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The Prejudices of Property Rights: On Individualism, Specificity and Security in Property Regimes

Espen Sjaastad and Daniel W. Bromley

E-mail: bromley@aae.wisc.edu

Posted with permission of Professor Daniel Bromley and Espen Sjaastad
[Complete version - 89Kb < 1min (26 pages)]     [ Share with a friend  ]

Abstract

It is a truth universally acknowledged that a nation with little wealth must be in want of land privatisation.1 This received truth - a prejudice - continues to animate the policy dialogue in a number of countries where traditional property regimes have not been shown to be failures (Bromley, 1991). In other words, given the ecological-economic nexus, common property regimes can be quite appropriate, despite various efforts to prove them 'inefficient' or destructive of environmental resources (Bromley, 1992). In this article we shall address a different prejudice pertaining to property rights - namely, that the transition from common property to private property represents a move towards more individual, more specific, and more secure land rights (Cohen and Weizman, 1975; Demsetz, 1967; Feder, 1987; Feder and Feeny, 1991; Feder and Noronha, 1987; Feder and Onchan, 1987; Feeny et al. 1990; North and Thomas, 1973; Platteau, 1996; Ruttan and Hayami, 1984). This is a prejudice because, to the extent that these outcomes are thought to be desirable, they are only so because of the normative system out of which they arise. In the extreme, institutions that ratify individualism at the expense of social cohesion can be questioned on grounds of sustainability.

We motivate our story by a simple illustration. Individual I may undertake activity A which leads to outcome B. If the activity is undertaken, to what extent can the individual expect to reap the rewards or suffer the consequences implicit in the outcome? It is conventionally asserted that efficient incentives are provided by an assignment of rights where I - and that individual only - is affected by the outcome B. It is said that efficiency demands complete internalisation - decision (A) and outcome (B) should remain within the perimeters of a single decision-maker (I). If internalisation is not complete, discrepancies between private and social costs and benefits will emerge (Pigou, 1920). In general, activities for which costs are dispersed will be supplied in excess of the social optimum, while those for which benefits are dispersed will be undersupplied. However, the conventional view of social costs ignores the dual nature of externalities, as well as the costs of specifying, enforcing, and exchanging exclusive rights (Coase, 1960; Dahlman, 1979; Randall, 1983; Barzel, 1989). On this broader view, the discrepancy between social and private costs is only an imagined discrepancy between economic performance in the real world and performance in a fictional world of costless transacting. The presumption of externalities, therefore, simply reflects the fact that the costs of internalisation exceed the benefits (Vatn and Bromley, 1997).

Assume that N farmers jointly manage an agricultural plot. If one farmer (I) spends an extra A hours labouring in the field, the crop yield will increase by B. If each farmer's share of the harvest is 1/N, individual I will receive B/N as a result of effort A. Note that the right of individual I to undertake A and subsequently claim B/N is an individual right2. The right is potentially specific, with a high level of precision in both the definition of the permitted action and the outcome to which the individual may lay claim. The right is inherently neither more nor less secure than what we usually regard as a private right in land. If the concept of security of rights is to have any meaning, it must be understood that I, after undertaking A, may have a secure right to B/N. Finally, even though the right may be individual, specific and secure, the arrangement outlined above appears to be a poor way of organising rights. In the absence of any additional restrictions, the incentive to undertake A is already halved when a group of two farmers replaces an individual cultivator. Before elaborating on each of the above examples, a brief note on rights and duties seems necessary.


Footnotes:
  1. With apologies to Jane Austen.
  2. 'A' can more generally be understood as any activity-labour, purchase of commercial inputs, or abstinence from further extraction of fuelwood-that represents a cost to the individual and which contributes to an increase in the value of the outcome at a decreasing rate. This form of tenure has been described as 'monolithically egalitarian' (Berry, 1993).
 


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