any contradiction between the
  2 above
• If contradiction not internalized externality,
  ill defined property rights

22
The Coasian analysis

• Problem of property rights, efficiency and
  externalities raised by Coase
• Argument What matters is the overall cost and
  benefit
• Compensation schemes can be built around this
  principle
• It depends who has the biggest loss
• The issue can be resolved by negotiation
• All allocations based on Coasian principle
  optimal

23
What do property rights provide?

• Demsetz claims that they are an internalization
  of externalities
• Adjustment of property rights are an adjustment
  to externalities
• Example forced labor
• Property rights originate when there are
  environmental scarcities

24
Problems raised by Dasgupta and Heal

• Property rights are not created in a vacuum
• Problem often comes from partially defined
  property rights
• Coase and Demsetz assume symmetry which might not
  exist
• They implicitly assume unique equilibrium
• Problem Multiple equilibria

25
Multiple equilibria
26
Solutions

• In these cases, solutions have to be revealed to
  producers
• Sometimes solutions have to be imposed