The Variety of Property Systems and Rights in Natural Resources

In this paper, Daniel H. Cole and Elinor Ostrom examine the current state of property theory relative to the impressive range, scope, and depth of recent social-scientific investigations into real-existing property systems. Property theory remains dominated by what Thráinn Eggertsson (1990, ch.8) has called the “naïve” theory, according to which private property rights emerge and proliferate at some stage in a society’s socioeconomic development in order to reduce externalities, transaction costs, and overexploitation of scarce resources that otherwise would be subject to an inexorable “tragedy of the commons” (following Demsetz 1967; Hardin 1968). However attractive that naïve theory of property rights might be, the simplistic story it tells of a unilateral progression toward private property, resulting in optimal (or, at least, maximal) resource conservation, is not consistent with the empirical evidence.

We do, of course, find a great deal of private property virtually everywhere. In many cases, private property does successfully conserve resources over long periods of time. However, when we examine property systems around the world we find an almost bewildering variety of property systems in use, often involving complex mixtures of private, common, and public rights (and duties), which sometimes fail but often succeed in conserving resources over long periods of time. Neither the naïve theory of property nor any other existing theory explains the wealth of property systems found in the world. Thus, this paper concludes with a call for more complex and realistic theories of property to keep pace with lessons from the social sciences.

This paper was presented at the Lincoln Institute’s conference entitled “Evolution of Property Rights Related to Land and Natural Resources” in 2010 and is Chapter 2 of the book Property in Land and Other Resources, edited by Daniel H. Cole and Elinor Ostrom.