1. Most critical environmental and natural resource problems arise from common pool externalities.
2. Even though there can be consensus on the need to address externalities associated with the common pool, such as the losses of over fishing, the too rapid draw down of aquifers, and the emission of greenhouse gases associated with global warming, actual agreement on an institutional response is complicated by information problems, distributional disagreements, and enforcement. These factors raise the transaction costs of institutional responses to the common pool.
3. Given these conditions, one cannot understand the process of institutional change without consideration of transaction costs.
4. In the presence of transaction costs, one must be careful in making strong efficiency claims about observed conditions that appear to be "inefficient."

This class is aimed at addressing the economics, law, and politics of the common pool (open access). All environmental and most natural resource problems involve some aspects of the “commons.” Resources may be open-access due to endogenous social regimes—costs, benefits, customary practices, etc, or due to particular geo-physical or biological regimes that raise the costs of controlling access. So the class will be about the explaining the causes and consequences of common pool resources and well as the institutional solutions—keeping open access, customs, private rights, group ownership, state ownership, state regulation.

You will obtain a better understanding of the “Tragedy of the Commons,” how open-access is managed, and why problems of the common pool often are so difficult to solve, despite important economic costs and incentives to resolve them. Management regimes include private ownership, joint ownership, customary control (common property), and administrative agency management. You will examine why and how each of these management arrangements exists and its effectiveness. You will read and discuss the basic theoretical and empirical literature.

In the analytical section of the course we will discuss open access, the tragedy of the commons, private property rights, common property rights, complex rights, state regulation, bargaining issues, externalities and social costs.

In the applications section there are many possibilities: land, minerals, water, wildlife, air, oceans, fisheries, spectrum, pests, and intellectual property.

*paper to be distributed prior to class.

I. Theory and Basic Arguments

A. Externalities: Session 1

1. Ronald Coase, 1960, “The Problem of Social Cost,” Journal of Law and Economics, 3: 1-44.
2. *Carl J. Dahlman, 1979, “Externality,” Journal of Law and Economics, 22: 141-162.

B. The Tragedy of the Commons: Over Entry and Use, Under Investment: Session 2

1. Garrett Harden, 1968, “The Tragedy of the Commons,” Science, 162: 1243-8.
2. *Gordon, H. Scott, 1954, “The Economic Theory of a Common Property Resource: The Fishery,” Journal of Political Economy 62 (2): 124-42.
3. Henning Bohn and Robert T. Deacon, 2000, “Ownership Risk, Investment, and the Use of Natural Resources,” American Economic Review, 90(3): 526-49.

4. Michael Heller, 1998, “The Tragedy of the Anticommons: Property in the Transition from Marx to Markets,” Harvard Law Review, 622-88.

D. Solutions: Customs, Common Rights: Session 3

1. Robert C. Ellickson, 1986, “Of Coase and Cattle: Dispute Resolution Among Neighbors in Shasta County,” Stanford Law Review 623: 659-67.
2. *Elinor Ostrom, 1998, “Self Governance of Common-Pool Resources,” The New Palgrave Dictionary of Economics and The Law. Peter Newman, ed. New York: Macmillan, Vol. 3: 424-432.
3. Henry E. Smith, 2000, “Semicommon Property Rights and Scattering in the Open Fields,” Journal of Legal Studies 29(1): 131-169.
4. James M. Acheson, 1975, “The Lobster Fiefs: Economic and Ecological Effects of Territoriality in the Maine Lobster Industry,” Human Ecology, 3: 183-207.

E. Solutions: Private Property Rights: Session 4

1. Harold Demsetz, 1967, “Towards a Theory of Property Rights,” American Economic Review, 57 (2): 347-59.
2. *Harold Demsetz, 1998, “Property Rights,” The New Palgrave Dictionary of Economics and The Law. Peter Newman, ed. New York: Macmillan, Vol. 3: 132-44.
3. Gary D. Libecap, 1989, Contracting for Property Rights, New York: Cambridge University Press, 1-28.

Applications Areas: Land, Oil, Fish, and Air.

1. *Lee Alston, Gary Libecap, and Robert Schneider, 1996, “The Determinants and Impact of Property Rights: Land Titles on the Brazilian Frontier,” Journal of Law, Economics and Organization, 25-61.
2. Robert T. Deacon, 1994, "Deforestation and the Rule of Law in a Cross-Section of Countries," Land Economics 70: 414-430.
3. Zeynep K. Hansen and Gary D. Libecap, 2004, “Small Farms, Externalities, and the Dust Bowl of the 1930s, Journal of Political Economy, 112 (3): 665-94.
4. Gary D. Libecap and James L. Smith, 2003, “The Economic Evolution of Petroleum Property Rights in the United States,” Journal of Legal Studies, 2003.
5. Steven N. Wiggins and Gary D. Libecap, 1985, “Oil Field Unitization: Contractual Failure in the Presence of Imperfect Information,” American Economic Review, 75 (3): 368-85.
6. R. Quentin Grafton, Dale Squires, and Kevin J. Fox, 2000, “Private Property and Economic Efficiency: A Study of a Common-Pool Resource,” Journal of Law and Economics, 43: 679-713.
7. Ronald N. Johnson and Gary D. Libecap, 1982, “Contracting Problems and Regulation: The Case of the Fishery,” American Economic Review, 72 (5): 1005-22.
8. Robert N. Stavins, 1994, “Transaction Costs and Tradable Permits,” Journal of Environmental Economics and Management 29: 133-148.
9. Paul L. Joskow, Richard Schmalensee, and Elizabeth M. Bailey, 1998, “The Market for Sulfur Dioxide Emissions,” American Economic Review, 88(4): 669-85.