The Economics of Common Pool Resources

neither the state nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resource systems[1]

From the unassuming eyes a 21st century individual, everything has an owner. When we view an object or a resource we naturally seek an owner, and hence the property rights associated. These well-defined and widely-accepted property rights make our decisions easier – we know who to ask for access, who to sue for damages and who has control.

Yet, some resources have no ownership; for example, a river. The valuable flow of water during a drought, the fish swimming in it, the air sitting above it – who do we turn to in this situation? These are known as Common Pool Resources (CPR), and present an interesting and valuable debate. The issue with CPRs is that while individuals have the self-interest to withdraw large amounts from the resource, this will quite often lead to a depletion and destruction of the resource stock itself. If, when making their individual decisions, appropriators do not take into account the interdependence of the situation, everyone loses.

Elinor Ostrom sought to deal with these CPRs in her 1990 book[2]; including their governance, management and in particular the institutional structures that evolved. Through analysis of various case studies (of both long-enduring and failed CPR institutional arrangements), Ostrom is able to define 8 design principles she sees are crucial to the successful management of CPRs in practice.

There are two general policies when faced with CPRs: use coercive state force, or privatise the resource. The former involves government intervention to protect the resource. The latter focuses on allocating property rights to various individuals, who will enforce and regulate the asset. Both of these options assume that the appropriators have little ability to undertake collective action for the common good.

An often ignored option is the possibility of collective action between the appropriators. A troubling implication of CPRs is that while individuals are making an independent decision, it is of benefit for all parties if the decision is made interdependently. Ostom’s discussion focuses on those situations, some of which have occurred for many centuries, where the appropriators develop institutional arrangements to manage their resource. The important outcomes of these institutions are the both the development of specific rules, and the monitoring and sanctioning of these rules.

Once the idea of common resources is in your head, you can barely help but notice new applications in everyday life. Ostrom’s design principles extend much further than natural resources. The rapid increases in technology and communication over previous decades have continually blurred the lines. The current focus of my PhD is mapping innovation as a commons.

Innovation is a private activity that can lead to a public good, and therefore has important society-wide implications. As with the discussion above, current general policy prescriptions focus on intellectual property law (privatising), and public funding via subsidy (state power). As with natural resources, what if there is a third option, collective action? My research focuses on where, when and why innovation commons emerge as a solution to the collective action problems faced.

[1] Governing the Commons (1990), Elinor Ostrom, page 1

[2] Governing the Commons (1990), Elinor Ostrom

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