Natural Resource Management in Developing Countries

1
Natural Resource Management in Developing
Countries

• Jim Murphy
• Rasmuson Chair of Economics

2
Natural resources, property rights
institutions

• Jim Murphy
• Rasmuson Chair of Economics

3
Whats this talk about?

• Managing the commons i.e., shared resources
• Tragedy of the Commons
• Small-scale, community-based systems of
  self-governance
• Prevalent in developing countries
• Lessons learned
• Insights from experimental economics

4
Some themes to look for take home messages

• The need for institutional diversity
• Importance of recognizing local knowledge, rules,
  norms, customs
• No one-size-fits-all panaceas

5
Intellectual roots of this talk

• Elinor Ostrom
• Political Scientist _at_ Indiana University
• Impossible to talk about the commons without
  mentioning Lin Ostrom
• My co-authors
• John Stranlund
• Juan-Camilo Cardenas
• Maria Alejandra Velez
• Maria Claudia Lopez

6
What is do I mean by the commons?

• Loose definition ? shared natural resources
• Characteristics
• Finite or limited resource
• Resource use subtracts from the stock
• If I catch a fish, then its not there for you
• Either
• 3a. Difficult to exclude users
• e.g, open access fisheries
• or
• 3b. Common ownership
• e.g., communal grazing lands
• ? no private property rights

7
Examples of common-pool resources

• Open-access fisheries
• Irrigation systems in developing nations
• Communal grazing lands
• Forests
• Internet bandwidth
• Earths atmosphere
• ability to absorb greenhouse gas emissions

8
Aristotle (384 BC 322 BC)

• For that which is common to the greatest number
  has the least care bestowed upon it. Every one
  thinks chiefly of his own, hardly at all of the
  common interest.

9
H. Scott Gordon (1954)

• If ocean resources are rich, why are fishermen
  poor?
• Why isnt this a problem with other natural
  resources?
• "overexploitation" in the fishery is, in
  reality, a manifestation of the fact that
  these natural resources are owned in
  common and exploited under conditions of
  individualistic competition.

10
Garrett Hardin (1968) Tragedy of the Commons

• Ruin is the destination toward which all men
  rush, each pursuing his own best interest in a
  society that believes in the freedom of the
  commons. Freedom in a commons brings ruin to all.

11
Gov. William Bradford (1623)

• When pilgrims settled in 1620, farmlands were
  owned in common
• Not by choice, imposed on them by investors
• By 1623, colony was having trouble feeding itself
• Theft increased, as did illnesses

• At length after much debate of things, I (with
  the advice of the chiefest among them) gave way
  that they should set corn every man for his own
  particular, and in that regard trust to
  themselves. ... And so assigned to every family a
  parcel of land.

12
Gov. William Bradford (1623)

• "This had very good success for it made all hands
  very industrious, so as much more corn was
  planted than otherwise would have been ...
• The first Thanksgiving celebrated the abundant
  harvest in 1623.

13
Many advocates for private property

• private property is the only institutional
  arrangement that will permit a society to be
  productive, peaceful, free, and just. (Hoover
  Institution)
• The only way to avoid the tragedy of the commons
  in natural resources and wildlife is . . . by
  creating a system of private property rights
  (RJ Smith 1981)
• These large amounts of land, with their
  attendant natural resources, will never yield
  their maximum benefit to Canada's native people
  as long as they are held as collective property
  subject to political management. . . Collective
  property is the path of poverty, and private
  property is the path of prosperity.   (Fraser
  Inst. 2002)

14
Types of property rights systems
Key point Advocating a single set of rules
(e.g., universality of ITQs) or broad
abstractions (e.g., centralization,
decentralization, privatization) can be the
problem not the solution.
15
Private property rights are not a panacea

• Some challenges with private property rights
• Difficulties defining the property rights
• Disputes over the allocation of property rights
• Limited enforcement
• Especially problematic in remote regions
• There are many examples of successfully managed,
  collectively owned, self-governing institutions
• Why do these exist?
• Why are some successful? (and others not)
• What lessons can be learned?

16
Törbel, Switzerland

• Private land holdings for agriculture
• Clearly familiar with / of private property
• Yetgrazing in communal alpine meadows
• Common property since 1483
• No problems with overgrazing
• 2 questions
• Why successful?
• Why common property?

17
Common property management in the Swiss Alps

• Limited access to citizens
• No outsiders land ownership did not
  automatically confer communal rights
• Wintering rule
• No more cows than one could feed over the winter
• Enforced with fines
• Rules voted on by citizens
• Not too different than a modern homeowners
  association

18
Why might common property make sense?

• Risk-pooling
• rainfall varies across region
• Economies of scale building infrastructure
• building, maintaining irrigation system
• Low productivity, large territory needed

19
Properties of long-enduring CPRs

• Local or regional scale within a single country
• Villages, watersheds
• Users have significant stake in resource
• Depend upon it for livelihood
• Common understanding about how the resource works
• How their actions affect the resource each
  other
• Social norms defining proper behavior
• Might not be formal rules
• Trust in others social capital

20
Properties of long-enduring CPRs (cont.)

• At least some local autonomy
• Engaged in decisions about resource management
• Rules aligned with resource characteristics
• Adapt quickly to changes
• Enforcement mechanism
• Monitoring behavior
• Sanction improper use
• People often more responsive to social sanctions
  than financial penalties
• Trust but verify

21
The problem with blueprints

• One size doesnt fit all
• Often fails to recognize local situation
• Ignores local knowledge, norms, customs
• Doesnt ask why there is common property to begin
  with.

22
Nepali irrigation systems

• Replaced primitive, farmer constructed irrigation
  systems with modern government owned canals
• Design focused on engineering. No effort to
  understand local rules and norms.
• ? New system less productive

23
Experiments

• Predictions about tragedy of the commons based on
  neoclassical economic model of rational,
  self-interested agents
• Model supported in open, competitive markets,
  esp. in industrialized societies
• Not always supported in field studies of local
  resource use
• Mix of motives
• Self-interested free-riders
• Reciprocators (conditional cooperators)
• Altruists (unconditional cooperators)
• Conformists

24
Some lessons learned from experiments

• Open access (no rules or property rights) leads
  to overexploitation
• When given opportunity, people will develop rule
  systems and punish noncompliance
• People often more responsive to social sanctions
  than financial penalties
• Weakly enforced rules imposed by external
  regulators can crowd-out intrinsic motivation
• Simply passing a law is not the same as creating
  an effective institution
• Substantial regional variability in
  responsiveness to formal and informal rules
• Need to understand local situation
• Relationship between formal regulations and
  informal rules likely to be community-specific

25
Take home messages

• Tragedy of the commons is not inevitable
• Many examples of long-enduring CPRs
• No single blueprint for success
• Need institutional diversity that reflects local
  conditions
• Blind adherence to a single set of principles can
  create problems, rather than solve them
• In social dilemmas, people often (not always!)
  engage in prosocial, or cooperative, behavior
• Need more robust model of choice than rational
  self-interest
• Challenges scaling up from local to global commons