Andy posted a nice piece here.Â Does private property protect natural capital?Â He provided a sophisticated economic analysis (and I like that!).Â Â Harvard’s Rob Stavins offers a concise account of how economists view these issues in this new paper.
In contrasting resources such as copper and trees, Stavins writes; “The irony is obvious: many nonrenewable natural resources, which are in finite supply, have not become more scarce over time, andÂ noneÂ has been exhausted; but renewable natural resources, which have the capacity to regenerate themselves, have in many cases become more scarce, and in some cases have indeed been exhausted, that is, become extinct. This irony can be explained by the fact that while most nonrenewable natural resources are characterized by well-defined, enforceable property rights, manyrenewable resources are held as common property or open access.”
We economists are consistent thinkers!Â Â Â Â There are 3 property rights regimes here;Â 1. private property, 2. common property with no government imposing barriers to entry and 3. government managing common property.Â We know that #2 will yield an ugly Tragedy of the Commons unless Elinor Ostrom rules that area.Â But, could #3 yield greener outcomes than #1?Â We would need to know what is the objective of government and how patient it is.Â We would need to know whether the government is able to monitor the workers in the field who actually implement the stated policies.Â In Andy’s example, the issue arises concerning why doesn’t the impatient asset owner simply sell to a more patient asset holder?Â This happens every day on Wall Street.Â
To rigorously test Andy’s hypothesis, we would need to run a field experiment such that private property rights are exogenously tightened or weakened and see if we observe a significant change in the extraction rate.Â An optimist would hope (in an Elinor Ostrom sense) that co-operation and social capital could be utilized to protect the commons (if the parcel of land has been randomly assigned from being private property to public property).Â