|-e;'s-IJI;1|-L -~ - -; - I- ^ ~~~~~14 13 1 Public Disclosure Authorized PROPERTYRIGHTS ANDTHE ENVIRONMENT Public Disclosure Authorized SOCIALAND ECOLOGICAL ISSUES Public Disclosure Authorized Editedby SusanHanna and MohanMunasinghe Public Disclosure Authorized The BeijerInternational Institute of EcologicalEconomics v and The World Bank r< r:-Y- Property Rights and the Environment Social and Ecological Issues Edited by Susan Hanna and Mohan Munasinghe Beijer International Institute of Ecological Economics and The World Bank Copyright © 1995 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W. Washington, D.C. 20433U.S.A. This publication may be reproduced in whole or in part and in any form for educational or nonprofit uses, without special permission from the copyright holder, provided acknowledgment of the source is made. Copies may be sent to the Environment Department, The World Bank, 1818H Street N.W., Washington, D.C. 20433,U.S.A. and to the Beijer International Institute of EcologicalEconomics, the Royal Swedish Academy of Sciences, P. 0. Box 50005,S-10405, Stockholm, Sweden. No use of this publication may be made for resale or other commercial purpose without the prior written permission of the copyright holders. The designations of geographical entities in this book, and the presentation of materials, do not imply the expression of any opinion whatsoever on the part of the World Bank or the Beijer Institute concerning the legal status of any country, territory, or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. The interpretations and conclusions in this report are those of the authors and do not necessarily represent the views of the World Bank or the Beijer Institute. ISBN0-8213-3415-8 CONTENTS Foreword ............................................ v About the Contributors ............................................... vii Introduction ............................................... 1 1. An Introduction to Property Rights and the Environment ...................... 3 Susan Hanna and Mohan Munasinghe Overview .............................................. 13 2. Property Rights and Environmental Resources ............................. 15 Susan Hanna, Carl Folke, and Karl-Goran Maler Governance .............................................. 31 3. Designing Complexity to Govern Complexity .33 Elinor Ostrom 4. Distributed Governance in Fisheries .47 Ralph E. Townsend and Samuel G. Pooley 5. Efficiencies of User Participation in Natural Resource Management .59 Susan Hanna 6. The Management of Transboundary Resources and Property Rights Systems: The Case of Fisheries ........................ 69 Veijo T. Kaitala and Gordon R. Munro Equity and Stewardship .................................................. 85 7. Building Equity, Stewardship, and Resilience into Market-Based Property Rights Systems ............................... 87 Michael D. Young and Bonnie J. McCay Traditional Knowledge ................................................ 103 8. Analysis of Earth Summit Prescriptions on Incorporating Traditional Knowledge in Natural Resource Management ................... 105 Biliana Cicin-Sain and Robert W. Knecht Linking Mechanisms ................................................ 119 9. Mechanisms that Link Property Rights to Ecological Systems ................ 121 Carl Folke and Fikret Berkes iii iv PROPERTY RIGHTS ANDTHE ENVIRONMENT Poverty and Population ................. 139 10. Poverty, Population, and the Environment ............................... 141 Partha Dasgupta FOREWORD Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. In consequence they structure incentives in human exchange, whether political, social, or economic. Institutional change shapes the way societies evolve through time and hence is the key to understanding historical change. Douglas North, Nobel Prize Laureate 1993 in Institutions, Institutional Change and Economic Performance Cambridge University Press, 1990 When analyzing environmental problems, economists have traditionally searched for ways of extending the rules of social cost-benefit analysis so as to include the environmental side effects associated with investment projects. This they have done by estimating the "economic" value of side effects. Such side effects are often called "externalities" in the economics literature. Economists have also studied the efficacy of various policy instruments-such as the taxation of resource use or the use of tradeable permits for environmental pollution-for directing economic activity in decentralized economic environments. Recently economists have inquired into the environmental side effects of macroeconomic policies.' However, a more fundamental question, concerning the nature of the institutions of society that shape the use of environmental resources, has only recently begun to be studied. One such program of research, conducted at the Beijer International Institute of Ecological Economics, on the ecology and economics of biodiversity loss, explored the notion that a significant cause of much biodiversity loss lies in inadequate institutions, in particular, ill- defined property rights.2 It was a natural next step for the Institute to launch a more general program of research on property rights and environmental resources. Towards this end, the Institute was fortunate to receive generous economic support from the MacArthur Foundation in Chicago. Subsequently, this support was augmented by the World Bank's Vice Presidency on Environmentally Sustainable Development. This enabled the two institutions to work together in what we believe to be a vital area of concern. We are particularly grateful to Professor Susan Hanna of Oregon State University (also Director of the Property Rights Programme at the Beijer Institute), and to Dr. Mohan Munasinghe of the Environment Department of the World Bank (also Fellow of the Beijer Institute) for the able manner in which they have developed the joint program of activities and produced these two volumes. Muqh remains to be done on the design of institutions that would improve upon the current patterns of use of environmental resources. For example, we need to better understand the relationship between various property rights regimes and the speed and direction of technological change because the use of environmental resources is greatly shaped by the technologies in operation. Future programs, both at the Beijer Institute and the World Bank, will hopefully address these issues. I. See M. Munasinghe and W. Cruz, Economywide Policies and the Environment (Washington, D.C.: World Bank, 1994). 2. For an overview of this research program, see the special issue of Ambio 1993, and E. Barbier, J. Burgess, and C. Folke, Paradise Lost (London: Earthscan, 1994). v Vi PROPERTYRIGHTS AND THE ENVIRONMENT The subject of property rights covers a wide field, as reflected in these volumes. The relevance of property rights for any study of environmental problems should be self-evident. Nevertheless, the bulk of the efforts that have been made to date for improving the state of the environment in developing countries has been devoted to a support of appropriate investment projects. It is time to place more emphasis on aid that is directed at improving the institutional framework within which resources are used. Indeed, institutional reforms that are aimed at a better management and use of environmental resources should now complement those reforms that are usually called structural adjustment programs. These two volumes should be read with this background in mind. Ismail Serageldin Partha Dasgupta Karl-Goran Maler Vice President Chairman of the Board Director Environmentally Sustainable Beijer International Institute Beijer International Institute Development of Ecological Economics of Ecological Economics The World Bank Stockholm Stockholm Washington, D.C. ABOUT THE CONTRIBUTORS Fikret Berkes is Professor and Director of the Institute of Ecological Economics, the Royal Natural Resources Institute, University of Mani- Swedish Academy of Sciences. Her research toba. His research interests include common areas are fishery economics, natural resource property resources, applied ecology, and ecolog- management, economics of common property ical economics. He has been fascinated for a resources, and the economic history of marine long time with the interface between natural resource use. systems and social systems, and reports in this volume on a research project that spans over VeiJoT. Kaitala is a Senior Research Fellow of twenty years in the James Bay area of Canada. the Academy of Finland at the Systems Analysis Laboratory of the Helsinki Institute of Technol- Biliana Cicin-Sain is Professor and Co-Director ogy. His fields of interest are environmental of the Center for the Study of Marine Policy at economics, environmental and ecological sys- the University of Delaware, and Co-Editor-in- tems analysis, and modeling. He has studied Chief of the international journal Ocean and dynamic game theory models of international Coastal Management. She has written exten- negotiations on resource management and the sively on a wide range of marine policy studies, environment since the early 1980s. including fisheries management, marine mam- mal management, offshore oil development, Robert W. Knecht is Professor and Co-Director multiple use conflicts, and international marine