Developing property rights

Clarifying property rights
Defining property rights

Description

Providing property rights to users designates responsibility for stewardship or ownership; this provides long-term security of use and may reduce misuse and lead to sustainable use of those resources.

Context

People tend to overuse resources such as forests, pastureland and fishing grounds to which they have open access and for which they have no designated responsibility. Government nationalization which seeks to eliminate open access can result in similar forms of resource abuse as a result of local non-ownership. Whilst there is a tendency to believe that public ownership and management is better than private or community control from the point of view of resource management, a case can be made for the reverse when the costs of resource degradation are borne largely by the resource "owner". Government policies that clarify and enforce property rights tend to encourage private investment in environmental protection, which reduces the financial requirements of government actions. While clarifying rights of ownership and use is no panacea, it has been shown to improve environmental outcomes, especially where those who invest in environmental protection would also benefit the most.

Even for natural resources other than land – minerals, trees and fish – if property rights are clearly defined, the self-interested decisions of owners have an incentive to maintain the quality of the resource, and thereby produce more desirable environmental outcomes than will open access. Private loggers on plantation forests, for instance, will weigh the returns from cutting trees today (including the accrued interest from investing these revenues) against future revenues, looking at price trends and the expected growth of timber yields.

Counter-claim

The assignment of property rights is not always a good instrument to accomplish environmental policy objective, however. The assignment of property rights could create a monopoly, or it may be impossible for a private owner to monitor the use of the resource by others and therefore charge the appropriate price. Also, many environmental assets have a "public good" quality to them so it is not efficient to charge prices for enjoying the asset in some of its uses. An example is a watershed that serves a large and difficult to identify downstream population. Finally, in some cases, effective common ownership of resources exists, such as in the forests of Japan, or in the pastures of the Swiss Alps. In these cases, actions that undermine the system by which common owners allocate the exploitation of the resource need to be avoided.