EconPort - Solutions to the Problems of the Commons

In the introduction, the two main kinds of solutions to commons problems were outlined -- government, or public solutions, and private solutions. In this section, we detail them further in the following order:

Government Solutions

Since the publication of Mancur Olson's landmark book, The Logic of Collective Action, in 1965, traditional economics has held that no self-interested person would contribute to the production of a public good, or, in this case, the maintenance of a commons. Olson went on to say that: "Unless the number of individuals in a group is quite small, or unless there is coercion or some other special device to make individuals act in their common interest, rational, self-interested individuals will not act to achieve their common group interests" -- also called the "zero contribution" thesis. In fact, it is as if all members of society or the group in question are playing an n-person Prisoner's Dilemma game, where the Nash equilibrium strategy leads to an undesirable outcome.

Sounds pretty straightforward, right? An open-and-shut case; the best way to deal with a problem of the commons was to put the government -- local, state, federal -- in charge, and fund the commons by raising taxes -- Olson's "coercion". Rules need to be externally enforced, for people to act in their own long-term best interest.

Indeed, government solutions are widely accepted, and in many cases, even a so-called private solution is actually somewhat mixed -- the auctioning of radio and mobile-phone spectrum is an example. It is the government which auctions the right to use the airwaves, which are public or common property, and keeps the proceeds from the auction. Any firm who desires to use the airwaves for a radio broadcast must purchase the rights from the government.

However, field research has shown that often, government policy can hinder private solutions to commons problems. Experimental research has also shown that external rules and monitoring can crowd out cooperative behavior.

For example, in the case of fisheries, efforts to combat overfishing by regulating the number of fish a single trawler can catch have often led to trawlers restricting their catch to only one kind of fish, & throwing back all other kinds that have the misfortune to get caught in their nets. The number of fish being killed is not reduced; if anything, it is only higher.

Private Solutions

Private solutions to commons problems tend to involve the evolution of norms or institutions among the group of people involved. Social norms can work towards generating cooperative behavior, sometimes achieving a solution almost, or as good as the public one. Also, norms seem to have more staying power than externally imposed rules, most probably because they are developed by, and within a community. The following factors have been identified as being conducive to, or detrimental to endogenous collective action:

The type of production & allocation functions
The predictability of resource flows
The relative scarcity of the good
The size of the group
How heterogenous the group is (more heterogenous groups find it easier to provide public goods, since it is likely that there will be at least a few people whose utility from the good is high enough that they will provide it even if all the others free-ride)
The dependence of the group on the good
The level of common understanding within the group
The size of the total cllective benefit
The marginal contribution by one person to the collective good
The size of the temptation to free-ride
The loss to cooperators when others do not cooperate
Whether people have a choice of participating or not
The presence of leadership
Past experience & level of social capital
The autonomy to make binding rules

Design principles of successful self-organized resource regimes

The presence of clear boundary rules: a defined set of relationships, so people know with whom to cooperate; who can withdraw from the resource & who can't
Allocating benefits proportional to required inputs
Local rules restricting the amount, timing, & technology of harvesting the resource, designed by the users
Enforcement is by local users, who are accountable to the community itself
Sanctions for rule violations are graduated

All these rules need to be crafted taking local conditions into account.

Case study: Irrigation systems

Bardhan (1990) studied 48 irrigation systems in India, & found that the quality of maintenance of canals was significantly lower when farmers perceived that the rules were made by a local elite. Also, wherever a government agency determined where & how the water was to be allocated, rules were frequently violated, & farmers tended to contribute less to the village fund. On the other hand, when the rules were crafted by the farmers themselves, they had a far more positive attitude towards them.

Ray & Williams (1999) also found that the deadweight loss from upstream farmers stealing water on government-owned irrigation systems in Maharashtra state, in India, approaches one-fourth of the revenues that could be earned using an efficient water allocation & pricing scheme.

Case study: Fisheries

Fisheries are among the most severely overused common resources in the world -- overfishing has already endangered numerous fish populations, including salmon in the North Atlantic. After all, the fish swim where they please, and the trawlers follow them on the open sea, making monitoring next to impossible. As mentioned earlier, restrictions imposed on the number of fish a single trawler can catch (largely used in Canada) have been counter-productive.

[Note: Due to the author's love of seafood, this is an intensely personal topic for her. She does not wish for it to vanish from store shelves within her lifetime, or even become prohibitively expensive. This note is therefore potentially short on objectivity.]

Farming most open-sea fish is infeasible for the simple reason that it's not easy to restrict fish to a particular area. Shrimp farming in China and South-East Asia has had some moderate success, and is certainly a step in the right direction. (To see why, consider the fact that cows and chickens are in no danger of extinction, despite the millions that end up on dinner plates every day. They are privately owned, and their owners have a personal interest in making sure their numbers remain high.)

Small local communities have, however, had some success at privately managing their fish stocks. The Chisasibi Cree of Quebec, Canada, have devised a set of entry & authority rules related to the fish stocks of James Bay (and also the beaver stock in their defined hunting territory). These rules take the form of social & religious norms, implying a loss of favor from the animals & social disgrace for violators. Since the rules meet shared concepts of fairness & are designed by the community, the members of the tribe are willing to abide by them.

An even more interesting case is that of lobstermen in Maine. By the mid-1990s, lobster populations off the coast of Maine had dropped alarmingly low, so a system of "co-management" was put in place. Government scientists set goals for the state's lobster population, & the lobstermen then decided how to reach them. According to the rules they have designed, any female bearing eggs, & any lobsters either smaller or larger than a predetermined size are tossed back into the water. The "eggers", as they are called, are released so as to breed a new generation of lobsters; the smaller ones are allowed to grow and mate; experiments have shown that the jumbo lobsters tend to have the best genes -- the males are preferred as breeding partners by the females, and jumbo females produce more eggs. Keeping them alive improves the quality and quantity of the next generation. Of course, this strategy works with lobsters because neither the traps nor the short period of time out of water, in the boat, kill or harm them.

As a result of these rules, Maine's lobster population has climbed sharply -- the 2003 season saw a haul more than two and a half times the 1945-85 average -- despite the fact that the number of lobster traps has increased from 2m in 1990 to 3m today. One additional reason for the success of the plan is the decrease in the population of "bottom-feeding" fish, which prey on young lobsters -- Maine's catch of cod plummeted by 70 percent in the 1990s, since they continue to be overfished. However, that does not account for all of the growth in lobster numbers -- the communities of
lobstermen tend to be small, & social ostracism is a very powerful sanction in close settings, leading to almost no violation of the rules.

References

Bardhan, Pranab. 1999. "Water Community: An empirical analysis of Cooperation on Irrigation in South India." Berkeley: University of California, Department of Economics, working paper
Berkes, Fikret. 1987. "Common Property Resource Management and Cree Indian Fisheries in Subarctic Canada," in The Question of the Commons: The Culture and Ecology of Communal Resources. Bonnie J. McCay & James Acheson, eds. Tucson: University of Arizona Press, pp.6691
"Claws! Lobsters in Maine", The Economist, August 19, 2004
Ostrom, Elinor. 2000. "Collective Action and the Evolution of Social Norms". Journal of Economic Perspectives. 14, no. 3, 137-159.
Ray, Ishar and Jeffrey Williams. 1999. "Evaluation of Price Policy in the Presence of Water Theft." American Journal of Agricultural Economics. November, 81, pp. 928-941.