Design Principles of Robust Property-Rights Institutions: What Have We Learned?

Abstract

The problem of overuse of open-access resources was clearly articulated by Scott Gordon (1954) and Harold Demsetz (1967). Garrett Hardin (1968) speculated about the same problem, but stressed that the resource users themselves were trapped in tragic overuse and that solutions had to be imposed on them from the outside. Gordon, Demsetz, and Hardin ignited a general concern that when property rights did not exist related to a valuable resource, the resources would be overharvested.

Sufficient empirical examples existed where the absence of property rights and the independence of actors captured the essence of problems facing users of land-based commonpool resources that the empirical applicability of the theory was not challenged until the mid-1980s. The massive deforestation in tropical countries and the collapse of many ocean fisheries confirmed the worst predictions to be derived from this theory for many. Since harvesters are viewed as being trapped in these dilemmas, repeated recommendations have been made that external authorities must impose a different set of institutions on such settings. Predictions of overharvesting are also supported in the experimental laboratory when subjects make anonymous decisions and are not allowed to communicate with one another, but not when they are able to engage in face-to-face communication.

Keywords: property rights, open access