Property Rights

The standard economic definition
In standard economics, property rights refer to a bundle of entitlements defining an owner‘s rights, privileges, and limitations to the use of a resource. An efficient structure of property rights is said to have three characteristics: exclusivity (all the costs and benefits from owning a resource should accrue to the owner), transferability (all property rights should be transferable from one owner to another in a voluntary exchange) and enforceability (property rights should be secure from seizure or encroachment by others).

Conventional economic theory assumes that a resource owner with these three characteristics has a significant incentive to use that resource efficiently because a loss of value of this resource represents a personal loss. Also, clearly defining and assigning property rights should resolve environmental problems by internalizing externalities and relying on incentives for private owners to conserve resources for the future. However, this assumes that it is possible to internalise all environmental costs, that owners will have perfect information, that scale economies are manageable, transaction costs are bearable, and that legal frameworks operate efficiently. Strengthening markets and creating and strengthening property rights should – so the story goes – reduce such problems. We know that private owners discount the future, they value present revenue over future private and social benefits when they operate in a market system.

The different categories of property rights
Property rights come in many forms (Ostrom, 1990; Bromley, 1991; Heinsohn and Steiger, 2003), encompassing a few basic categories:

•  Private property rights are held by individuals and firms and can be transferred between them, most of the time through the exchange of money. Private property rights are the basis for markets to the point that markets cannot exist without them.
•  In state-property regimes, governments own and control property. This type of regime exists to varying degrees in all countries of the world. For example, parks and forests are frequently owned and preserved by governments. In communist countries, governments may own all resources. Problems can occur with state-property rights when the incentives of rule-makers for resource use diverge from the collective interest. For example, toxic and radioactive waste had accumulated in Russia by the year 2990 because central plans which established national priorities favoured growth over environmental protection.
• Common-property regimes refer to properties jointly owned and used by a specified group of co-owners through formal (specific legal rules) or informal (protected by tradition or custom) entitlements. While there are numerous very successful examples of common-property regimes such as Swiss alpine common property regimes, unsuccessful examples exist also. Population pressure and increased demand from outsiders undermines collective cohesion to the point where traditional rules became unenforceable leading to overexploitation of the resource and lower incomes for all.
• Open access regimes can be exploited on a first-come, first-served basis because no individual or group has the legal power to restrict access. The consequences of open access have become popularly known as what Hardin (1968) misleadingly called the tragedy of the commons.

The transition to a Western-type property system
The transition to capitalism has historically been preceded by land appropriation by large private landowners or by the state, through different kinds of enclosure movements – physical as well as legal. The English version of this process was defined by Polanyi (1944) as a revolution of the rich. During the 19th and 20th centuries, former colonial administrations introduced Western-type property rights in order to secure their access to natural resources. They often transformed customary common pool resources – such as forests – into state property. This phenomenon led to an unequal repartition of property rights allowing capitalist accumulation through the dispossession of community customary rights. A Western-type property regime is indeed central in the functioning of capitalism itself by standardizing the economic system, by fixing the economic potential of resources in order to allow credit and selling contracts, and by protecting (by armed force if needed) property and transactions.

Today, the approach of standard economics still emphasises the necessity to extend a Western-type property system to all kind of goods and services in order to ensure growth and even sustainability. Surprisingly, such policy is still frequently referring to Hardin‘s (1968) tragedy of the commons, based on the erroneous conflation of open access and commons. The important point is to achieve a correct match between institutions, and cultural and biophysical environments. Indeed, anthropological studies have shown that societies have often developed institutions regulating access rights to natural resources and duties between different community members in order to ensure the social functioning of the group and the management of natural resources (Berkes, 1999). Thus, the transformation of common pool resources into state and private property has often been socially unequal and ecologically unsustainable.