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Design Principles of Robust Property Rights Institutions: What Have We Learned? 25 Elinor Ostrom

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Design Principles of Robust Property Rights Institutions: What Have We Learned? 25 Elinor Ostrom PROPERTY RIGHTS AND LAND POLICIES INGRAM Proceedings of the 2008 Land Policy Conference Edited by Gregory K. Ingram and Yu-Hung Hong HONG PRO roperty rights are fundamental to the conceptualization and implementation of sound land policies, which require a good understanding of how public and private property rights are conceived, applied, and balanced in different P PE institutional environments. To take stock of current research on this subject, the Lincoln Institute of Land RT Policy in June 2008 convened a group of international scholars from different disciplines including economics, law, political science, and planning to discuss their Y work on the nexus between property rights and land policies. The chapters and R commentaries in this book summarize the conference participants’ perspectives on the subject and are organized under three key themes: IGH — the linkages between the design principles for property rights institutions and the political and cultural histories in countries such as China, Estonia, Russia, the United States, and Vietnam; TS AND L — private property rights, the public interest, and compensation for eminent PROPERTY RIGHTS domain and regulatory takings in Brazil, Colombia, Mexico, the United States, and selected Western European countries; and — the effectiveness and fairness of using varied property rights approaches to reduce poverty, promote environmental conservation, and provide affordable housing. AND LAND POLICIES Chapter authors: AND R. Jerome Anderson • Antonio Azuela • Abraham Bell • Dallas Burtraw • Stephen B. Butler • Klaus Deininger • Keri-Nicole Dillman • Joseph K. Eckert • Robert C. Ellickson • Gershon Feder • Edésio Fernandes • Lynn M. Fisher • Harvey M. Jacobs • Jerold Kayden • Gerald Korngold • Elinor Ostrom • P Dwight H. Perkins • Vincent Renard • Bertrand Renaud O Gregory K. Ingram is president and CEO of the Lincoln Institute of Land Policy LI and cochair of the Department of International Studies. C Yu-Hung Hong is a fellow at the Lincoln Institute I of Land Policy and a visiting assistant professor at E Massachusetts Institute of Technology. S Edited by Gregory K. Ingram and Yu-Hung Hong Property Rights and Land Policies Edited by Gregory K. Ingram and Yu-Hung Hong © 2009 by the Lincoln Institute of Land Policy All rights reserved. Library of Congress Cataloging-in-Publication Data Property rights and land policies / edited by Gregory K. Ingram and Yu-Hung Hong. p. cm. Includes index. ISBN 978-1-55844-188-0 1. Land tenure. 2. Land use. 3. Real property. 4. Eminent domain. I. Ingram, Gregory K. II. Hong, Yu-Hung. III. Lincoln Institute of Land Policy. HD1251.P77 2008 333.3—dc22 2009002563 Designed by Vern Associates Composed in Sabon by Achorn International in Bolton, Massachusetts. Printed and bound by Puritan Press Inc., in Hollis, New Hampshire. The paper is Rolland Enviro100, an acid-free, 100 percent PCW recycled sheet. manufactured in the united states of america CONTENTS List of Illustrations ix Preface xi Introduction 1 1.Examining Land Policies from a Property Rights Perspective 3 Gregory K. Ingram and Yu-Hung Hong The Design and Evolution of Property Rights Institutions 23 2.Design Principles of Robust Property Rights Institutions: What Have We Learned? 25 Elinor Ostrom 3.U.S. Private Property Rights in International Perspective 52 Harvey M. Jacobs 4.China’s Land System: Past, Present, and Future 70 Dwight H. Perkins commentary 93 Scott Rozelle 5. Property Rights and Real Estate Privatization in Russia: A Work in Progress 96 Bertrand Renaud, Joseph K. Eckert, and R. Jerome Anderson commentary 134 Robert M. Buckley 6. Developing Land Markets Within the Constraint of State Ownership in Vietnam 137 Stephen B. Butler commentary 175 Annette M. Kim vi Contents Public Compensations for Takings 179 7. The Use of Eminent Domain in São Paulo, Bogotá, and Mexico City 181 Antonio Azuela commentary 200 Vicki Been 8. The Myth and Reality of Eminent Domain for Economic Development 206 Jerold S. Kayden commentary 214 John D. Echeverria 9. Property Rights Protection and Spatial Planning in European Countries 216 Vincent Renard commentary 230 Barrie Needham 10. Should Decreases in Property Value Caused by Regulations Be Compensated? 232 Abraham Bell commentary 251 Perry Shapiro Property Rights Approaches to Achieving Land Policy Goals 255 11. Land Registration, Economic Development, and Poverty Reduction 257 Klaus Deininger and Gershon Feder commentary 292 Alain Durand-Lasserve Contents vii 12. Looking Beyond Land Titling and Credit Accessibility for the Urban Poor 296 Edésio Fernandes commentary 314 Ernesto Schargrodsky 13. Property Rights Created Under a Federalist Approach to Tradable Emissions Policy 317 Dallas Burtraw and Richard Sweeney commentary 355 Wallace E. Oates 14. Private Conservation Easements: Balancing Private Initiative and the Public Interest 358 Gerald Korngold commentary 378 Nancy A. McLaughlin 15. The Role of Private-Sector Developers in Challenges to Local Land Use Regulations 384 Keri-Nicole Dillman and Lynn M. Fisher commentary 413 Alexander von Hoffman 16. The Mediocrity of Government Subsidies to Mixed-Income Housing Projects 418 Robert C. Ellickson commentary 449 Ingrid Gould Ellen Contributors 453 Index 457 About the Lincoln Institute of Land Policy 485 2 Design Principles of Robust Property Rights Institutions: What Have We Learned? Elinor Ostrom The Problem of Open Access 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 from the outside. Gordon, Demsetz, and Hardin ignited a general concern that when property rights related to a valuable resource did not exist, the resources would be over- harvested. Because of the existence of sufficient empirical examples of the problems fac- ing users of land-based common-pool resources given the independence of actors in the absence of property rights, the empirical applicability of the theory was not challenged until the mid-1980s. For many observers, massive deforestation in trop- ical countries and the collapse of many ocean fisheries confirmed the worst predic- tions to be derived from this theory (Hutchings 2000; Jackson et al. 2001; Rudel 2005). Since harvesters are viewed as being trapped in these dilemmas, repeated demands that external authorities impose a different set of institutions on such settings have been made. Predictions of overharvesting have also been supported in the experimental laboratory when subjects made anonymous decisions and Support from the National Science Foundation and from the Lincoln Institute of Land Policy is gratefully acknowledged. The research help of Michael Cox; the excellent comments by Yu-Hung Hong, Gregory K. Ingram, and Prakash Kashwan; and the outstanding help of Patty Lezotte are also greatly appreciated. 25 26 Elinor Ostrom were not allowed to communicate with one another, but not when they were able to engage in face-to-face communication (Ostrom, Gardner, and Walker 1994). Solving the Problem by Recommending Optimal Institutions Many policy analysts have recommended a single optimal policy for solving the open-access problem. Some recommended private property as the most efficient form of ownership, as did Demsetz himself (Posner 1977; Raymond 2003). Oth- ers recommended government ownership and control (Lovejoy 2006; Terborgh 1999, 2000), even though it is difficult for a bureaucracy to make rational deci- sions given the high level of uncertainty involved in most resources (Whitford 2002). Grafton (2000) made a more nuanced argument for the state in governing resources, sometimes as the owner of a resource and sometimes providing good backup to those engaged in collective action. Theorists frequently implicitly as- sumed that regulators would act in the public interest and that they knew how ecological systems work and how to change institutions so as to induce socially optimal behavior (Feeny, Hanna, and McEvoy 1996, 195). Unfortunately, many of the recommended optimal institutions are little more than stylized figures based on the underlying simple models that Gordon and Demsetz developed. Colin Clark (2006, 15) reflected on the power of these simple models to clearly illustrate the deep problems of overharvesting. The underlying “stick figures,” however, are too simplistic for analysis that adequately captures the dynamics of all common-pool resources. Applying rules that bring the costs of harvesting up to the level that would induce sustainable yield is a simple solu- tion when modeling, but not at all simple when faced with the complexity of field settings. Self-Organized Development of Property Rights The possibility that the users of a resource would find ways to organize them- selves was not considered in most economics, natural resource, and property rights literature until the last three decades. Organizing so as to create rules that specify rights and duties of participants creates a public good for those involved. Everyone included in the community of users benefits from this public good, whether they contribute or not. Getting “out of the trap” is itself a second-level social dilemma. Investing in diverse mechanisms to increase the likelihood that participants follow the rules they make also generates a public good. These in- vestments represent a third-level social dilemma. Since the initial problem
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