Common-pool Resource

             In economics, a common-pool resource (CPR), also called a common property resource, is a type of good consisting of a natural or human-made resource system (e.g. an irrigation system or fishing grounds), whose size or characteristics 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 (e.g. water or fish), 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.

            A common property regime is 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 criticized, because common-pool resources are not necessarily governed by common property regimes.

            Examples of common-pool resources include irrigation systems, fishing grounds, pastures, forests, water and the atmosphere. A pasture, for instance, allows for a certain amount of grazing to occur each year without the core resource being harmed. In the case of excessive grazing, however, the pasture may become more prone to erosion and eventually yield less benefit to its users. Because their core resources are 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 contradict claims that common-pool resources should be privatized or else face destruction in the long run due to collective actionproblems 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 complexcommunity 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, access to the resource is not free, 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 appears as a private good to an outsider and as a common good to an insider of the community. 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 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.

Critique

                A common pool resource is defined above by a set of characteristics, but a common property regime is an institution. The implicit idea is that certain resources may have a propensity to be governed by common property institutions. This concept has limited usefulness because it suppresses the co-evolution of resource scarcity and institutional governance. The most that economists have been able to show, according to Copeland and Taylor 2009, is that resource characteristics may be identified that lead an institution being eventually governed by one institution or another. Three forces determine success or failure in resource management: the regulator’s enforcement power, the extent of harvesting capacity, and the ability of the resource to generate competitive returns without being extinguished. The transition of resource governance from open access to common property to regulated private property is less well understood.

Ref : Wiki

Elinor Ostrom

 2009 Nobel Memorial Prize in Economic Sciences           

       

                            Elinor Ostrom (born August 7, 1933) is an American political scientist. She was awarded the 2009 Nobel Memorial Prize in Economic Sciences, which she shared with Oliver E. Williamson, for “her analysis of economic governance, especially the commons“.She is the first woman to win the prize in this category. Ostrom is on the faculty of both Indiana University and Arizona State University. She is the Arthur F. Bentley Professor of Political Science and Co-Director of the Workshop in Political Theory and Policy Analysis at Indiana University in Bloomington and Research Professor and the Founding Director of the Center for the Study of Institutional Diversity at Arizona State University in Tempe.

Education

                         Ostrom graduated from Beverly Hills High School in 1951 and then received a B.A. (with honors) in political science at UCLA in 1954. She was awarded an M.A. in 1962 and a Ph.D. in 1965, both from UCLA in political science.

Her Research

                         Ostrom is considered one of the leading scholars in the study of common pool resources. In particular, Ostrom’s work emphasizes how humans interact with ecosystems to maintain long-term sustainable resource yields. Common pool resources include many forests, fisheries, oil fields, grazing lands, and irrigation systems. She conducted her field studies on the management of pasture by locals in Africa and irrigation systems management in villages of western Nepal. Ostrom’s work has considered how societies have developed diverse institutional arrangements for managing natural resources and avoiding ecosystem collapse in many cases, even though some arrangements have failed to prevent resource exhaustion. Her current work emphasizes the multifaceted nature of human–ecosystem interaction and argues against any singular “panacea” for individual social-ecological system problems.

Ostrom identifies eight “design principles” of stable local common pool resource management:

1. Clearly defined boundaries (effective exclusion of external unentitled parties);
2. Rules regarding the appropriation and provision of common resources are adapted to local conditions;
3. Collective-choice arrangements allow most resource appropriators to participate in the decision-making process;
4. Effective monitoring by monitors who are part of or accountable to the appropriators;
5. There is a scale of graduated sanctions for resource appropriators who violate community rules;
6. Mechanisms of conflict resolution are cheap and of easy access;
7. The self-determination of the community is recognized by higher-level authorities;
8. In the case of larger common-pool resources: organization in the form of multiple layers of nested enterprises, with small local CPRs at the base level.

Nobel Prize

                              In 2009, Ostrom became the first woman to receive the prestigious Nobel Memorial Prize in Economic Sciences. The Royal Swedish Academy of Sciences cited Ostrom “for her analysis of economic governance,” saying her work had demonstrated how common property could be successfully managed by groups using it. Ostrom and Oliver E. Williamson shared the 10-million Swedish kronor (£910,000; $1.44 m) prize for their separate work in economic governance.

                              The Royal Swedish Academy of Sciences said Ostrom’s ‘research brought this topic from the fringe to the forefront of scientific attention’, “by showing how common resources—forests, fisheries, oil fields or grazing lands, can be managed successfully by the people who use them, rather than by governments or private companies”. Ostrom’s work in this regard, challenged conventional wisdom, showing that common resources can be successfully managed without government regulation or privatization .

Notable publications

• Governing the Commons: The Evolution of Institutions for Collective Action Ostrom, Elinor, Cambridge University Press, 1990
• Institutional Incentives and Sustainable Development: Infrastructure Policies in Perspective Ostrom, Elinor, and Schroeder, Larry, and Wynne, Susan, Oxford: Westview Press, 1993
• Rules, Games, and Common Pool Resources Ostrom, Elinor, and Gardner, Roy, and Walker, James, Editors, Ann Arbor, University of Michigan Press, 1994
• with Crawford, Sue E. S., “A Grammar of Institutions.” American Political Science Review 89, no.3 (September 1995): 582–600.
• A Behavioral Approach to the Rational Choice Theory of Collective Action: Presidential Address, American Political Science Association, 1997. Ostrom, Elinor. The American Political Science Review 92(1): 1–22. 1998
• Trust and Reciprocity: Interdisciplinary Lessons for Experimental Research, Volume VI in the Russell Sage Foundation Series on Trust, Elinor Ostrom and James Walker, Editors, Russell Sage Foundation, 2003
• Understanding Institutional Diversity Ostrom, Elinor, Princeton, Princeton University Press. 2005.
• Understanding Knowledge as a Commons: From Theory to Practice Ostrom, Elinor and Hess, Charlotte, Editors, The MIT Press, Cambridge, Massachusetts, 2006.
• Linking the Formal and Informal Economy: Concepts and Policies, edited with Basudeb Guha-Khasnobis and Ravi Kanbur (Oxford, UK: Oxford University Press, 2006; paperback published in 2007)