Toward a Political Economy of the Commons
Ever since Nobel Laurate Elinor Ostrom (1990) wrote her magnus opus Governing the Commons, there has been growing interest in the challenges to governing ‘the commons.’ The commons can be defined as the tangible or intangible resources that, given their natural or physical structure, are easily accessible or consumed by members of society (i.e., it is difficult to exclude people from using the commons’ resources). Typical examples of commons resources include natural materials such as the air, oceans, fisheries, lakes, water resources, minerals, and land. A common pool resource (CPR), arises when a group of people seeks to jointly own and manage a resource by establishing certain boundaries for exclusion (Ostrom and Ostrom, 2002).
The situation posed by the commons is basically a governance challenge that requires some form of collective action to organize and distribute ownership via rules, to monitor and enforce the rules, and to sustainably use and distribute the common’s resources over time. Given modern social complexity and various environmental challenges, the commons are now being considered as possible alternatives in several disciplines as a means of managing key resources and productive activities (Paniagua, 2021). These issues—in concomitance with E. Ostrom (2010) receiving the Nobel Prize in Economics in 2009—has generated widespread interest in the field and has spurned many to think about how to delineate a theory of the commons. A journal has even emerged that is dedicated exclusively to these issues: the International Journal of the Commons, published by the The International Association of the Commons (IASC).
Nonetheless, the literature on the commons has typically focused on three themes: the history of specific local commons related with some traditional communities, recent experiences and empirical-statistical accounts of local ecological-common situations, and examples of successes or failures of the commons. While such studies have offered valuable contributions to our understanding of specific cases, this focus has obscured study of the general principles and key challenges facing the governance of the commons. Paradoxically, contemporary studies of the commons have slightly deviated from the broader questions delineated by Elinor Ostrom (1990; 2010), which sought to illuminate the general political, economic, and institutional analysis of the governance properties exhibited by successful solutions to the problems of the commons. In short, the scholarship on the commons often remains niche and narrowly focused on local experiences, and this has in turn resulted in less attention being devoted toward more general questions involving institutional analysis, property rights, and governance.
What seems to be missing is a broader understanding of the political economy of the commons. This is exactly what Toward a Political Economy of the Commons: Simple Rules for Sustainability examines, making it a highly relevant and valuable contribution to our understanding of the problems of the commons. Toward a Political Economy of the Commons will be of interest to a broad range of social scientists interested in the commons, as well as political economists interested in governance dilemmas, property rights, and institutional analysis. Given the book’s focus on resource and natural commons, it is also relevant for teaching development economics, ecological and natural resource economics, and sustainability and environmental economics.
2. A brief overview of the book and its empirical cases
The book is divided in seven chapters. Chapter 1 provides a brief account of the political economy of the commons. Chapter 2 presents a more detailed political economy framework for analyzing the governance of the commons. The authors’ framework relies heavily on property rights economics, institutional economics, and Bloomington public choice. The framework is thereafter used to analyze four cases of natural challenges: deforestation challenges, inshore and offshore fisheries, mining resources and mines, and global climate change and greenhouse gas (GHG) emissions.
Chapter 3 reviews the evidence from deforestation and land economics studies. The authors analyze this vast literature using their framework and conclude that deforestation is likely to be mitigated through a better definition and enforcement of property rights, greater wealth generated by capitalist institutions, deeper democracy through polycentrism, and supportive social institutions, such as trust.
Chapter 4 explores the political economy of inshore and offshore fisheries. The authors explore first the cases of salmon fishing in the Pacific Northwest, focusing on how indigenous tribes created and enforced property rights over salmon, and second, the case of lobster fisheries in the United States (US). These examples highlight how property rights can be created and enforced endogenously by local communities, with minimum interference from outside forces such as the State.
Chapter 5 describes how miners have avoided the tragedy of the commons. Focusing on the US, they review gold mining in California during the gold rush, the emergence of agreements for governing oil and gas reservoirs, and the evolution of rules for governing hydraulic fracturing (i.e., ‘fracking’).
Chapter 6 reviews the final case of the political economy of the commons through examining climate change. The authors explore GHG emissions, climate change mitigation, climate change adaptation, and climate justice. In short, partial alleviation of climate change and what is needed from societies could reside in the political economy of the commons at various levels: at the meta level, introducing incentives in the form of a ‘climate club’ associated with trade treaties (Nordhaus, 2015); at the local level, polycentric political institutions could adapt to climate change at different scales, while respecting local conditions (Dorsch and Flachsland, 2017); and lastly, markets for pollution and economic incentives (and costs) would be needed to stir innovation and profit-oriented entrepreneurship directed toward cleaner and better sources of energy (Romer, 2018).
Chapter 7 concludes the book by merging the themes shared by these four commons dilemmas, with the aim of helping us to better grasp the simple rules for sustainability, based on the applied political economic framework. One of the final takeaways is that polycentric governance, rather than centralized responses, are more likely to successfully manage complex and nested problems and, thus, better able to alleviate commons dilemmas (see also Paniagua, 2022). In this sense, government public policies that help to build social capital and sustain the social fabric of local communities (including trust, civic education, and information) have beneficial spillover effects to govern the commons (see also Paniagua and Rayamajhee, 2022).
3. The main thesis and takeaways of the book
Following Richard Epstein’s (2009) idea of ‘simple rules for a complex world’ and Elinor Ostrom’s (1990) ‘design principles’ for successful governance of commons dilemmas, Toward a Political Economy of the Commons proposes simple rules for successful governance of the commons and the promotion of natural resource sustainability. Its main argument is that a political-economic approach is necessary to understand different levels of success in overcoming commons dilemmas. The authors claim that successful commons governance requires following simple, yet key, economic, political, and social principles:
- Concerning economic aspects, focus must be placed in a) defining and enforcing property rights, b) creating (direct or adjacent) markets to appropriately value resources and the environment, and c) establish institutions that encourage wealth creation whilst upholding responsible conservation.
- The political aspect must include establishing polycentric and nested political institutions that enable local participation in governing commons challenges.
- The social aspect must include encouraging the development of different forms of social capital such as trust, patience, and an appropriate form of individualism.
In a nutshell, the main takeaway of this book is that:
“… successful governance of resource commons arises from polycentric political institutions, clearly defined property rights, the presence of markets for goods and services produced from commons as well as markets for pollution… and supportive social institutions, especially trust, patience, and individualism.” (Cai, et al., 2022, p. 4)
One of its greatest contributions is that the book shows that the tragedy of the commons is not inevitable, and environmental and harmful degradation of the natural environment is not the only alternative; instead, the aforementioned principles guide us to define and enforce property rights in response to local conditions, establish adjacent markets that generate information and incentives to conserve resources, and promote local-level public policies that encourage trust, patience, and individualism. This remains challenging since having simple principles does not mean easy solutions.
Leaning on these principles, the book highlights a crucial corollary for environmental policy and conservation of the commons, involving mostly the crucial properties of capitalism—markets and property rights—as the key to good governance of the commons. This claim may seem at odds with the standard concerns raised regarding externalities and market failure to price common pool resources. However, the authors provide substantive evidence throughout the 7 chapters showing that well-designed markets and clearly established and enforceable property rights (i.e., that adapt well to local conditions) are critical for the successful conservation and management of natural commons. Consequently, whenever we find environmental degradation or the destruction of natural commons, we usually also find either badly priced resources—due to the absence of markets or poor regulations that impede exchanges—or nonexistent or non-enforceable property rights.
According to this argument, markets, prices, and property rights should not be portrayed as institutions that are intrinsically involved in undermining the commons, rather they are depicted as key instruments of political economy that can help generate the incentives and knowledge necessary to sustain the successful governance of resources. This argument parallels another key contribution of the book: environmental degradation and the tragedy of the natural commons are not problems associated with abstract notions such as ‘capitalism’ or ‘greedy corporations’, but rather usually associated with specific failings of institutions and a lack of enforceable property rights.
One of the most interesting ideas of the book is the concept of creating adjacent markets around natural resources to facilitate more accurate pricing of the commons and, subsequently, create a market-driven series of inducements for establishing new and better property rights. In other words, “the expansion of markets put in motion the creation of property rights” (ibid., p. 8). Although this may sound theoretical and speculative, the authors show that this is exactly what happened in cases such as the establishment of cattle associations in Montana and Wyoming (ibid., p. 8), the creation of property rights during the gold rush in California (ibid., 93-97), and with the correct management of water resources, fisheries, and floods (ibid., 83-86). Using a simple example, imagine that we share a piece of open-range pasture that might be affected by the ‘tragedy of the commons’; if we create adjacent markets for cattle and meat and dairy products, then we also generate economic incentives to better manage the open range, and, thus, to price land in a manner that effectively internalizes the externality of the tragedy. This scenario may lead cattle owners to attempt to develop a system of property rights for the land and a system of governance to maintain a sustainable herd size, since the adjacent markets signal to them the value of doing so. As such, well-crafted markets can be part of the environmental solution rather than part of the problem (Romer, 2018).
The book develops many such interesting themes and ideas, of which I will highlight another four. First, there is the idea that successful governance of the commons and sustainability depend crucially on economic, political, and social aspects of the commons. The authors strive to distill and simplify the political economy of the commons by refocusing attention onto key (yet neglected) ideas, boiled down to, “the definition of property rights is key to managing a commons; so is a responsible political apparatus. Those factors, along with social capital, go a long way to overcoming the tragedy of the commons” (Cai, et al. 2022, p. vi).
Second, an underlying theme of the book is that the sustainability of natural resources ultimately depends mainly on institutions. As E. Ostrom (1990, p. 22) reminds us: “institutional details are important” since they determine, 1) incentives, 2) information, and 3) the monitoring and punishment mechanisms that affect decisionmakers within a collective action situation. Institutions and their properties are extremely important in every governance challenge. The authors recognize, “in the end, institutions are all we have. Governing the commons is always a question of institutions, but the best institutions tend to be decentralized ones” (Cai, et al. 2022, p. vii). This underlying theme is strongly Ostromian in orientation; it is ultimately a plea for institutional and comparative analysis, while also signaling to avoid ideology and abstract panaceas (Ostrom et al., 2007).
Third, the book underlines the crucial analytical distinction between private property and bundles of property rights, by building on Schlager and Ostrom (1992) and Libecap (1989). Standard forms of private property that we use daily are only one form of ‘property rules’, which are not the only way to solve commons dilemmas. The need for establishing property rights does not refer solely to the need for creating exclusive private property. Importantly, “the simple rule is not that private property is necessary, but that property rules must reflect the local conditions” (ibid., p. 13). This is a crucial point in political economy since it suggests that strict forms of private property are not panaceas, nor the best ‘property rule’ for all situations (Leeson and Harris, 2018). Indeed, different systems of property rights need to be well-defined, credible, and enforceable, while also reflecting the local conditions relevant to the problem at hand. Thus, “conserving or preserving the commons always requires property rights, with the proviso that the specific form is always determined by the context” (ibid., p. 34). To conclude, what is always necessary is aiming for a nuanced and less ideologically driven analysis of property and property rights and focusing on how they can be institutionally crafted to fit the local conditions.
Finally, an important message that the authors communicate is that sound political economy requires engaging in interdisciplinary social sciences grounded in empirical evidence. Cai and colleagues (2022) engage in a very rigorous form of political economy while borrowing insights from property rights economics, institutional economics, public choice, market process theory, comparative political economy, ecological and land economics, and empirical analysis. The book delineates a valuable way forward for developing relevant political economy studies. Young scholars and students interested in political economy should follow the analytical framework and the multidisciplinary approach presented in this book.
Toward a Political Economy of the Commons is a very welcome contribution to the intellectual approach and research agenda initiated by Elinor Ostrom (1990) on the political economy of the commons. Central to this agenda was the understanding of the core principles of robust governance structures as a means of attaining the conservation of our natural resources, and careful thinking about how to avoid environmental catastrophe. As such, this book delineates a fruitful road that the literature on the commons and environmental economics should adopt—one marked by institutional analysis, public choice, and political economy. For these reasons this book should be widely read and cited in the years to come.
About the Author
Dr. Pablo Paniagua Prieto, Professor of Political Economy at Universidad del Desarrollo, Chile, and Research Fellow at the Centre for the Study of Governance & Society, King’s College London.
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 In other words: “Commons are scarce resources that are subject to dissipation or congestion when their use is unrestrained or unrestricted” (Cai, et al., 2022, 1).
 The modern literature on the commons started with Elinor Ostrom’s (1990) book, and thus there has been nearly thirty years of scholarship on common pool resources (CPRs) and the commons. For an overview of the literature see: van Laerhoven, et al. (2020) and Berge and van Laerhoven (2011).
 In the words of the authors, “Approaches to [commons] resources have become so descriptive that scholars have lost sight of the big picture” (Cai, et al., 2022, p. vi).
 The authors establish that “Polycentrism, which is defined by multiple levels of governance each with autonomy to make rules, is an especially significant concept for understanding commons governance” (Cai et al., 2022, p. 3).