Common pool resources

Common-pool resource

In economics, a common-pool resource (CPR), alternatively termed a common property resource, is a particular type of good consisting of a natural or human-made resource system, the size or characteristics of which makes it costly, but not impossible, to exclude potential beneficiaries from obtaining benefits from its use. Unlike pure public goods, common pool resources face problems of congestion or overuse, because they are subtractable. A common-pool resource typically consists of a core resource, which defines the stock variable, while providing a limited quantity of extractable fringe units, which defines the flow variable. While the core resource is to be protected or entertained in order to allow for its continuous exploitation, the fringe units can be harvested or consumed.

The term "common property regime" refers to a particular social arrangement regulating the preservation, maintenance, and consumption of a common-pool resource. The use of the term "common property resource" to designate a type of good has been criticised, as common-pool resources are not necessarily governed by common property regimes.

Examples of common-pool resources include irrigation systems, fishing grounds, pastures, and forests. A pasture, for instance, allows for a certain amount of grazing to occur each year without the core resource being harmed. In case of excessive grazing, however, the pasture may become more prone to erosion and eventually yield less benefit to its users. Their core resource being vulnerable, common-pool resources are generally subject to the problems of congestion, overuse, pollution, and potential destruction unless harvesting or use limits are devised and enforced.

The use of many common-pool resources, if managed carefully, can be extended because the resource system forms a positive feedback loop, where the stock variable continually regenerates the fringe variable as long as the stock variable is not compromised, providing an optimum amount of consumption. However, wanton consumption leads to deterioration of the stock variable, thus disrupting the flow variable for good.

Common-pool resources may be owned by national, regional or local governments as public goods, by communal groups as Common property resources, or by private individuals or corporations as private goods. When they are owned by no one, they are used as open access resources. Having observed a number of common pool resources throughout the world, Elinor Ostrom noticed that a number of them are governed by common property regimes - arrangements different from private property or state administration - based on self-management by a local community. Her observations are in contradiction with claims that common-pool resources should be privatized as they necessarily will face destruction in the long run due to collective action problems leading to the overuse of the core resource (see: Tragedy of the commons).

Common property regime

Common property regimes arise in situations where appropriators acting independently in relationship to a common-pool resource generating scarce resource units would obtain a lower total net benefit than what is achieved if they coordinate their strategies in some way, maintaining the resource system as common property instead of dividing it up into bits of private property. Common property regimes typically protect the core resource and allocate the fringe through complex community norms of consensus decision-making. Common resource management has to face the difficult task of devising rules that limit the amount, timing, and technology used to withdraw various resource units from the resource system. Setting the limits too high would lead to overuse and eventually to the destruction of the core resource, while setting the limits too low would unnecessarily reduce the benefits obtained by the users.

In common property regimes there is no free access to the resource, and common-pool resources are not public goods. While there is relatively free but monitored access to the resource system for community members, there are mechanisms in place which allow the community to exclude outsiders from using its resource. Thus, in a common property regime, a common-pool resource has the appearance of a private good from the outside and that of a common good from the point of view of an insider. The resource units withdrawn from the system are typically owned individually by the appropriators. A common property good is rivaled in consumption.

Analysing the design of long-enduring CPR institutions, Elinor Ostrom (1990) identified eight design principles which are prerequisites for a stable CPR arrangement:

  1. Clearly defined boundaries
  2. Congruence between appropriation and provision rules and local conditions
  3. Collective-choice arrangements allowing for the participation of most of the appropriators in the decision making process
  4. Effective monitoring by monitors who are part of or accountable to the appropriators
  5. Graduated sanctions for appropriators who do not respect community rules
  6. Conflict-resolution mechanisms which are cheap and easy of access
  7. Minimal recognition of rights to organize (e.g., by the government)
  8. In case of larger CPRs: Organisation in the form of multiple layers of nested enterprises, with small, local CPRs at their bases.

Common property regimes typically function at a local level to prevent the overexploitation of a resource system from which fringe units can be extracted. There are no examples of common property regimes which solve problems of overuse on a larger scale, such as air pollution. In some cases, government regulations combined with tradable environmental allowances (TEAs) are used successfully to prevent excessive pollution, whereas in other cases - especially in the absence of a unique government being able to set limits and monitor economic activities - excessive use or pollution continue.


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