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Property Rights and Collective Action in Natural Resources with Application to Mexico

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Property Rights and Collective Action in Natural Resources with Application to Mexico. Lecture 1: Introduction to the political economy of natural resources ... – PowerPoint PPT presentation

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Title: Property Rights and Collective Action in Natural Resources with Application to Mexico


1
Property Rights and Collective Action in Natural
Resources with Application to Mexico
  • Lecture 1 Introduction to the political economy
    of natural resources
  • Lecture 2 Theories of collective action,
    cooperation, and common property
  • Lecture 3 Principal-agent analysis and
    institutional organization
  • Lecture 4 Incomplete contracts with application
    to Mexico
  • Lecture 5 A political economy model
  • Lecture 6 Power and the distribution of benefits
    with application to Mexico
  • Lecture 7 Problems with empirical measurement
    with application to Mexico
  • Lecture 8 Beyond economics An interdisciplinary
    perspective

2
Outline
  • Types of goods common pool resources
  • Tragedy of Commons
  • Prisoners Dilemma
  • Collective action (Ostrom 1990)
  • Mexican forestry policy
  • Profile of Mexican community forestry

3
Models of natural resource problems
  • Tragedy of commons
  • Prisoners Dilemma
  • Olsons Logic of Collective Action (1965)

4
Who will provide, use and maintain resource?
  • Depends on type of good
  • Is the good excludable?
  • Is the good rival?

5
THE DIFFERENT KINDS OF GOODS
  • Excludability
  • a person can be prevented from using it.
  • Rivalry in consumption
  • one persons use diminishes other peoples use.

6
Common Resources
  • Tend to be
  • Rival
  • Nonexclusive
  • Examples
  • Fisheries
  • Water routes
  • The environment

7
The Free Rider
  • Arises from the exclusion problem.
  • A free-rider is a person who receives the benefit
    of a good but avoids paying for it. Each person
    hopes other will pay for it.

8
Tragedy of the Commons
  • The free rider problem with common resources
  • Common resources tend to be used excessively when
    individuals are not charged for their usage.

9
Tragedy of the Commons
  • The parable (Hardin 1968)
  • A herdsman puts his animals on the pasture he
    uses in common with other herdsmen. Even though
    signs exist of pasture degradation with
    overstocking, it is rational for each herdsman
    to add more animals because he gains full
    benefits of each extra animal while sharing costs
    of overgrazing with other herdsmen. .. Freedom
    in the commons brings ruin to all.

10
Free Rider Problem and Common Pool Resources
  • Will anyone have adequate incentive to restrain
    themselves in the appropriation and provision of
    common pool resources?

11
The Prisoners Dilemma
Bonnie s Decision
Confess
Remain Silent
Confess
Clydes
Decision
Remain
Silent
12
A Common-Resource Game
Exxon

s Decision
Drill Two Wells
Drill One Well
Drill Two
Wells
Chevrons
Decision
Drill One
Well
13
Prisoners Dilemma
  • Shows how cooperation breaks down
  • Noncooperation is dominant strategy
  • Cannot get to Pareto optimal outcome
  • Premises
  • Narrow view of individuals one-shot game
  • Depends on uncertainty regarding others actions

14
Olsons Logic of Collective Action (1965)
  • Groups do not just form
  • Unless the number of individuals is quite small
    or unless there is coercion or some special
    device to make individuals act in their common
    interest, rational, self-interested individuals
    will not act to achieve their common or group
    interests.

15
Olsons Logic of Collective Action (1965)
  • Premise
  • Free rider
  • Inability to exclude
  • How form groups
  • Individual incentives
  • Smaller or medium sized groups have it easier
  • External actor like an entrepreneur
  • Something else

16
Ostroms revolution (1990)
  • How explain institutions that exist (informal and
    formal rules, customs, norms, laws) that govern
    common pool resources
  • Open access versus common property
  • Property implies an institution has been created
  • Not PD game or TOC
  • Collective action problem
  • How, when, why institutions emerge and evolve to
    govern common pool resources?

17
3 puzzles for collective action
  • Supply of institutions
  • How overcome free rider problem?
  • Credible commitments
  • How believe that rules will be followed in LR?
  • Mutual monitoring
  • Cost to monitors, so will they report?

18
Classical means of collective action(a) Theory
of firm
  • Entrepreneur realizes an opportunity (supply)
  • Negotiates contracts with others (supply)
  • Individuals induced to participate (credible
    commitments)
  • Entrepreneur makes a take-it-or-leave-it offer
    (credible commitments)
  • Keeps residual profits/losses (supply, credible
    commitments)
  • Entrepreneur monitors performance and can fire
    agents (monitor)
  • Supply of institutions
  • Credible commitments
  • Mutual monitoring

19
Classical means of collective action (b) Theory
of state
  • Political entrepreneur (supply)
  • Ruler gets monopoly on protection and use of
    force
  • Everyone protected (credible commitment)
  • People give taxes, labor, resources or else are
    sanctioned (monitoring, credible commitment)
  • Ruler gains residuals (credible commitment,
    supply)
  • Supply of institutions
  • Credible commitments
  • Mutual monitoring

20
Classical Solutions for Common Resource Problems
  • Property rights (Privatization)
  • Create a private property right for a group
  • Ex. Water markets, carbon markets, PES
  • Regulation (Leviathan)
  • Ex. Fisheries

21
Alternative assumptions
  • Think collective action What if all principals
    and no agents?
  • Alternative assumptions
  • Not a PD game
  • Appropriation (flow) and provision (stock)
    problem
  • More complex games
  • Assurance, repeated games under uncertainty,
    establish trust, and sense of community where
    players signal intention to cooperate ?
    cooperative equilibrium.
  • No one model of collective action
  • Multiple scales and levels of analysis
  • Beyond operational rules
  • Collective action and constitutional rules
  • Technology and institutions change

22
Collective Action Problem
  • How, when, why institutions emerge and evolve to
    govern common pool resources?

23
What look for?
  • Characteristics of resource and users
  • Example of coding forms
  • Appropriation resource
  • Location
  • Operational level
  • Appropriation subgroups
  • Operational rules
  • Organizational inventory
  • Organizational structure and process
  • Inter-organizational level

24
Determinants of collective action(from most to
least important)
  • Shared fear of damage if did nothing together
  • We are in it together most are affected in
    similar way
  • Been here and going to stay here most have low
    discount rate
  • Cheap Low costs of information,
    transformation, enforcement
  • We can talk social capital, reciprocity, trust
  • Small and stable group

25
Application to Mexican Forestry!
  • What mean by collective action in forestry in
    Mexico?
  • How did this come about?
  • What are main challenges?

26
Core Community Governance
27
Vertical Integration ProfileSemarnat Permit
Data (2004)
28
Sample Community Forest Characteristics
29
Colonial period 1820-1910
  • Spanish displaced people by rewarding people with
    land grants.
  • Timber for mining, ship building, fuel to urban
    areas.
  • Poor forest regulation
  • Independence 1821 but no major forestry
    departments created.
  • Post-1821 problem how get investors if land
    communal and not in land market? Answer
    privatize and expropriate from church and
    indigenous sectors.

30
Colonial period 1820-1910
  • Railroads grew a lot.
  • Land survey companies eventually owned ¼ of
    national territory
  • Lands concessioned
  • Indians lost 90 of their land.
  • Most law favored investors
  • Little law regulated forest.
  • Deforestation blamed on Indians

31
1910-1940 property but no rights, power
  • 1930 920k ha of forest in ejidos
  • 1940 6800k (Cárdenas)
  • 1926 law introduced parks, bans, some
    regulation, the permit process, but little
    changed
  • Rentismo become entrenched in a negative way,
    based on unequal partners, conflict and low
    prices.
  • No money for enforcement, no money to communities
  • Quevedo blamed deforestation on Indians and
    companies pushed forest conservation above all
    else created forestry schools and forestry
    society wanted public control.

32
1940-1960 Concessions granted
  • Many small private logging companies, very
    inefficient, local leaders manipulated
  • 1956 damage assessed by government offices but
    concluded that there was underproduction due to
    the inefficiency and lack of planning.
  • Solution bans in some places, concessions in
    others.
  • Concessions import substitution, UIEF

33
1960-1970 Little change
  • Bans ineffective experts recommended rational
    production
  • 1960 law allowed participatory associations --
    association between a buyer and a seller, i.e.
    the community and some company, to harvest.
  • Still no money to support program or ministry
  • Foresters like police, and lots of corruption
  • Campesinos marginalized
  • Concessions same as rentismo
  • Corps in ag ministry argued for grassroots
    forestry development
  • Some attempt to create community businesses
    through INI and ejido credit bank top down
    effort that did not have widespread success.

34
1970-1992 Community forestry
  • Puebla forestry plan grouped communities and
    small owners gave training, slow process of
    organizationally development and did better
  • Other success Plan Piloto in QR
  • End of concessions
  • 1986 law no more concessions, permits to owners,
    community businesses recognized first law to
    have as purpose the welfare of communities.
  • By 1992 about 40 of commercial production from
    communities

35
How is Mexican community forestry collective
action?
  • Eventual devolution of rights and abilities over
    time
  • Community rights strengthened
  • Access to and participation in market increased
  • Decisionmaking in community
  • Collective decisions to invest and manage
  • Individual decisions to cooperate with rules
    and support enterprise
  • Embedded within agrarian community system

36
Community Forestry Governance with Specialization
37
How 1992 reforms changed forestry
  • Privatization of individually-used ag land
    possible
  • Cannot privatize land classified as forest.
  • Procede titling program
  • Mobility w.r.t. ejidatario rights.
  • Can form a SPR for work groups.
  • Plantations a more distinct possibility because
    allows consolidation of some lands.
  • Privatized STFs

38
Major challenges
  • Managerial expertise
  • Technical expertise

39
State Programs
  • PRONARE reforestation
  • PROCYMAF institutional capacity, technical
    assistance
  • PRODEFOR About 6500 projects funded, about 4000
    of those for management, mainly thinnings, fire
    prevention, and management plans
  • PSAH ecosystem services outside of forestry
    sector

40
Questions for Mexican Community Forestry Policy
  • What is role of community in future of Mexican
    policy?
  • In forestry policy?
  • Eventual privatization?
  • More forests to state control/ownership of
    forest?
  • Communities as stewards of forests or economic
    actors?

41
Conclusions
  • New institutional economics
  • Common pool resources as a collective action
    problem
  • Mexican community forestry
  • Actor in market
  • Role in management of forests
  • Based on local governance
  • Next lectures
  • Application to Mexican community forestry how is
    it like a firm? How is it not?
  • Incorporating power and influence

42
Other games
  • Repeated PD game
  • Assurance
  • Tit for tat

43
Assurance Game
Bonnie s Decision
Confess
Remain Silent
Confess
Clydes
Decision
Remain
Silent
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