2  Types of property

This section discusses those aspects of property that determine how rights to property can be defined and allocated. These aspects may be natural in origin (ie, individual segments of the atmosphere cannot be partitioned, constrained or tracked) or legal or customary (ie, common grazing lands or open access to beaches). Both constrain the manner in which property rights can operate, though the latter is more flexible.

2.1  Private, common, public and open access property

The terms private, common and public are often based on the concepts of excludability (who can determine who benefits from the resource) and rivalness (whether use is affected by the number of users). These concepts apply across a range of rights associated with property, such as access, withdrawal, management and exclusion (Schlager and Ostrom, 1992).

Taken together, these concepts and rights can be used to address the confusion often apparent in discussions of types of property, particularly between terms such as common and open access, which are sometimes used interchangeably. Broadly, the difference is that for common property, use is limited to members of the common group (although within that group constraints on use may or may not exist and their nature can vary widely), while for open access property there is no constraint on who can use it; ie, exclusion is impossible or costly (Cole, 1999).

This difference is illustrated in the break-down in Table 1 of types of property into private property (generally excludable and rival), common property (group members have the right to exclude non-members), public property (owned by all, but with access and use controlled by the state), and open access property (where no one has the right to exclude anyone).[2]

Open access property may exist because ownership has never been established, because the state has legislated it, or because no effective controls are in place, or feasible, ie, the costs of exclusion outweigh the benefits (Ostrom, 1999). The state can sometimes effectively convert open access property into private, common or public property by legislating to define rights and enforce them.

Most newly defined property rights regimes tend to involve former common or open access property since private and public property tend to already be covered by generic regimes, having generally been converted from common or open-access property in the past.

2.2  The “tragedy of the commons”

The tragedy of the commons is a well known story about the effects on a common property resource when the intensity of use reaches a level where rivalness becomes an issue (Hardin, 1968) and the resource is destroyed by uncontrolled use. The term is a misnomer as it is typically applied to open access resources. True commons, where rights are held and exercised by a group, can break down (particularly where individual and joint benefits of use diverge or where the size of the group hinders effective governance) but provide greater scope for managing conflicts through shared benefits and enforcement.

There are two key problems. One is that when individuals increase their use of the resource, they receive the full benefits associated with that increased use, but only bear their proportional share of the costs (eg, any additional degradation of the resource). The second is that no one has a guaranteed future entitlement to an absolute or proportional amount of the resource, so that incentives to preserve or develop the resource for future use are weak.

The incentives created by these problems drive users towards overuse, especially when the future benefits of restraint are discounted and restraint by others cannot be guaranteed.[3] This means that “anyone who refrains … does so not to his benefit but to the benefit of others who will continue to exercise their communal right” (Alchian and Demsetz, 1973, p20). The approach is one of first come, first served, and investments are limited to those which have short time horizons, generate high returns and are easily monitored (Pejovich, 1972). Land is therefore over-grazed and fisheries are exhausted. “Freedom in a commons brings ruin to all” (Hardin, 1968, p3).

The establishment of property rights held by individuals, corporates, communities or trusts) to avoid the tragedy of the commons has been strongest in land but is now becoming more prominent in areas such as fisheries where the ability to move vessels to exploit new fish stocks in other parts of the world is coming to an end and strongly illustrated by the tragedy of the commons effect in the North Atlantic cod fishery (Kurlansky, 1997). This is discussed further in Section 4.4.