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Required Assignment 1

Due Date

Friday of Week 3, January 22

Conceptual Background

Read Hardin and either (1) Wade or (2) Seabright (more theoretical than Wade; Seabright uses theory of repeating cooperative and noncooperative games).

Application.

Either one is required of all students.

Read either (1) Acheson or (2) Cinner

Conceptual Assignment Reading.

Required of all students.

Hardin, G. 1968. “Tragedy of the Commons.” Science, 162: 1243-1248.

Conceptual Assignment Reading.

Read this or Seabright.

Wade, R. 1987. “The Management of Common Property Resources: Finding a Cooperative Solution.” World Bank Research Observer 2(2): 219-234.

· pdf file is available on class website.

Conceptual Assignment Reading.

Read this or Wade.

Seabright, P. “Managing Local Commons: Theoretical Issues in Incentive Design.” Journal of Economic Perspectives 7(4): 113-134.

Application Assignment Reading.

Read this or Cinner.

Acheson J. 1975. “The Lobster Fiefs: Economic and Ecological Effects of Territoriality in the Marine Lobster Industry.” Human Ecology 3:183-207.

Application Assignment Reading.

Read this or Acheson.

Cinner, J. 2005. “Socio-Economic Factors Influencing Customary Marine Tenure in the Indo-Pacific. Ecology and Society 10(1):1-36.

Assignment

4-page paper (typed, double spaced, 12 Arial font, 1” margins) discussing the possible use of common property to address the commons problem.

Please develop your discussion within the context of either (1) Acheson and the lobster fiefs or (2) Cinner and customary marine tenure in the Indo-Pacific. Note: you don’t have to read Acheson if you read Cinner and vice versa, but in either case you should show evidence of having read Hardin and either Wade or Seabright.

Managing Local Commons: Theoretical Issues in Incentive Design

Paul Seabright

The Journal of Economic Perspectives, Vol. 7, No. 4. (Autumn, 1993), pp. 113-134.

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Journal of Economic Perspectiues-Volume 7, Number 4-Fall 1993-Pages 113-134

Managing Local Commons:
Theoretical Issues in Incentive Design

Paul Seabright

G
rowing interest in environmental economics has led to a great deal of
work in recent years on the economics of local common property
resources, but it would be a mistake to think that the topic is in any

danger of being over-grazed. Local commons encompass a wide range of
resources whose shared feature is the need for some form of collective manage-
ment, and pose interesting problems in such disparate sub-fields as agricultural
economics and the theory of the firm.

T h e definition of local common property resources must do two things:
first, define common property resources, and secondly, distinguish local from
other kinds of common property resources. Common property resources, as
the name suggests, are resources in which there exist property rights, but
property rights that are exercised (at least partly) collectively by members of a
group. There must also be rivalry in consumption of the resource within the
group; that is, an increase in the amount consumed by one individual reduces
the amount remaining for others to consume. What makes the right of control
collective, rather than individual, is simply the absence of a complete set of
contractual relations governing which member of the group is entitled or
required to do what. Like lawyers in a lifeboat, they find themselves obliged by
circumstances to cooperate. However, membership of the group is limited by
legally recognized and practically enforceable rights, and does not have to be

w Paul Seabright is Director of Studies i n Economics, Churchill College, Cambridge,
United Kingdom.

114 Journal of Economic Perspectives

concerned with the possibility of “open access,” namely the risk that additional
exploiters might have free entry to the resource.’

T h e typical examples of local commons, as opposed to other types of
commons, are often assets owned by reasonably small communities, such as
villages. These are distinguished from global commons in two main ways. Most
importantly, the main members of the local community are few enough to be
known to each other; some of their actions are observable; and consequently
they have the ability and sometimes the incentive to build reputations for
behaving in certain ways. By contrast, some global commons problems, like
global warming, involve billions of us. However, sometimes global commons
problems concern a limited set of known players, namely governments; what
distinguishes these cases from classic local commons is a second feature, namely
the absence of even the potential for intervention by a state that is more
powerful than any of the individuals. In the case of governments .making
decisions about global warming, this simply means that no world government
exists to tackle the issue. For the purposes of this paper I shall define local
commons problems as small-numbers problems, but I shall generally also make
the empirical assumption that state intervention is one option among others for
resolution of these problems.

So local commons certainly include the familiar dramatis personae of envi-
ronmental microeconomics, like grazing lands and inshore fisheries (although
since deep-sea fisheries are open to access by others, they fall into a separate
category). They include collectively managed irrigation systems such as canals
and tanks; subterranean aquifers and oil reserves; forests and many wildlife
habitats.’ But they also include many phenomena that should be analyzed in
similar terms, and which typically appear in very different areas of the

‘1n an “open access” problem, as distinguished from the subject of this paper, any agreements
governing relations between existing exploiters are vulnerable to free entry by new exploiters from
outside. Thus, the problems of common property resources are typically both more complex (since
they concern interactions among specific individuals) and potentially more soluble than problems
of open access. I n the literature, common property resources are sometimes defined more broadly,
as resources characterized by difficulty of exclusion as well as by rivalry in consumption (for
instance, Berkes, 1989, p. 91). On this view, open access problems are just one kind of common
property resource issue, namely one where it is impossible to exclude anybody. Feeny et al. (1990)
use the term communal property to refer to what are here called common property resources, namely
those where some people can be excluded but not others. It is not particularly important which set
of definitions is used, so long as each is used consistently, and so long as the issues raised by what
are here called common property resources are not confused with those of open access. I have also
here avoided use of the term “common pool resources,” which may suggest that only the overall
stock of the resource matters, whereas I am interested in the more general case where potentially
many aspects of the management of a resource can be important.
‘ ~ n d a n ~ e r e dspecies have typically been treated in the literature as open access problems. But as
Swanson (1993) emphasises, the fact that they are de facto open access should really be treated as
endogenous. Governments have the ability to safeguard endangered species by regulating access if
they wish to, and their unwillingness to d o so is often the symptom of insufficient economic rent
generated by the survival of the species in question. Policies to preserve such species are often
better addressed to raising the rent appropriable by the parties with the power to control access,
than by such currently fashionable means as trade conventions.

Paul Seabright 115

economics literature: partnerships and joint-stock companies, for example.
Other situations that can be analyzed within this framework include house-
holds, research joint ventures, collective amenities in apartment buildings,
pension funds, university departments.

Establishing Common Interests

T h e bulk of the literature on common property resources has taken the
main analytical problem they raise to be one of resolving conflicts over the
contribution of different members towards a common management policy. As a
result, conflicts of interest over what is the optimal management of the resource
have been largely ignored. At first, this distinction may sound merely semantic.
After all, the difference in value to some member between the optimal manage-
ment policy given the preferences of that member and a compromise manage-
ment policy might be counted as part of the “contribution cost” paid by the
member towards the compromise solution. However, the distinction is impor-
tant for two reasons.

First, social choice theory points out that the very existence of an optimal
collective management policy cannot be taken for granted, and that mecha-
nisms to decide upon such a policy may be vulnerable to strategic manipula-
tion. Secondly, the information required for commons management will be
much reduced if it can be assumed that the management policy for the
resource (for example, what its aggregate rate of depletion should be) can be
determined separately from the way that policy should be implemented (for
example, how the consumption made possible by the agreed-upon depletion
rate should be shared out among members). Call these two aspects of the
management problem the production plan and the implementation plan.

T h e separation of these tasks will be a reasonable assumption only when
everyone can agree on what would be the optimal production plan, without
knowing anything about the distribution plan. This may sound unlikely. But
remember that a firm’s shareholders will unanimously support attempts by that
firmb to maximize value (according to the Fisher separation theorem as de-
scribed in Milne, 1974; DeAngelo, 1981), as long as the economy has complete
risk-sharing opportunities. Consequently it is possible to determine the firm’s
optimum production plan (given a price system) without knowing anything
about shareholders’ preferences or constraints. It follows that, for there to be
conflicts of interest between member-beneficiaries of a common property re-
source over the production plan, production decisions must make a significant
difference to at least some members’ risk-sharing opportunities, and must d o so
in different ways for different members.

An example should help to clarify the issue here. Consider a group of
farmers who have conflicting interests regarding the use of common grazing
land during periods of drought, according to whether or not they have access

I 1 6 Journal of Economic Perspectives

to irrigation. A strictly value-maximizing policy would restrict access to com-
mon grazing more during droughts than at other times because of the danger
of erosion; but it is precisely during droughts that those engaged in rain-fed
agriculture may find themselves most dependent upon livestock and therefore
most in need of common grazing. Therefore, in the absence of other means to
diversify away this risk they would prefer a policy that permitted them to react
to a drought by increasing their demands on the common grazing land. Their
conflict of interest with the farmers who have access to irrigation will in
consequence concern not just how the limited grazing opportunities should be
shared between them (the implementation plan), but will also extend to a basic
conflict of interest over the production plan-that is, over how much grazing in
total there should be when droughts occur.

Solving such conflicts of interest may be very difficult, and the absence of
appropriate means of compensation for the missing risk-sharing mechanisms
may lead to a breakdown of the management of the common property re-
source. In what follows, however, we shall be concerned mainly with the
problems of implementing a known optimal production plan. These problems,
as the empirical evidence shows, are quite serious enough.

Devising Incentives to Advance Common Interests

T h e central implementation problem for common property resources is
that, in the absence of binding agreements to the contrary, consumption of the
common resource by one agent will impose negative externalities on others.
Since individuals do not take these externalities into account, aggregate con-
sumption of the resource is typically inefficiently high. Deforestation, over-
grazing and excessive mineral depletion are the standard instances. In a classic
article, Garrett Hardin (1968) referred to this outcome as a “tragedy of the
commons.” Alternatively, the externalities may mainly affect investment, in that
resources expended in the enhancement of the common property resource’s
value will typically confer external benefits on other members, and under-
investment will result. Inadequate maintenance of irrigation systems and roads,
and neglect of drainage, fencing and upkeep of public land are common
examples.

T h e investment externality characterizes virtually all common property
resources, including such non-standard examples as firms and research joint
ventures: the tendency towards under-investment by shareholders in monitor-
ing a firm’s management is a classic example (Grossman and Hart, 1980). I n
fact, the distinction between consumption and investment externalities is practi-
cally useful but not analytically important: the optimal production plan for
common property resources will typically involve most if not all members both
consuming less of the resource than their private incentives would lead them to

Managing Local Commons: Theoretical Issues 11 7

do, and investing more of their other resources in the maintenance and
enhancement of the common property resource’s value.

How might members be induced to implement such a plan? T h e next
section will focus on informal mechanisms that may induce members of a
common property resource to undertake collectively beneficial but individually
costly actions. T h e following section will focus on more formal mechanisms: the
privatization of property rights, the decentralization of incentives within com-
mon ownership and control, and the delegation of management responsibility
to an agent so that participants are limited to a monitoring role. T h e value of
these more formal mechanisms will depend significantly upon the success or
lack of success of the informal mechanisms of collective management that they
replace.

Informal Incentives for Cooperative Behavior

Mechanisms of collective management tend to look very different under
the lenses of different social sciences. In particular, anthropologists and sociolo-
gists focus on the way in which individual behavior is governed by rules and
codes of conduct, the genesis of which is often explained by how well such rules
serve the interests of the group. Economists, by contrast, focus less upon rules
than upon incentives. Recent work in game theory has devoted much effort to
explaining cooperative behavior in terms of a more sophisticated understand-
ing on the part of individuals about where their (individual) long-term interests
really lie. In particular, individuals face problems of collective action not once
but repeatedly. T h e knowledge that pursuit of their short-term interests can
harm their long-term aims by affecting the reaction of others in future interac-
tions may be a powerful inducement to behavior that displays apparent solidar-
ity with the interests of the group. This does not mean that economics has
undermined the validity of arguments that appeal to altruism or to social
norms; these different explanations are complementary, although their relative
importance will need careful empirical investigatiom3

Economists who argue that cooperative behavior can grow out of self-
interest usually draw heavily on the theory of repeated games (see the survey
by Sabourian, 1990). Figure 1 displays a version of the familiar prisoners’

3 ~ tis also likely that feelings of altruism and social solidarity, though extremely important, may be
more volatile and difficult to promote consciously than perceptions of self-interest. For instance,
familiarity and repeated interaction may provoke antipathy instead of sympathy between members
of a community. This does not justify ignoring altruism as a social phenomenon, but it may reduce
its amenability to systematic analysis. Graham Greene remarks of Scobie in The Heart of the Matter
that “they had been corrupted by money, and he had been corrupted by sentiment. Sentiment was
the more dangerous, because you couldn’t name its price. A man open to bribes was to be relied
upon below a certain figure, but sentiment might uncoil in the heart at a name, a photograph, even
a smell remembered.” For a contrary view, see Casson (19921, which develops a theory of
leadership as the promotion of cooperative action by the manipulation of people’s preferences.

118 Journal of Economic Perspectives

Figure 1
A Prisoners’ Dilemma

Player 2

Cooperate Defect

I I 1

Cooperate
1 receives 4
2 receives 4

1 receives – 10
2 receives 5

Player 1
Defect

1 receives 5
both players

2 receives – 10 receive zero I
dilemma. If the two players know that they are playing the game only once,
then Player 1 reasons as follows: “Player 2 might either cooperate or defect. If 2
cooperates, than I am better off defecting, and receiving 5 rather than 4. If 2
defects, then I am still better off defecting, since I receive 0 rather than – 10.”
When both players reason this way, they both defect, and end up receiving 0.
The problem is whether, if the game is repeated a number of times, the two
players can find a way to cooperate.

The idea that repetition can sustain cooperation is based on the thought
that individuals tempted to defect may be dissuaded from doing so from fear of
losing the benefits of cooperation in the future. For this dissuasion to be
effective, three conditions must hold. First, the future must matter enough to
outweigh the immediate benefits to any individual of failing to cooperate; that
is, other players must have at their disposal retaliatory strategies that “hurt”
the deviator sufficiently in future periods, even when future payoffs are dis-
~ o u n t e d . ~So, for instance, excluding those who breach their fishing quotas
from the fishing grounds in the future must be a sufficiently damaging prospect
to outweight any immediate gains from over-fishing. In the prisoners’ dilemma
example in Figure 1, the benefits to and costs of cooperation are symmetric, but
asymmetry of itself need not threaten cooperation so long as there exists, for
each player, a retaliation strategy capable of outweighing the gains to that player
of failing to cooperate.

4 ~ o r egenerally, imagine that if both players cooperate, they both receive X. If both defect, both
receive 0. If one defects and one cooperates, the player who cooperates receives -2, while the
player who defects receives Y. T h e only restrictions are that Y > X > 0, that 2 X > Y – Z and that
Z > 0. There is a discount factor g . Then we know that provided Y – X < gX/(1 - g ) there exists a retaliation strategy which consists of playing Defect for a finite number of periods in the event that the other player has played Defect after an agreement to cooperate, and which ensures that the other player is no better off from the defection. Let T be the lowest integer such that Y - X _< g X + g 2 ~ Then T is the smallest number of periods for which each player must threaten to + . . . + g T ~ . retaliate in order for the threat credibly to sustain cooperation. If, on the other hand, it happens that Y - X 2 g X / ( l - g ) , then there exists no finite T, and consequently no retaliatory strategy that can sustain cooperation.

Paul Seabright 119

Secondly, these retaliatory strategies must be credible, which means that,
once an individual has defected, it must be in the others’ interest to put the
retaliation into effect. For example, excluding those who have breached their
fishing quotas must not require an unreasonable level of effort on the part of
others in policing the fishing grounds. Abandoning an agreement to restrict
extraction rates of a mineral asset (as a punishment for free-riding by some
parties to that agreement) must not reduce its stock so substantially as to
damage the interests of the retaliators by more than the original free-riding
did. So when will retaliation be credible? It may be credible naturally (retalia-
tion may be what they would anyway d o in the circumstances, as when it
involves playing a Nash equilibrium of the prisoners’ dilemma game). Alterna-
tively, it may be true because of a credible agreement between the affected
parties to put the retaliation into effect. In the latter circumstance, retaliation is
itself a form of collective action, which must therefore be credible if the original
collective action is to be credible. It is in this respect that one can think of the
setting u p of police forces, inspectorates and similar institutions as a central
form of common property resource management. T h e formal mechanisms to
be discussed in the next section are therefore special cases of the more general
repeated game response to one-shot inefficiencies.

Thirdly, the benefits of cooperation in the future must themselves be
sufficiently probable to act as an incentive to cooperation in the present. Sheer
repetition of the game is not enough to ensure this. For example, if the game is
to be played a fixed number of times, then both players will know before the
last repetition of the game that defection in that last round cannot be punished
and that therefore cooperation is unlikely in that round. But knowing that,
they will each defect in the penultimate round. And knowing that, the argu-
ment by backward induction holds that they will defect even in the original
round.

For future cooperation to be a sufficiently probable incentive, one of a
number of conditions must hold. T h e game may be infinitely repeated, o r there
may be sufficient uncertainty about how many times it will be repeated. An
alternative solution is “reputation;” even a very small probability that the
player is of a type that intrinsically prefers to cooperate acts as an incentive to
all types of players to behave cooperatively, so long as the game is sufficiently
far from its final period for the loss of a reputation for cooperation to be costly.5
Another is bounded rationality, where a small probability that the player is of a
type to cooperate “irrationally” has much the same effect (Radner, 1980).
Finally, the one-shot game may have multiple Nash equilibria over which all
players have a strict preference ordering (Benoit and Krishna, 1985; Friedman,
1985; Fraysse and Moreaux, 1985). In all cases, the possibility of cooperation
depends upon players’ not discounting future payoffs too heavily (or

5 ~ e eKreps et al. (1982); the argument is sufficiently well known not to bear repeating in detail
here. Dasgupta (1988) provides an application of the reputation model to the problem of building
u p trust.

120 Journal of Economic Perspectives

equivalently, on their interacting at sufficiently frequent intervals); if they don’t
place much value on the future, the gains from short-term self-interested
behavior may be too great for any future inducements to outweigh.6 They must
also be able to observe one another’s behavior with sufficient reliability to
observe whether agreements are being kept.

T o this point, the considerations discussed in this section are all essentially
forward-looking: people will cooperate if they expect to gain in the future from
doing so. Much of the empirical literature on the management of common
property resources, however, stresses that historical considerations also play an
extremely important part in accounting for successful collective action. In
particular, traditions and institutions of collective action can increase the
likelihood of successful collective action in the future, and we often observe that
cooperative institutions work more successfully when they are embedded in a
context in which collective action has worked in the past. Alternatively put,
cooperation can be habit-forming (Seabright, 1993).

What can the theory of repeated games say about this phenomenon? One
possibility that immediately springs to mind is that all cooperative equilibrium
strategies in repeated games must be to some extent history-dependent, if only
in the simplest of ways: the possibility of retaliation depends on actions that are
sensitive to what other players have done in previous periods.7 So, a break-
down of cooperation in one period would be expected to lead to a failure of
cooperation in a future period, by way of retaliation. Unfortunately, this
suggestion is not very useful as a way of explaining a tendency for cooperation
to be habit-forming. What it tells us is that the use of threats that are history-

‘1n the limit, when the complete information game i s repeated infinitely often and there is no
discounting o f the future, the Folk Theorem states that any individually rational payoffs (that is,
payments that make continued participation preferable to withdrawing from the game) can be
supported as an equilibrium, by a suitable choice o f strategies to punish players who deviate from
the equilibrium behavior. T h e Folk Theorem i s couched in terms o f Nash equilibrium strategies
(and may therefore rely on threat strategies that are not credible out o f equilibrium). But an
extension by Aumann and Shapley (1976) and Rubinstein (1976) shows that any individually
rational payoffs can also be supported as a sub-game perfect equilibrium. T h e idea is to construct
strategies that punish players who fail to play their part in punishing those who deviate from
equilibrium behavior; the infinite horizon ensures that any player can always be punished for long
enough to prevent any deviation from being worthwhile. Unfortunately this result i s not necessarily
robust in the presence o f even very slight discounting o f the future, although Fudenberg and
Maskin (1986) show that it will be so under certain conditions (namely that the dimension o f the
space o f individually rational payoffs is as great as the number o f players). Abreu et al. (1990) prove
important and intuitive results for the case o f repeated games with discounting and imperfect
monitoring, including the proposition that the equilibrium average value set is monotonic in the
discount factor (which means, roughly, that an increased degree o f concern for the future always
results in increased benefits from cooperation).
7 ~ u t t aand Sundaram (1993) point out that tragedies o f the commons can be avoided even in
Markovian games where strategies are restricted to being functions o f the current state and cannot
draw on memory. This i s because the stock o f the resource can act as a state variable that in some
sense embodies a (restricted) memory o f past actions. In some equilibria there can even be
under-exploitation; however, efficient levels o f exploitation cannot be sustained by Markovian
strategies.

Managing Local Commons: Theoretical Issues 121

dependent can enable parties to achieve efficient outcomes; but if the outcomes
are achieved, the threats do not need to be exercised, so we may never see any
history-dependence in observed behavior. What we need to know is why
cooperation sometimes works and sometimes doesn’t, and whether the fact that
there has been cooperation in the past should by itself make any difference to
the prospects of cooperation in the future.

Another possibility is that, in the absence of effective means of communica-
tion between players, past history may act as a mechanism which enables them
to coordinate in selecting between the multiplicity of potential equilibria to
which we know repeated interactions give rise.8 However, it is hard to believe
that this is practically important for local commons. First of all, in the kinds of
cooperative institutions that are typically established to manage local commons,
there is no difficulty about communication. On the contrary, members may
spend a long time communicating with each other (or squabbling, to put the
matter less clinically), but may still fail to resolve their difficulties in implement-
ing successful collective action. Secondly, if individuals are seeking to coordi-
nate their actions, it is hard to understand why they should ever choose to
coordinate on any but efficient outcomes. If we observe failures of cooperation
in the past followed by failures of cooperation in the future, it seems perverse to
imagine that the reason for this is that players have chosen to coordinate on an
equilibrium with little cooperation (when they might have chosen to coordinate
on one with more).

So if none of these arguments really explains the observation that coopera-
tion does seem to be habit-forming, what sort of analysis does demonstrate the
point? T o begin, since cooperation often fails even when the opportunities for
communication are good, we can infer that cooperation is hard to sustain. This
suggests that most common property resource problems involve either high
discount rates (relative to the frequency with which opportunities occur for
repeated cooperation), or one-off benefits from defection that are high relative
to the per period costs to the defector of retaliation. This accords with common
sense. Suppose an institution is established to protect common grazing land in
a village. It may take some time to discover that the rules of grazing are being
flouted o r that the officers have embezzled the funds set aside to put up fences.
Even though the previously cooperative members may now withdraw their
cooperation in retaliation, the dishonest officers or the uncooperative grazers
may have benefitted by enough in the meantime for this retaliation to leave
them no worse off than they would have been by cooperating.

or example, Crawford and Haller (1990) develop a model in which agents in repeated coordina-
tion games use past behavior to assist their coordination among multiple equilibria in the future. I n
their framework, where there are multiple equilibria of each stage game, the choice of past
equilibria is used to coordinate on future equilibria. If applied to the prisoners’ dilemma, players
would need to use past strategies (which might not have been equilibrium strategies of the one-shot
game considered in isolation) to coordinate on future equilibria.

122 Journal of Economic Perspectives

In circumstances like these-namely, where the sustainability of coopera-
tion is a marginal matter-the presence or absence of trust will affect the extent
to which cooperation succeeds. By “trust” here I mean the expectation by
members of a group that other members will cooperate. T h e very fact that the
immediate benefits from defecting are large implies that it makes a significant
difference to individuals whether they cooperate anticipating similar behavior
on the part of others, or choose instead to defect without waiting for others to
do so first. A good analogy is a cease-fire during a civil war: if each side expects
the cease-fire to hold, it has less of an incentive to make a pre-emptive strike,
and consequently the cease-fire is more likely to hold.

This presence or absence of trust may itself depend on past traditions and
institutions; in short, institutions can channel trust. In Seabright (1993), I
develop a model of “habit-forming” cooperation in which the frequency of past
cooperation determines the probability of future cooperation. T h e basic idea of
the model is that people’s expectations about how cooperative others will be
may fluctuate randomly. If people’s moods are correlated, but not perfectly
correlated, then any one person’s expectation about the cooperativeness of
others will amount to an expectation about how likely others are to be
sufficiently optimistic about the prospects for cooperation to be willing to
cooperate themselves. Cooperation is then induced by “optimism about the
level of optimism,” which is something that pre-existing institutions can chan-
nel and enhance. T h e same paper reports an econometric study of milk
producers’ cooperative societies in India, which are organizations requiring
small farmers to sell milk at less than open market prices in return for the
provision of a number of collective benefits such as access to finance and
infrastructure. T h e study suggests that, controlling for directly economic vari-
ables, the presence of a prior history of cooperative institutions in the commu-
nities concerned was a positive predictor of cooperative society success.

What exactly does it mean to say that institutions can “channel” trust? One
possibility is simply that certain institutions, by giving people the opportunity to
undertake collective action, allow them to establish a reputation for cooperation
that will serve them well in the future. So, for instance, in the study just
reported, villages whose members had previously organized collective religious
festivals (as opposed to those where festivals were organized by sub-groups such
as caste), were more likely to make a success of milk-producers’ cooperatives.
Likewise, many voluntary organizations working in poor countries concern
themselves with promoting plays, festivals and sporting activities among disad-
vantaged groups, not only because of these activities’ intrinsic value but because
they know of their value in “building trust.”

A second possibility is more subtle, and appeals to the idea that institutions
may allow the establishment of “collective reputation.” For instance, Kreps
(1990) discusses the way in which the reputation of individuals undertaking
market transactions will be heavily influenced by the reputation of the firms to
which they belong; indeed, one of the primary purposes of firms is to transmit

Paul Seabright 123

reputation across cohorts of employees. Tirole (1993) proposes that the persis-
tence of corruption in a society may partly be explained by the fact that
younger generations “inherit” the reputation of their elders; those born to
corrupt elders will in consequence have less incentive to be honest themselves.
An unresolved theoretical question is why some institutions are more effective
than others at transmitting reputation across cohorts of members; but given
that they are effective, such institutions may, then represent a mechanism
whereby cooperation can be habit-forming.

Both these suggestions imply that trust is to be understood as a kind of
capital good, embodied either in individuals or in the organizations to which
they belong, and which acts as a state variable whose value influences the
probability of future cooperation independently of the direct associated
with such cooperation. In addition, informal institutions that enhance coopera-
tive management of common property resources may also act in other more or
less formal ways to change the direct payoffs. They may act as monitoring
mechanisms, for example: by helping members to observe the behavior of
others, they may make it easier to implement retaliation strategies. For in-
stance, Indian cooperative societies with relatively educated officers were re-
ported in Seabright (1993) to be more successful; closer investigation revealed
this to be not because the more educated were intrinsically more trustworthy,
but because they were more likely to have implemented mechanisms of quality
control that diminished members’ incentives to “cheat” by watering down their
milk. An alternative, more subtle possibility is that in circumstances where it is
unclear what kind of behavior is consistent with optimal resource management,
institutions may help members to coordinate on relatively simple (and there-
fore more easily monitored) standards of acceptable behavior (Kreps, 1990,
suggests this to be the main function of a corporate culture). A number of
empirical studies have reported the successful evolution within relatively short
periods of time of collective management institutions whose primary function is
monitoring and the clarification of rules (Feeny et al., 1990, p. 10-1 I).’

Whatever the mechanisms invoked, many recent contributions to the
literature have stressed that relatively informal collective management of com-
mon property resources can in the right circumstances avoid the severe re-
source degradation predicted by “the tragedy of the commons.” Nevertheless,
both empirical and theoretical arguments suggest that cooperative behavior

‘some writers on problems of collective action in developing countries have suggested that these
may often be modelled better as a coordination game (sometimes called an assurance game) than a
prisoners’ dilemma (Runge, 1986; Stevenson, 1991, especially pp. 73-76). I n a coordination game,
unlike the prisoners’ dilemma, it is in the players’ interests to cooperate even when they play only
once, provided they can be assured that others (or enough others, where multi-person games are in
question) will d o the same. It is obviously an empirical matter whether particular situations are
indeed better modelled as one type of game rather than another. However, one way of viewing the
literature on repeated games is as analyzing the circumstances under which the threat of retaliation
transforms a prisoners’ dilemma in the one-shot game into a supergame whose overall payoff
structure is in fact an assurance game.

124 Journal of Economic Perspectives

may be only partial, and the incentives of short-term self-interest only partially
held in check. Under what circumstances, then, can more formal implementa-
tion mechanisms make good the deficiency? And, given that formal incentives
are typically stronger than informal ones, are there any reasons why informal
incentives might nevertheless sometimes be preferred?

Formal Incentives for Cooperative Behavior

The distinction between formal and informal implementation mechanisms
is itself only an informal one. Nevertheless, a useful pragmatic line can be
drawn between cases where uncooperative behavior by individuals is met
merely by a withdrawal of cooperation by others, and those where cooperation
is enforced by rewards and punishments that are defined in law or in custom-
ary practice, and are enforceable by appeal to courts or other institutions of
arbitration. This section considers the theoretical rationale for three kinds of
formal inducement to cooperative behavior in the management of common
property resources: the privatization of property rights; the decentralization of
incentives within common ownership and control; and the delegation of man-
agement responsibility to an agent so that participants are limited to a monitor-
ing role.

Privatization of Property Rights: Can Trade Destroy Trust?
The case for privatizing property rights in what have hitherto been com-

mon property resources rests on the view that having an individual or firm own
the resource will lead to the resource being allocated in a more efficient way.
Any private property right requires specifying enforceable and appropriate
contractual relations. Sometimes the means of doing this (and especially the
technology embodied in a modern legal system) have only recently become
available in developing countries, so privatization is seen as a response to
changing conditions rather than an adverse judgment on the appropriateness
of collective management for previous conditions.

The desirability of privatization for any particular common property re-
source is, of course, an empirical matter. Stevenson (19911, for example,
demonstrates econometrically the higher productivity of pasturing under pri-
vate than under common property in Switzerland, while nevertheless accepting
that transactions costs may make privatization infeasible in some circumstances.
But in addition to the costs of specifying and enforcing rights, there are a
number of things that can go wrong in attempting to introduce private
property rights in what was once a common property resource; identifying
these factors will help to describe in which situations privatization is more or
less likely to succeed. All of the problems with privatization have their roots in
the fact that private contractual rights can provide effective incentives for only

Managing Local Commons: Theoretical Issues 125

some of the many individual actions that may be required for implementing an
efficient production plan. Other necessary actions may remain unenforceable,
either because they are unobservable by some of the affected parties or by the
enforcing authorities, or because they are too complex to be specified in
contractual form (actual contracts, in other words, are likely to be incomplete).
As a result, the attempt to enforce private contractual rights may lead to a
breakdown of whatever cooperative mechanisms may have evolved among
those who shared implicit, non-contractual rights in the common property
resource beforehand.

For example, the privatization of areas of forest for timber production may
fail to internalize all the externalities involved (so there will still be excess
production and inadequate replanting). It may also fail to respect some of the
implicit entitlements of those who previously used the forest for food, fuelwood
or medicine, in ways that are both inequitable and inefficient. They are
inequitable because implicit entitlements are still entitlements; and they are
inefficient because they fail to build on the fact that those who benefit from a
resource may also be induced to contribute to its maintenance, and some of
them may have a comparative advantage in doing so (those who live in the
forest may be in a position more easily to monitor its rate of degradation, for
instance).

Must private property make it more difficult to respect implicit entitle-
ment? It might be thought that the breakdown of pre-existing cooperative
mechanisms shows merely a failing in the particular system of private property
rights introduced, and has no implications one way or the other for the merits
or otherwise of private property in itself. But in fact there are two important
reasons, intrinsic to the nature of (most) private property systems, that suggest
how privatization may threaten implicit entitlements. First, privatization typi-
cally changes the relative bargaining power of those who depend upon the
resource, giving more power to those who acquire the property rights and less
to those who do not, in a way that may be sufficiently asymmetric to undermine
the mutual dependence that was the incentive to cooperate originally. For
example, privatizing grazing land may not completely prevent encroachment,
but may reduce the incentives of those without private rights to prevent erosion
on the land belonging to those who do. Privatizing forest land, by making forest
dwellers unable to rely on traditional sources of food or fuelwood, may
encourage more destructive practices (say of slash-and-burn) and discourage
care of newly-planted saplings. In addition, it is difficult to frame formal
contractual rights so as to safeguard traditional entitlements (a clause requiring
landowners to grant “reasonable” access to “responsible” grazers or forest
dwellers would be very hard to enforce).

In fact, it is quite possible that by diminishing incentives for informal
cooperation, privatization may make both parties worse off-including the
owner of the newly created property right! This possibility is suggested by the
game in Figure 2. In this game, Player 1 has a property right, which means that

126 Journal of Economic Perspectives

Figure 2
The Dilemma After Privatization

Player 2
Cooperate Defect

1 receives 4 1 receives – 10
Cooperate

2 receives 4 2 receives 5

Player 1
1 receives 5 1 receives 3

Defect 2 receives – 10 2 receives – 3

if both players defect, Player 1 ends up better off than Player 2. Consequently
the threat of retaliation by Player 2 can no longer hurt Player 1 sufficiently to
induce him to cooperate. But notice that in spite of this, cooperation is still
better for both players than defecting.” So there is a sense in which members
of a common property resource can in some circumstances be made better off
by being denied rights that appear superficially to be to their advantage.

There is an air of paradox about this conclusion, since it might seem that
Player 1 could simply offer to relinquish his property right. But voluntary
relinquishment may not be credible, since (if cooperation breaks down) there

ore generally, following the framework from note 4, imagine that it remains true that if both
players cooperate, both receive X, and if one cooperates while the other defects, the defector
receives Y while the cooperator receives -Z. However, if both players defect, it is now true that the
player with the property right receives A , while the player without the property right receives – A .
Assume that 0 < A < X, Z. This shift may be enough to prevent Player 2 from credibly threatening a retaliation sufficiently costly to Player 1 to enforce the cooperative outcome. T o see this, note that even if there exists a T such that

which is the condition for there to exist a cooperative equilibrium of the infinite repetition of the
game in Figure 1, there may exist no T * such that

which is the analogous condition for Figure 2. Indeed, given the value of T, for T * to exist requires
(by manipulation of (1) and (2)):

and for any G there evidently exist values of A sufficiently close to X such that (3) is not satisfied.
Notice that the shift in bargaining power has made both players worse off (not just player l), since
now their discounted equilibrium payoffs are gA(1 – g ) and gA(g – 1) respectively, which by
assumption are less than those of the cooperative equilibrium.

Paul Seabright 127

may be nothing to prevent him from re-asserting it. Thus a promise by
landowners not to prevent entry to their land by forest dwellers may not be
credible given the fact that private property entitles them to bring actions for
trespass; the only way for them to make this promise credible may be for there
not to be privatization at all. And intermediate kinds of property (such as
logging rights) may not give a credible mechanism of enforcement to the forest
dwellers (as inhabitants of the Amazon basin have discovered).

This leads naturally to the second and more subtle reason why private
property may make it difficult to respect implicit entitlements. This is that some
of the mechanisms that sustain informal cooperation-like a reputation for
cooperating or the threat of retaliation-require reasonably long time horizons,
the reliability of which may be undermined by the tradeability of private
property rights. For example, those who farm communally owned land may be
prepared to invest in the soil’s fertility by using organic fertilizer, may plant
trees to prevent erosion and so on. But once ownership is privatized, even an
assurance that present owners would continue to respect the implicit entitle-
ments of farmers to the fruits of their investment may be inadequate if present
owners are able at any time to sell their land to new owners without such a
reputation.

Exactly this kind of argument has been advanced in the context of firms by
Shleifer and Summers (1988), who point to the possible adverse consequences
of highly liquid markets in the ownership of firms. Hostile takeovers, they
suggest, may result in “breaches of trust” when incoming management teams
cut wages or fire workers who had previously invested in firm-specific human
capital for which existing management had promised adequate remuneration
(but without being able to make such an understanding contractually binding).
Even in the absence of an actual takeover, the knowledge that share markets
are sufficiently liquid to make a takeover possible is, they suggest, a serious
disincentive to efficient levels of investment in firm-specific human capital.”

Intuitively appealing as this argument is, it is somewhat trickier than it
sounds. T h e reputation model suggests that owners will be deterred from
inadequately rewarding the specific human capital investments of workers by
fear of the loss of their reputation. However, that reputation is itself a sunk
cost; if owners sell the firm, the best price they can receive for it from new
owners is the value of the firm under owners who lack a reputation for
honoring implicit contracts; the price will discount the cost to them of the
retaliation they may expect to face. Consequently, the incentive to sell the firm
to new owners who will breach implicit contracts is no greater than the

I I This has striking affinities with the argument in Hirshman (1970). According to him, members of
an organization may resort to the options of “exit” or “voice” if the organization is not being run as
they would wish; but the exercise of voice typically generates positive externalities for members of
the organization, and excessive ease of exit may therefore result in inadequate use of voice. Similar
arguments underlie some people’s opposition to easy divorce laws.

128 Journal of Economic Perspectives

temptation to breach implicit contracts directly.12 Or, to put it another way,
selling the firm to disreputable owners is itself a disreputable act. So the
tradeability of property rights as such has no direct efect on the incentive properties of
long-term relationships.

This does not mean that there is nothing in the argument that tradeability
of property rights can weaken incentives for relationship-specific investment.
But such weakening, if it occurs, is not due to the intrinsic undermining of the
credibility of reputation or the threat of retaliation by the tradeability of
property rights alone. Something more must be added to the story. Suppose,
for example, the new owners differ from the old in that breaching the implicit
contract offers them a higher payoff. For instance, new owners may be less
concerned about the anger and resentment of the existing workers or tenants
on the common resource. Then they may be less deterred by the threat of
retaliation and may consequently be willing to offer a price for the asset that
does not discount for the expected retaliation by as much as the cost of such
retaliation to the original owners.

What welfare consequences follow therefore from the tradeability of prop-
erty rights? It may happen that the welfare of the owner of an asset is higher if
the owner is prevented from selling than if the owner’s rights are tradeable.
This will be true in the case where the owner is unique in some way (perhaps
through having enjoyed a long-standing relationship with workers or tenants),
making it likely that any alternative owner will have more immediately to gain
from breaching the implicit contracts. Given the possibility of a sale, this risk
will dissuade cooperation with the present owner. Conversely, owners that can
commit themselves not to sell, or to do so only subject to safeguarding the
interest of workers and tenants, may thereby help themselves as well.

In many common property resources, there is no absolute prohibition on
trading the right to membership, but typically the admission of new members
requires the consent of (at least some of) the existing members, a stipulation
that may be enough to mitigate the problem described above. Systems of
private property, by contrast, often face difficulties, since it is impossible to
specify formal incentives to safeguard the interests of existing members (in-
deed, that is typically the reason why there were implicit rather than explicit
contracts in the first place).

12 Using the notation in footnote 4 , assume that Player 1 (who moves first) represents a worker or
tenant who must decide whether to make a relationship-specific investment, while player 2 decides
whether or not to reward this. Cooperation will be an equilibrium i f Y – X < g X / ( l - g). What difference does it make i f the owner now has the opportunity to sell out instead o f deciding whether or not to reward the investment? Clearly the owner will sell i f the price P received is greater than or equal to the value o f continuing to own the asset, i.e. i f P 2 X / ( 1 - g). How much would a new owner be prepared to bid i f she were intending to breach the implicit contract? T h e first period payoff would be Y , then there would be a period o f retaliation for the minimum necessary T periods, and only then would the benefits o f cooperation resume. So the value V to the new owner i s Y = g T + l ~ / ( l- g). Into this expression we can substitute the equation defining T in footnote 4 , to yield that V < X / ( 1 - g ) and consequently that V i s always less than P . This shows that any owner who would honor implicit contracts cannot receive a price greater than or equal to the continuation value o f the firm from an owner who would not.

Managing Local Commons: Theoretical Issues 129

Two caveats are in order. First, it has so far been assumed that the new
owner differs from the old owner only in receiving higher payoffs from
choosing not to cooperate. If, however, the new owner is also more efficient at
managing the firm in equilibrium, the costs of denying tradeable property
rights would be correspondingly higher. There is a trade-off: private property
may damage implicit contracts, but it is also likely to match owners more
efficiently to their assets. Secondly, the welfare of the old owner is not the only
important consideration, since that owner did not internalize the welfare of
workers/tenants in decisions. So introducing tradeable property rights, even if
it is in the interest of owners, may damage the interests of workers and tenants
by enough to outweigh this benefit.

T o summarize, it should be clear that private property rights not only may
fail to solve the problems of externalities that bedevil common property re-
sources. When contractual relations remain in important respects incomplete,
private property may also weaken the mechanisms of cooperation that previ-
ously existed, either by shifting the bargaining power of the parties so that they
no longer share enough interdependence to make cooperation credible, or by
weakening the credibility of long-term contracts. However, we have also seen
that the circumstances under which the latter problem occurs are somewhat
special. Long-term implicit contracts are not weakened by the mere fact of
tradeability of property rights in assets; it is tradeability plus a sufficient
likelihood of the presence of potential new owners with different out-of-
equilibrium payoffs that is the key factor. Establishing that such circumstances
exist empirically may require quite careful examination of the evidence.

Decentralization of Incentives under Common Management
It often happens that the members of a local common property resource

meet and decide on systems of rewards and penalties to implement a produc-
tion plan. The most frequent means of doing so are production quotas,
reinforced by systems of monitoring, with fines or the threat of exclusion from
the common property resource altogether for those who breach the agreement.
Such quotas have been evident in agreements over grazing land (see
McCloskey, 1976, for the medieval English commons, and the contributions
surveyed in Feeny et al., 1990); in control of fisheries (Berkes, 1986); and in the
production agreements of the OPEC oil cartel. As the discussion to this point
would imply, cooperation will be feasible in these situations only when the
penalties for breaching quotas are sufficiently large relative to the gains from
doing so.

One circumstance that favors the chances for cooperation is when members
of the common property resource also share access to additional resources.
Suppose the common property resource is grazing land or an irrigation system,
but it is owned by a village; individuals who breach the agreed quotas can be
punished by being denied access not merely to the common property resource
but to some of the other benefits of village membership. When these additional

130 Journal of Economic Perspectiues

benefits are sufficiently important, village leaders have the power to levy fines
or impose other punishments that substantially enhance the credibility of the
cooperative outcome.

Why are quantitative instruments, like quotas for enforcing production
plans, so much more common than price-based instruments like taxes? One
answer is that for many common property resources that involve renewable
resources such as forests or fisheries, the damage done by misjudging the
optimum utilization rate may be very much higher than that due to misjudging
members’ willingness to pay. For example, an unexpected surge in demand
one year would under quotas lead to unexpectedly high prices; this may be
preferable to the outcome under a tax system, namely unexpectedly high
production which could leave the fishery seriously depleted and requiring
several years of nursing back to optimum levels. In general, when the optimum
use of a resource lies quite close to the level below which the resource’s capacity
for self-renewal is seriously damaged, and when some uncertainty is involved in
how any control mechanism will work, a quota will pose lower risks than a price
mechanism (Weitzman, 1974).

A second reason for the prevalence of quotas is the comparative ease with
which they allow decentralization of the monitoring process. It is often easier
for other members of the common property resource to observe whether a
quota has been violated than to know whether a particular member is evading
the terms of some (possibly non-linear) optimum schedule of Pigouvian taxes.
T h e former can usually be monitored by observing production, which happens
within the common resource, whereas the latter may require monitoring of
market transactions, which can happen anywhere. This consideration may also
account for the observed prevalence of systems of strict equality among mem-
bers in production rights even when efficiency considerations might suggest
otherwise: Feeny et al. (1990) report agreements to fish in rotation to ensure
equal access to the best sites in Turkey; random assignment of harvest produce
to households in meadow commons in Japan; and revenue pooling regardless
of the productivity of individual members in a fishing cooperative in New
Jersey. I n all of these cases a visible commitment to equality of treatment,
besides facilitating monitoring, may also have helped to build u p mutual trust.
When a group simply pools its output, it assures that the benefits of any
excessive production are shared among its members, rather than privately
appropriated.

Delegation of Management Responsibility to an Agent
All forms of collective management involve some asymmetry in the degree

of involvement of different parties. At one end of the spectrum is the practice of
delegating managerial responsibility to an agent charged with managing the
asset on behalf of others; at the other, full participatory decision-making. In the
middle of the range, a smaller group of agents are chosen by the larger group,

Paul Seabright 131

which simply means that the collective management problem of the original
owners of the common property resource is reproduced in miniature among
the agents.

T h e delegation of responsibility to an agent does not, of course, leave the
original members with nothing to do (otherwise they might as well just sell the
asset); but it does limit their activities to a monitoring rather than a fully
participatory role. So when is it desirable for members of a common property
resource to specialize-some in management, some in monitoring-rather
than all attempting a combination of the two? And what might be the source of
gains from specialization? Another way to pose these questions is to inquire
under what circumstances economies (or possibly diseconomies) of scope be-
tween the management and monitoring tasks are offset by diseconomies (or
possibly economies) of scale in the management and monitoring tasks
thpmselves.

Some jobs can be easily monitored using almost none of the skill or the
effort that are required for the task’s performance: someone who has never
held a spade can tell fairly easily how fast someone else is digging. Others need
much more: refereeing a scientific paper may require as much skill, as well as
(notoriously) sometimes almost as much effort as writing it. Delegation of
management responsibility is much more likely where the management of the
resource resembles the first kind of task rather than the second, since those
who delegate thereby save themselves a substantial amount of work.

But is is important not to confuse the ease with which management can be
monitored and the ease with which management can itself monitor any re-
sources it employs. For instance, suppose a community needs to dig an
irrigation channel. It makes sense to delegate this job to a manager, since the
main activity (digging) can be monitored by the manager, and it is easy for the
rest of the community to see how fast the channel is progressing. By contrast,
suppose the community wants to landscape some parkland. Again the main
activity is digging, and it is just as easy for the manager to monitor this. But it
now matters very much how and where this digging takes place, and it is
harder for the rest of the community to monitor the management of the project
without interesting themselves substantially in its details. Collective manage-
ment is in such circumstances a more likely outcome.

Even in the latter case the evident economies of scope between the
management and monitoring tasks are to an extent offset by economies of scale;
it is senseless to duplicate the management of all the little tasks involved in a
landscaping project. Likewise the job of policing a collective agreement to
restrict grazing on common land may be worth delegating to employed guards
during the night hours, even if it is unnecessary during the daytime because
other members can combine the policing task with their own grazing.

T h e benefits of delegation will also depend on the extent to which the
conflicts of interest between the agent and the principals who are the members
of the common property resource can be minimized through appropriate

132 Journal of Economic Perspectives

remuneration procedures. As the literature on principal-agent problems within
firms has emphasized (Jensen and Meckling, 19761, aligning the interests of
agents with those of principals is usually restricted by the risk aversion of
agents, which makes it very costly for them to bear the full marginal responsi-
bility for their actions. Consequently, the incentives for managing a firm usually
consist of a combination of direct financial incentives (like profit-related pay
and stockholdings), monitoring by principals, and contingent transfers of con-
trol rights to other parties in the event of certain management difficulties, like
bankruptcy (Aghion and Bolton, 1992). Recent work in this field has empha-
sized that for such incentives to be effective, those who have the ability to
monitor management must have the power to intervene if management acts
contrary to principals’ interests, and also the interest in intervening on behalf of
the principals (Dewatripont and Tirole, 1992).

This lesson is nowhere more important than in those circumstances where
management of a common property resource has been taken over by the state.
T h e state differs from other agents to whom management of a common
property resource might theoretically be delegated in that the chain of delega-
tion is typically longer; citizens delegate to their political representatives who
delegate to government ministers who delegate to senior civil servants who
delegate to junior civil servants and so on. This long chain of delegation may be
unavoidable for non-local commons, but for local commons, shorter chains of
delegation are probably feasible. If agents of the state are to be involved in the
management of a common resource, they need an incentive to act in the
interests of those to whom the resource notionally belongs. Where state man-
agement has worked, it has usually been through local involvement and
empowerment of those who depend on the resource for their livelihood (see
Chopra, Kadekodi and Murty, 1989, for the example of forest resources in the
Himalayan foothills). It is not necessarily that their monitoring abilities are
superior to those of the state’s agents-the latter may be able to call on more
sophisticated monitoring technologies-but their interests in the optimal man-
agement of the resource may be much greater.

T h e principal-agent literature has tended to emphasize the problems faced
by dispersed principals in monitoring the activities of their agents: in this case,
the problem of citizens in monitoring their government. A more realistic
approach would recognize that in many principal-agent problems it is those
who are notionally the agents who write their own contracts, subject to a
greater or lesser degree to the power of veto by their principals. Agents can
thereby become entrenched, implementing policies in their own private inter-
ests, owing to the costs to dispersed principals of organizing to dislodge them.
Nowhere is this more true than when principals are voters and their agents are
the many kinds of employees of the modern state. Much of the reaction against
state management of local common property resources (whether these are
traditional environmental common property resources or others such as
industrial enterprises) can be seen as a rewriting by citizens of the terms of their

Managing Local Commons: Theoretical Issues 133

contracts with managing agents, a rewriting that often occurs drastically be-
cause the transactions costs between citizens mean that it is forced to take place
infrequently.

Conclusion

It can be easy for economists from industrialized countries to disparage
developing country management of common property resources, because
property rights aren’t clear, monitoring arrangements seem very informal, and
government agencies are unresponsive to citizens. But of all the professions,
economists should perhaps be most sensitive to the fallacy that if the govern-
ment isn’t managing something according to a formal plan, then great ineffi-
ciency must be occurring. Likewise, they should be wary of assuming that
moving from one situation of imprecise incentives to another with more formal
but still somewhat imprecise incentives will always improve efficiency. Local
communities have often evolved sophisticated informal methods of managing
common property resources. As developing countries move towards greater
clarity and enforceability of laws, towards greater reliance on markets, and
perhaps towards more democratic government, it is important that these
mechanisms not be ignored, disparaged or lost.

a I should like to thank Jacques Crimer, Jean Tirole, Bhaskar Vira and the editors of
this journal for very helpful comments and advice.

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You have printed the following article:

Managing Local Commons: Theoretical Issues in Incentive Design
Paul Seabright
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[Footnotes]

2

Regulating Endangered Species
Timothy Swanson; Patrick Bolton; Alan Manning
Economic Policy, Vol. 8, No. 16. (Apr., 1993), pp. 183-205.
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6

The Folk Theorem in Repeated Games with Discounting or with Incomplete Information
Drew Fudenberg; Eric Maskin
Econometrica, Vol. 54, No. 3. (May, 1986), pp. 533-554.
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6

Toward a Theory of Discounted Repeated Games with Imperfect Monitoring
Dilip Abreu; David Pearce; Ennio Stacchetti
Econometrica, Vol. 58, No. 5. (Sep., 1990), pp. 1041-1063.
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8

Learning How to Cooperate: Optimal Play in Repeated Coordination Games
Vincent P. Crawford; Hans Haller
Econometrica, Vol. 58, No. 3. (May, 1990), pp. 571-595.
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THE MANAGEMENT
OF COMMON PROPERTY
RESOURCES:
Finding a Cooperative Solution

Robert

W
hen will villagers come together to produce goods and ser-
vices that they all need but cannot provide individually? In
what circumstances will those who face a potential “tragedy

of the commons” be able to formulate rules by which the tragedy is
averted?

Many writers on collective action are inclined to think that the
circumstances are very limited. They argue that people in a situation
in which all could benefit from cooperation will be unlikely to coop-
erate without an external agent to enforce agreements. Likewise,
many theorists on property rights argue that common property re-
sources will be overexploited as demand rises, so only private enclo-
sure or state regulation stands a chance of preventing such a result.1

This article offers a critique of some of the analytical arguments used
to reach these conclusions and argues that they have been inappro-
priately applied to certain types of village resources. It then discusses
how to judge whether villagers will be able to sustain local rules of
restrained access to common property resources and interprets the
evidence from a study of forty-one villages in South India.

Clearly there can be no general presumption that collective action
rather than privatization or state regulation will work: witness the
frequency of degraded grazing commons, despoiled forests, overex-
ploited groundwater, and depleted fisheries. But there are many exam-
ples of villagers collectively managing property for long periods. Pri-
vatization or state regulation is therefore not always essential. A third
option—local collective action—needs to be taken seriously. Because

© 1 9 8 7 The International Bank for Reconstruction and Development/The World Bank 219

less public money is likely to be needed for local collective action than
for either privatization or state regulation, it makes financial sense to
establish local rules where circumstances permit.

Common
Property

and
Common-Pool
Resources

On a continuum of property rights, exclusive possession (freehold)
is at one end. At the other is no property, as in ocean fisheries or the
atmosphere. In between lies common property, where the rights to
exploit a resource are held by people in conjunction with each other.
These rights may take several forms: they may allow unlimited exploi-
tation for those within a specified group (as happened in commercial
fisheries under national jurisdiction) or they may stipulate limits for
each user (as in most commercial fisheries today or as in “stinting” of
a grazing commons).

Of course, the same type of resource may be exploited under a
variety of property rights. This article deals with those resources that
might be called “common-pool” resources—a subset of public goods,
as that term is used in economics. All public goods have the property
that many people can use them at once, because exclusion is difficult.
But some public goods yield infinite benefits, in the sense that if A
uses more there is not less available for others (lighthouses and weath-
er forecasts, for example). Common-pool resources, by contrast, are
public goods with finite, or subtractive, benefits: if A uses more, less
remains for others. Common-pool resources are therefore potentially
subject to congestion, depletion, or degradation (Blomquist and Os-
trom 1985; Randall 1983).

Groundwater is an obvious example of a common-pool resource. It
can be used jointly, but use is subtractive. So when water is scarce,
the groundwater table is likely to be depleted. Canal irrigation water,
unfenced grazing land, and unfenced forest all meet the same criteria.
These three resources—water, grazing, and trees—are vital to the
livelihoods of millions of people in developing countries; the question
of how to prevent their overexploitation as population grows is im-
portant for development policy.

The prevailing answer runs as follows: when people are in a situa-
tion where they could mutually benefit if all of them restrained their
use of a common-pool resource, they will not do so unless an external
agency enforces a suitable rule. Each individual has an incentive to
ignore the social costs of his behavior for fear that others will exploit
the resource before he does. As a result, the rate of aggregate use
exceeds the physical or biological rate at which the resource renews
itself (Ostrom 1985b).

This argument has been used to justify far-reaching proposals for
changing the way that common-pool resources are managed (Ostrom
1985a; Runge 1986). According to one school, full private property

220 Research Observer 2, no. 2 (July 1987)

rights over the commons are a necessary condition for avoiding over-
exploitation (Demsetz 1967; North and Thomas 1977; Johnson 1972;
Picardi and Siefert 1976). According to another, it is essential to give
an external agency—usually the state—full authority to regulate the
commons (Carruthers and Stoner 1981; Hardin 1968). For both
schools, the policy issue is simply how to achieve the desired change
with the least opposition from those involved.

Defining the conditions under which users of common-pool re-
sources may voluntarily restrain their use can be considered as a
subproblem of the theory of collective action, also known as the
theory of public goods. Collective action is action by more than one
person intended to achieve a common goal or satisfy a common
interest (that is, a goal or interest that cannot be obtained by an
individual alone). Achievement means that a public or collective good
has been provided. The collective action might be setting and observ-
ing a rule of restrained access to a common-pool resource, and the
public good might be the sustainable exploitation that results.

One of the theories that has generated pessimism about the viability
of collective action is Mancur Olson’s “logic of collective action”
(which might better be called the illogic of collective action, or the
logic of collective inaction). His core proposition is this: “unless there
is coercion or some other special device to make individuals act in
their common interest, rational, self-interested individuals will not act
to achieve their common or group interests” (Olson 1971, emphasis
added). In other words, the theorem says that (a) voluntary collective
action will not produce public goods, and (b) collective action based
on selective (that is, excludable) penalties or rewards may produce
public goods. Existing cases of common interest groups are thus to be
explained by selective punishments or inducements.

My findings question this argument.

Theories
of Collective

Action

The conventional view of Indian villages is that they lack any real
public realm. A number of men are regarded as “big men,” in some
sense first in the village. But there is no clearly defined social domain
or institution separate from state authority where activities of a public
nature are carried out, no center of community management other
than the lowest levels of the state apparatus itself, and no machinery
for raising resources for public (village) purposes other than through
state-sanctioned taxation.

I analyzed forty-one villages in South India (Kurnool district, An-
dhra Pradesh), thirty-one of which are irrigated from one or another
of two large canal systems, while the other ten are dry. Despite the

Indian
Villages

Robert Wade 221

conventional view to the contrary, a significant number of these vil-
lages do provide public goods and services through local arrange-
ments that have nothing to do with outside bodies, whether govern-
ment or voluntary agencies.

The Public Kurnool district is semiarid; rainfall averages 620 millimeters a year
Realm m a u m m o d a l distribution. Population density averages 105 people a

square kilometer (1971), up from 53 in 1870. Seventy percent of
the cultivated area is under foodcrops; only 12 percent is irrigated.
Thirty-four percent of villages are supplied with electricity (1971).
There is one tractor for every one or two irrigated villages, and many
fewer in rainfed villages (1980). Most variation in real wage rates is
contained within the range of 1.5 to 4.5 kilograms of foodgrain a day.

In those villages that have a public realm, it consists of four main
institutions: a village council (distinct from the statutory Panchayat,
which is moribund in all the forty-one villages); a village standing
fund (distinct from local government moneys); a group of village
guards, employed by the council to protect crops from livestock and
thieves; and a group of “common irrigators,” employed by the council
to distribute water to the rice fields and to help get more water to the
village through the government-run canal. The council, and through it
the field guards and common irrigators, are loosely accountable to an
annual meeting of all the village’s farmers.

The council also organizes the supply of many other public goods
and services, such as repairing wells, ridding the village of monkeys,
and making donations for a new primary school or a building where
sick animals can be treated, and so on. All these services except water
distribution are financed from the village standing fund, for which the
council raises money in a variety of ways.

Take K village as an example. Its population is just over 3,000. The
council has about nine members (the number is fixed for any one year,
but varies slightly from year to year). It has authority to make deci-
sions affecting all the village. The village’s standing fund spends about
Rs 10,000 a year (in an economy where a male agricultural laborer
gets Rs 4 a day outside of seasonal peaks). The standing fund pays the
salaries of the field guards. Four are employed full-time for most of
the year, and another two to four are added as the harvest approach-
es. About twelve common irrigators are employed for up to two and a
half months, for about 1,200 acres of first-season rice. At harvest
the common irrigators supplement the field guards in protecting the
crops.

In the sample of thirty-one canal-irrigated villages, eight have all
four of the main corporate institutions—council, fund, field guards,
and common irrigators; eleven have some but not all; and twelve have

222 Research Observer 2, no. 2 (July 1987)

none. These proportions are not necessarily typical of the whole area,
since the sample was drawn not randomly but with an eye to ease of
access and a representative range of water arrangements. Among the
ten dry villages, eight have field guards; six have a village council; and
six have a village fund.

The impetus for central (village) control comes primarily from two
distinct sources of social conflict and production loss. Trespassing
animals and thieves are one. Unrestrained use of irrigation water is
the other. These are discussed in turn, using K village as an example.

K has a population density of 159 people a square kilometer. With
this density goes a farming system of annual cropping (at least one
crop on each plot each year) and multiple cropping where irrigation
permits. Little waste or yearly fallow land is left; the village has no
common, in the sense of a large area available for common grazing
for a year or more. But oxen and buffalo are needed for traction, and
they must be fed. During the growing season they graze close to the
crops, on the verges or on small areas of fallow, which are treated as
commons. Because fields are not fenced, the animals must be tethered
or shepherded. But the incentives for careful shepherding or tethering
are asymmetrical—I may not be unhappy to see my animals get fat on
your grain. The rationale of the field guards is to make the incentives
less asymmetrical. During the medieval and early modern period in
Europe, the open-field system solved the problem primarily by regu-
lating the cropping; these Indian villagers solve it mainly by regulating
the livestock.

If the field guards catch an animal grazing a standing crop, they
take it to the village pound, where it remains until its owner pays a
fine. If just a few animals are involved, the fine is a flat rate—Rs 2 per
animal during the day, Rs 4 at night. The rate is set by the council;
the field guards collect and keep the fine, dividing it equally among
themselves. If many animals are involved, the council uses its discre-
tion. The fine may run into hundreds of rupees. The field guards
collect it, keep 25 percent, and hand the rest over to the standing
fund. (In most villages the owner of the damaged crop is not compen-
sated.) The field guards do not enforce a stinting. The decision about
how many animals to own and graze is left to each individual.

After the harvest of most of the rainfed crops in February, large
areas of stubble become available for grazing. (Even in irrigated vil-
lages, the area under rainfed crops is generally greater than the irri-
gated area.) Each landowner could reserve his stubble for his own
animals or those he chose to allow. He could do so by posting guards
around each field or by fencing. But the cost of either method—the
cost of privatizing the stubble—is very high; all the more so as each

The
Management

of Grazing

Robert Wade 223

landowner tends to have his holding divided into several scattered
plots (McCloskey 1975). So, as in the open-field system of Europe, the
stubble is put in common; private rights to the product of the land
extend only to the crop, not to the crop residues.

How, in the “corporate” villages, is this commons managed? Since
the village’s own stock of animals is adjusted to the availability of
year-round grazing, after the harvest it has some surplus grazing,
which it could rent out to herdsmen from drier parts of the district.

The market for grazing and manure is organized in two ways. In
one system, a small group of herders bargains with the council for
exclusive access to the village’s grazing. The bargain states how many
sheep and goats they will bring, when they will come, how long they
will stay, and how much they will pay for the franchise. Once the
bargain is made, those herders have exclusive claim to the village’s
grazing, and others can enter only as some leave. Their flocks graze
over the stubble by day. By night, when the animals drop most of
their manure, they are put on the plots of particular landowners, who
pay them an agreed nightly rate per animal. So the herders as a group
pay the village a lump sum for access to the commons; and they
individually get back part of what they pay through the sale of
manure.

The second method (used in K, among others) is more complex.
Again, a group of herders obtains exclusive access. But instead of a
group rent, an auction is held regularly (every four days in K) to
decide who will have each flock on his land at night up to the next
auction. The auction is arranged by the village council. Half the
winning bid (for each flock) is then paid to the herder, and half goes
to the village fund. In K, some 9,000 to 13,000 animals commonly
enter the village for about six weeks, and the village fund gets about
Rs 5,000 in return.

Such a large number of animals entering the village when some
crops (mainly the irrigated ones) are still standing poses a serious risk
of loss for those crop owners. The response is to tighten the regula-
tion of the livestock in two ways. One is to stipulate rules for both
herder and landowner. These rules are read out at the first auction of
the year and may be read out again if infringed. They are worth
repeating here because they do not fit easily with the view that Indian
villagers cannot, so to speak, get their act together (although they
may seem unremarkable compared with the elaborate by-laws of
open-field villages in medieval England cited in Ault 1973).

For the herder:

• He must take the flock to the designated field by 6:30 p.m. and keep
it there until 8:00 a.m.

• He must not allow the flock to graze standing crops.

2 2 4 Research Observer 2, no. 2 (July 1987)

• He must deposit with the council half the money paid to him for
the first “turn” (four nights); if he leaves before completing four
turns (sixteen nights), he forfeits his deposit to the village fund.
(This is to discourage herders from leaving before the farmers have
had their fields manured and cleared of stubble.)

• He must stay within the village boundary; if the farmer asks him to
go to a field outside he must refuse.

For the farmer:

• He must keep the flock within the village boundary.
• If he prefers to pay the fund or the herder in kind rather than cash,

he must make the conversion at the rate (in early 1980) of Rs 1.25
per measure of hybrid sorghum or Rs 1.50 of “local” sorghum.

• To help the herder guard the flock at night, he must provide two
men for each 2,000 head. Hired guards must be paid Rs 3 a night,
or the equivalent in grain. (This is to prevent the farmer from
sending nonablebodied men, who could be paid less.)

Such rules are not self-enforcing. Any one farmer would have an
incentive to cheat, by not providing the stipulated number of guards
or by bringing the flock to a field outside the village boundary.
So joint regulation is carried further by means of village-appoint-
ed guards.

To pay the guards, it would be possible for the council to set a flat
rate—so much per cultivated acre—which each landowner had to
pay. But such an arrangement would be vulnerable to free riding: a
farmer could delay payment indefinitely, expecting that others would
not similarly delay. In most villages this free rider problem is avoided
by raising the money for the guards’ salaries from a collective source.
The chief source is the money received from the sale of the grazing
franchise, which is generally enough to pay for a semipermanent team
of field guards.

The “corporate” irrigated villages tend to have several other
sources of revenue for the standing fund, based mostly on the sale of
council-sanctioned franchises. In addition to the grazing franchise, a
franchise to sell liquor is a valuable source of revenue. By law the
franchise is sold in a government-run auction. However, the corporate
villages usually send just one person from their village, thus acquiring
the franchise at the lowest price. They then auction it within the village
which, with competition, produces a higher price. The difference be-
tween the two prices goes to the village fund. Or again, one village in
the sample has an irrigation tank (a small reservoir). Each year the
council stocks it with fingerlings, and later in the year auctions the
franchise to catch the fish, the money going to the fund. Some villages
auction the right to collect a commission on all their grain sales.

Robert Wade 2 2 5

The
Management
of Irrigation

Any irrigation system that experiences water shortages poses an
inherent conflict between farmers upstream and those downstream.
Those upstream have first access, and their supply is relatively abun-
dant; how much they take determines how much the downstreamers
will get. Without some rules about access, continual conflicts are
likely.

The villages in the sample are irrigated from large, government-run
canals and grow rice in the first (wet) season. The rice is transplanted
in late July or early August and harvested in December and January.
By the end of September the heavy rains have normally stopped, so
the crop depends on canal water. Common irrigators are then ap-
pointed to allocate the scarce and fluctuating supply of canal water
over the village’s land and also to procure, by various means, more
water from the government-run supply (which may include surrepti-
tiously blocking the outlets of upstream villages).

This arrangement is notable in two respects. First, the common
irrigators do not decide how much land will make a claim to the
irrigation water; that is left to individual farmers (as are decisions
about how many animals to graze). Second, however, once the com-
mon irrigators are appointed, they take important decisions out of the
hands of individual farmers, in the name of a villagewide authority.

The criterion used by the common irrigators is “adequately wet-
ted.” Each field is entitled to be adequately wetted, but it cannot get
more water until the other fields downstream from that outlet (most
villages have several outlets) have also been adequately wetted. This
criterion is quite different from the open access, first-come-first-served
rule that prevails before the common irrigators are appointed. The
criterion is also quite different from the approach in northwest India,
where canal water is always scarce; there during a fixed period of the
week each field is entitled to draw whatever water is flowing in the
watercourse, but cannot draw more until the same time the following
week.

The difference in approach presumably derives from the difference
between rice (in Andhra Pradesh) and other crops (in the Northwest).
Rice is more adversely affected than other crops if the water available
is less than potential evapotranspiration; however, rice does not suffer
from excessive irrigation. As a result, one farmer’s overgenerous irri-
gation of a rice crop can cause drastic yield reductions for others.
Therefore, whereas the Northwest’s “fixed time per acre” method is
self-policing—the next farmer in line knows exactly when his turn
should start—the judgment of adequate wetting cannot be left to each
irrigator and must be made by people answerable to a villagewide
authority.

Farmers who steal water—who try to influence how much water

226 Research Observer 2, no. 2 (July 1987)

they get once the common irrigators have been appointed—are liable
to be fined by the council. During a drought, the fines may be Rs 20
to 50 each time, but the main penalty is the stigma of being dressed-
down in front of the council.

The common irrigators are paid at harvest time, not from the
village fund but by means of a levy—so much per irrigated acre—on
each irrigator. The rate is set by the council. Is this not vulnerable to
free riding? The short answer is no, because the levy is in kind rather
than cash and is made at the harvest—the one time of the year when
every farmer has no excuse to delay payment in kind. More impor-
tant, common irrigators who are not paid one year can damage the
nonpayer the next year. The withdrawal of common irrigator services
from one individual’s land has graver implications than does the
withdrawal of field-guarding services.

This article has so far discussed how things are done in the corpo-
rate villages, those with all or most of the four corporate institutions.
Although most of the detailed information comes from K village, the
organization of the four key institutions varies little from village to
village, even though they were not imposed from above.

Many villages, however, have no corporate organization: no village
council, no standing fund, no common irrigators, and no village-
appointed guards (though private landowners may hire their own,
sometimes forming small groups to do so). In these villages the rule of
open access to canal water applies, although informal turn-sharing
may develop along some watercourses. And uncoordinated groups of
herders may enter a village’s land at will, or with the permission of
the headman, and will negotiate with individual farmers about where
they fold their flocks at night.

Why the difference between the corporate and uncorporate villages?
The first point is that the corporate irrigated villages are located
toward the tail-end of an irrigation distributary (roughly, the bottom
one-third of its length; typical distributaries are ten miles long). The
second point is that the corporate dry villages tend to be located in
areas with black, rather than red, soil. The third point is that, in the
semiarid tropics generally, black soil areas tend to be lower down a
watershed than red soil areas. So irrigated villages toward the tail-end
of a distributary also tend to have a higher proportion of black soils.

Black soils are more water-retentive than red soils, allowing a wider
range of rainfed crops and a higher yield—and hence a more abun-
dant and varied supply of stubble. With unrestrained access, too many
animals might come in, damaging the soil. Moreover, the risks of crop
loss are higher: with the more varied cropping pattern of black soils,
large areas of stubble from the early-harvested crops will become

The Ecological
Basis of

Common
Property

Rules

Robert Wade 227

available when other crops are still standing. This provides the impe-
tus to arrange for the fields to be guarded, which can be financed by
the herders’ willingness to pay for the better grazing on black soil.

In theory, the power structure of the village might be such that
collective action was impossible because it was not supported by a
few key households with land close to the canal. In practice, however,
holdings are typically scattered in small parcels, partly because land-
owners want to diversify risk. A family with land close to one irriga-
tion outlet may have another plot close to the tail-end of a block fed
from another outlet. This greatly helps the consensus on the need for
rules and joint regulation.

Areas of rainfed cultivation higher up a distributory have more red
soil, which dries out sooner after the rains stop. They therefore have
less stubble, so herders are less interested in grazing there. The higher
irrigated areas tend to be under rice in both seasons, but sheep and
goat manure is wanted mainly for other crops. So both the demand
and supply of animals and grazing is less in the higher villages—and
canal water there is more plentiful and reliable. It is in villages lower
down a watershed that the potential for conflict is greatest. The
evidence of my sample suggests that these lower villages are very
likely to have an organized public domain, with rules on the use of
water and grazing and the provision of other public goods.

How effective are the rules of restrained access in changing the way
that resources are used? This question is difficult to answer, because it
is hard to find a pair of similar villages, one with corporate institu-
tions, one without. All one can say with confidence is that both
production and equity are greater where rules and institutions apply
than they would have been had the same villages been unorganized.
Where individual benefits from joint action are high, joint action is
likely to be forthcoming.

This is not to say that the temptation for self-interested individuals
to go for immediate gain is minor. The need to respond to the free
rider problem affects a village’s organization. The typical council has
developed formidable arrangements for enforcing the rules, precisely
to convince each individual that his fellow villagers will probably
abide by the rules, so that if he too does so he will not be the sucker
(Runge 1984). These expectations are reinforced by the social compo-
sition of the council, an elite body with no pretense at representation.
Councils have increased their authority with the passage of time: in
all these villages, they have been operating for several decades at least.

Lessons What of Olson’s argument? One of its main weaknesses is a lack of
for Theory attention to the size and nature of the collective benefit.1 It concen-

trates instead on the size of the selective benefits and costs, those that

2 2 8 Research Observer 2, no. 2 (J”‘y 1987)

can discriminate between people according to whether or not they
help to provide the public good. It simply assumes the net collective
benefit to be high, since free riders must by definition be among those
who value the public good highly. So the argument is geared to
interpret noncooperation as evidence for the free rider hypothesis,
rather than for the hypothesis of low collective benefit. In these Indian
villages, however, cooperation and noncooperation are explained in
terms of high and low collective benefit, as indicated by downstream
or upstream location on a water supply channel and by black or red
soils. The presence or absence of selective punishments has little
bearing on the variation among villages.

Another qualification to Olson concerns the source of control and
punishment. Olson’s key proposition—that examples of collective ac-
tion groups can be explained as the response to selective punishments
or rewards—differs from the more conventional notion that joint be-
havior is related to the presence of an external enforcer of agreements.
Olson is not entirely clear on whether the source of selective punish-
ment or reward is inside the group or outside. But he can be read to
mean that the penalties must be organized from outside the group.

This notion is contradicted by my findings and those of many
others. There are many examples where villagers have established
rules, monitored the conditions of the commons, checked for cheat-
ing, and assigned punishment.3 There are also, of course, many more
examples where attempts to do so have failed; in the absence of state
regulation or private property, the commons has then degenerated.
But the successful examples of local rules show that regulation of the
commons does not have to be imposed from outside (McKean 1984;
Ostrom 1986).

Where Olson and other pessimists about collective action are surely
right is in the need for coercion to back up agreements. Their empha-
sis on the difficulties of voluntary collective action is a useful counter
to the simple optimism of those who believe that community develop-
ment projects, people’s participation, water users’ associations, and
the like are mainly a matter of teaching people about their real
common interests or promoting values that are less individualistic. On
the contrary, rules that make people do what they may not imme-
diately want to do are a necessary ingredient of managing common
resources, so that while free riding tendencies may remain, they need
not destroy the organization.

The voluntariness of collective action, therefore, has to be consid-
ered as a constitutional issue and as a matter of action. Constitution-
ally, people can agree on a set of rules of restrained access or financial
contributions, their incentive to do so being prospective net collective
benefit. In action, compliance with the rules must also be mainly
voluntary, not the result of a calculus of evasion and punishment. But

Robert Wade 2 2 9

the rules must be backed by a system of punishment, which helps to
assure each individual that if he follows the rules he will not be
cheated, and which at times of crisis can directly deter violations.4

Lessons
for
Organiza tional
Design

If an outside authority wanted to encourage the establishment of
some cooperative bodies, how would it choose to design them? One
lesson is that, in the South Indian context at least, villagers are likely
to follow joint rules and arrangements only to achieve intensely felt
needs that could not be met by individual action (Johnston and Clark
1982). These are likely to involve primarily the defense of production
(avoidance of crop or animal loss), secondarily the enhancement of
income, and last by a long way, education, nutrition, health, and civic
consciousness. The opportunities for avoiding losses or boosting in-
come by collective action will be taken only if the losses or gains are
large. In my irrigated villages, corporate organization to manage com-
mon property is found, with barely an exception, only toward the
tail-ends of distributaries.

The second lesson is that corporate organizations, to be effective,
should be based on existing structures of authority. In practice, this
means that the council will be dominated by the local elite, which is a
disturbing conclusion for democrats and egalitarians. But rules made
by the majority of villagers would carry little legitimacy in the eyes of
the powerful. More important, the effectiveness of a council depends
on its councillors all having a substantial private interest in seeing
that it works, and that interest is greater the larger a person’s land-
holding (provided holdings are in scattered parcels). Moreover, the
tendency of the nonelite to cheat can be checked by the sanctions of
the village’s power structure. Without these wider sanctions, the coun-
cil’s formal penalties would probably be ineffectual. This point tends
to be overlooked in the public choice literature because it assumes a
context of free and equal individuals.

If the elite runs the council, will it not become another instrument
of exploitation? That is not so in these Indian villages, which reflects
the third design lesson: the council is concerned only with nonpriva-
tizable benefits. It is not involved in supplying inputs other than
water. It is not involved in settling disputes unrelated to husbandry or
water. It does not try to compensate the owners of animal-damaged
crops, for that would create conflict about privatizable value. In K
village, the council once tried to intervene in the allocation of a
privatizable good (rationed sugar): the conflicts over who got it be-
came so strong that the council almost ceased to function.

The fourth lesson is that a council should take on less vital func-
tions (well repairing, monkey catching, and so on) only when it is
very good at the core (income-defending or income-enhancing) activi-

230 Research Observer 2, no. 2 (July 1987)

ties. Not all those councils that are organized to do the essentials also
do much less-essential work.

The fifth lesson is to keep the techniques of calculation and control
simple. Some record keeping and accountability are needed, so as to
“institutionalize suspicion,” in Ronald Dore’s phrase (1971). But the
accountability procedures are straightforward in these Indian villages.
There is an annual general meeting of all farmers to discuss the forth-
coming season, ratify the new council, and receive nominations for
guards. The records on standing fund income and expenditure are
simple and are read out at the general meeting. Meetings of the council
are held in the open, and anyone who passes can listen on the fringes.

One specific lesson is that, where water users’ associations are
deliberately fostered, the right unit of organization is usually the
whole village. Attempts to form a water users’ association around
each canal outlet are likely to be futile if such a group of farmers does
not already do other things together. The group will simply not
contain enough authority. Yet many programs for irrigation improve-
ment in India assume that the natural unit of organization is the
outlet or some other hydrologically defined unit.

More generally, what can be said about the conditions on which
successful collective action depends? In the extreme case—many users,
unclear boundaries of the common, resources, people scattered over a
large area, rules easy to break—degradation of the commons can
confidently be expected as demand increases, and privatization or
state regulation may be the only options. The likelihood of successful
collective action therefore depends on the following:5

• Resources. The smaller and more clearly defined the boundaries of
the common resources, the greater the chances of success.

• Technology. The higher the costs of exclusion technology (such as
fencing), the better the chances of success.

• Relation between resources and users
Location: The greater the overlap between the location of the

common-pool resources and the residence of the users, the greater
the chances of success.

Users’ demands: The greater the demands (up to a limit) and the
more vital the resource for survival, the greater the chances of
success.

Users’ knowledge: The more users know about sustainable yields,
the greater the chances of success.

• Characteristics of users
Size: The smaller the number of users, the better the chances of

success. However, there is a minimum number below which the
tasks able to be performed by such a small group cease to be
meaningful.

Robert Vfftule 231

Boundaries: The more clearly defined the boundaries of the group,
the better the chances of success.

Relative power of subgroups: The more powerful are those who
benefit from retaining the commons and the weaker are those who
favor enclosing private property, the better the chances of success.

Existing arrangements for discussion of common problems: The
more developed such arrangements are, the greater the chances
of success.

Extent to which users are bound by mutual obligation: The more
concerned people are about their social reputations, the better the
chances of success.

• Noticeability. The more noticeable is cheating on agreements, the
better the chances of success. Noticeability is a function partly of
how clearly defined are the resource boundaries, how near they are
to users’ residences, and how large is the group of users.

• Relation between users and the state. The less the state can or
wishes to undermine locally based authorities and the less it can
enforce private property rights effectively, the better the chances of
success.

As the list implies, there can be no presumption that collective
action will generally work—any more than there can be a presump-
tion that private property or state regulation will generally work. My
argument is only that (a) the propensity to descend into anarchy or
destruction is neither as strong nor as general as mainstream collective
action theory implies and (b) that where circumstances look promis-
ing for collective action government officials should treat this option
as seriously as the other two.

The government can help these local systems by providing a legal
framework and perhaps technical assistance. The legal framework
should enable village organizations to obtain legally enforceable re-
cognition of their identity and rights and to call upon the state as an
enforcer of last resort (Korten, forthcoming). Obvious though it may
sound, few governments in Asia have given much attention to this
task, at least with respect to rural (as distinct from modern urban)
organizations. If governments did more, their efforts would widen the
range of situations in which locally based common property regimes
could be expected to work.

Abstract When will villagers come together to supply themselves with goods and services that
they all need but could not provide for themselves individually? Can locally based
collective action be a viable way to manage common property resources? Many writers
on collective action and common property are pessimistic about the ability of people
who face problems with common property resources to organize sustainable patterns
of use for themselves. Some writers favor privatization of the commons as the only viable
solution; others, the imposition of state regulation. This article shows, with reference

2 3 2 Research Observer 2, no. 2 (July 1987)

to Mancur Olson’s “logic of collective action,” that the analytical basis for this
pessimism is weak for the village-based use of common property resources. There can
thus be no general presumption that collective action will fail in the management of
common property resources, any more than there can be a general presumption that it
will work. The article suggests that the chances of success through collective action
depend on the characteristics of the resources, the user group, and group-state relations.

This article is based on a forthcoming book, Village Republics: Economic Conditions NotCS
for Collective Action in South India, Cambridge University Press. I am grateful to Hans
Binswanger, Richard Kimber, Ford Runge, and especially Elinor Ostrom for discussions
on various points of the argument.

1. For references, see citations later in text.

2. It is not that Olson says or implies that the size of the collective net benefit is
irrelevant; he simply does not give it much attention.

3. For example, McKean (1984) on Japan; Gilles and Jamtgaard (1981) on Peru;
Campbell and Godoy (1985) on the Andes; Hitchcock (1980), Peters (1983), and
Thomsen (1980) on Africa; and Netting (1978) on Switzerland. See also Runge (1987)
and Ostrom (1985b).

4. This argument is in line with some of the early writings in public choice theory,
notably Buchanan and Tullock (1962) and Ostrom (1968). Later work in the public
choice tradition has tended to focus too much on the issue of financial contributions.

I have not discussed here the issue of group size. Olson’s celebrated theorem, stated
without qualification early in his book, is later restricted to large groups in a taxonomy
of small, intermediate, and large. He says little about how to distinguish the three types
of groups in practice, but he might argue that the groups under discussion here are
intermediate groups and therefore outside the scope of his argument.

5: See also Ostrom (1985b), the starting point of my own formulation.

Ault, W. 1973. Open-field Farming in Medieval England: A Study of Village By-laws.
London: Allen and Unwin.

Blomquist, W., and E. Ostrom. 1985. “Institutional Capacity and the Resolution of a
Commons Dilemma.” Policy Studies Review 5, no. 2: 383-93.

Buchanan, J., and G. Tullock. 1962. The Calculus of Consent. Ann Arbor: University
of Michigan Press.

Campbell, Bruce, and R. Godoy. 1985. “Common-field Agriculture: The Andes and
Medieval England Compared.” Queens University of Belfast, Geography Department.

Carruthers, I., and R. Stoner. 1981. Economic Aspects and Policy Issues in Groundwater
Development. World Bank Staff Working Paper 496. Washington, D.C.

Demsetz, H. 1967. “Toward a Theory of Property Rights.” American Economic Review
57: 347-59.

Dore, R. 1971. “Modern Cooperatives in Traditional Communities.” In P. Worsley, ed.
Two Blades of Grass. Manchester: Manchester University Press.

Gilles, J. L., and K. Jamtgaard. 1981. “Overgrazing in Pastoral Areas: The Commons
Reconsidered.” Sociologia Ruralis 21: 129-41.

Hardin, G. 1968. “The Tragedy of the Commons.” Science 162 (December): 1343-48.

Hitchcock, R. K. 1980. “Tradition, Social Justice, and Land Reform in Central
Botswana.” Journal of African Law 24: 1-34.

Johnson, O. 1972. “Economic Analysis, the Legal Framework and Land Tenure
Systems.” journal of Law and Economics 15: 259-76.

References

Robert Wade 233

Johnston, B., and W. Clark. 1982. “Organization Programs: Institutional Structures and
Managerial Procedures.” In Redesigning Rural Development: A Strategic Perspective.
Baltimore, Md.: Johns Hopkins University Press.

Korten, F. 1987. “The Policy Framework for Community Management.” In D. Korten,
ed. Community Management: Asian Experiences and Perspectives. Hartford, Conn.:
Kumarian Press.

McCloskey, D. 1975. “The Persistence of English Common Fields.” In W. Parker and
E. Jones, eds. European Peasants and Their Markets: Essays in Agrarian Economic
History. Princeton, N.J.: Princeton University Press.

McKean, M. 1984. “Management of Traditional Common Lands in Japan.” Duke
University, Department of Political Science.

Netting, R. 1978. “Of Men and Meadows: Strategies of Alpine Land Use.” Anthropolog-
ical Quarterly 45, no. 3: 132-44.

North, D., and R. Thomas. 1977. “The First Economic Revolution.” Economic History
Review 30: 229-41.

Olson, M. 1971. The Logic of Collective Action. Cambridge, Mass.: Harvard University
Press.

Ostrom, E. 1968. “Some Postulated Effects of Learning on Constitutional Behavior.”
Public Choice 5 (Fall): 87-104.

1985a. “Are Successful Efforts to Manage Common-Pool Resources A Challenge
to the Theories of Garrett Hardin and Mancur Olson?” Working Paper W85-31.
Indiana University, Workshop in Political Theory and Policy Analysis.

. . 1985b. “The Rudiments of a Revised Theory of the Origins, Survival, and
Performance of Institutions for Collective Action.” Working Paper W85-32. Indiana
University, Workshop in Political Theory and Policy Analysis.

. . 1986. “Institutional Arrangements for Resolving the Commons Dilemma: Some
Contending Approaches.” In B. McKay and J. Acheson, eds. Capturing the Com-
mons. Tucson: University of Arizona Press.

Peters, Pauline. 1983. “Cattlemen, Borehold Syndicates and Privatization in the Kgatleng
District of Botswana.” Ph.D. dissertation, Boston University.

Picardi, A., and W. Siefert. 1976. “A Tragedy of the Commons in the Sahel.” Technology
Review 78: 42-51.

Randall, A.-1.983. “The Problem of Market Failure.” Natural Resources Journal 23, no.
1: 131^*8.

Runge, C. Ford. 1984. “Institutions and the Free Rider: The Assurance Problem in
Collective Action.” Journal of Politics 46: 154-81.

1987. “Common Property and Collective Action in Economic Development.”
World Development. Forthcoming.

Thomsen, James T. 1980. “Peasant Perceptions of Problems and Possibilities for Local-
Level Management of Trees in Niger and Upper Volta.” Paper presented at the
African Studies Association Meetings, October 15-18.

Wade, Robert. 1985. “Common Property Resource Management in South Indian
Villages.” Agricultural Research Unit Discussion Paper 35. World Bank, Agriculture
and Rural Development Department, Washington, D.C.

1986. “The Management of Common Property Resources: Collective Action as
an Alternative to Privatization or State Regulation.” Agricultural Research Unit
Discussion Paper 54. World Bank, Agriculture and Rural Development Department,
Washington, D.C.

. . 1987. Village Republics: Economic Conditions for Collective Action in South
India. Cambridge: Cambridge University Press. Forthcoming.

2 3 4 Research Observer 2, no. 2 (July 1987)

Copyright © 2005 by the author(s). Published here under license by the Resilience Alliance.
Cinner, J. 2005. Socioeconomic factors influencing customary marine tenure in the Indo-Pacific. Ecology
and Society 10(1): 36. [online] URL: http://www.ecologyandsociety.org/vol10/iss1/art36/

Research

Socioeconomic factors influencing customary marine tenure in
the Indo-Pacific

Joshua Cinner1

ABSTRACT. For generations communities in the Western Pacific have employed a range of resource
management techniques (including periodic reef closures, gear restrictions, entry limitations, and the
protection of spawning aggregations) to limit marine resource use. Localized control over marine resources,
commonly known as customary marine tenure (CMT), is the legal and cultural foundation for many of
these practices. Because of their perceived potential to meet both conservation and community goals, these
traditional resource management techniques are being revitalized by communities, governments, and NGOs
as an integral part of national and regional marine conservation plans in the Pacific. However, the viability
of conservation strategies built on a foundation of marine tenure may be in question, as it remains unclear
whether marine tenure systems will be able to withstand the profound social and economic changes sweeping
the Pacific region. Numerous studies have suggested that changes in marine tenure are attributed to social
and economic factors, however, specific relationships between socioeconomic conditions and marine tenure
are still not well understood. This paper examines the social and economic characteristics of 21 coastal
communities in Papua New Guinea and Indonesia, and explores the characteristics of the communities that
employ exclusive marine tenure to answer the following questions: Which socioeconomic factors are related
to the presence of CMT regimes? How might socioeconomic factors influence the ability of communities
to employ or maintain CMT regimes? Distance to market, immigration, dependence on fishing, and conflicts
were found to be related to the presence of highly exclusive marine tenure systems. Exploring these
relationships will help conservation practitioners better understand how future social changes may influence
the foundation of conservation and development projects.

Key Words: customary marine tenure; common-property; socioeconomic; Papua New Guinea; Indonesia.

INTRODUCTION

Contrary to Western society’s propensity toward
managing marine resources as open-access
situations, another paradigm of common ocean
governance called Customary Marine Tenure
(CMT) is prevalent in parts of the Pacific. Under
CMT, access to inshore marine resources is
generally controlled by social units including
individuals, families, clans or other kinship-based
institutions, and villages (Carrier 1987, Ward 1997).
These marine tenure institutions can range from
relatively simple communally-owned marine areas
from which outsiders are excluded to the complex
and overlapping system of individual and family
rights to space, species, gear, and even specific

techniques of using gear described by Carrier (1987)
and Cinner et al. (in press a) in the Manus province
of Papua New Guinea (PNG). Although CMT has
been documented throughout the World (Hviding
1996), it has reached the highest level of
development in the Western Pacific (Ruddle and
Akimichi 1984), including Japan (Ruddle 1985),
Melanesia (Malinowski 1935, Hviding 1983, 1996,
Wright 1985, Carrier 1987, Aswani 1999, 2002,
Cooke et al. 2000, Foale and Macintyre 2000,
Hickey and Johannes 2002), Polynesia (Hoffmann
2002), Micronesia (Johannes 1981, Zann 1985),
Indonesia (Polunin 1984, Mantjoro 1996, Ruttan
1998, Harkes and Novaczek 2002), and Australia
(Johannes and MacFarlane 1984). Legal recognition
of marine tenure regimes can vary significantly

1James Cook University

http://www.ecologyandsociety.org/vol10/iss1/art36/

mailto:joshua.cinner@jcu.edu.au

Ecology and Society 10(1): 36
http://www.ecologyandsociety.org/vol10/iss1/art36/

between countries. For example, in PNG customary
ownership of marine resources is formally
recognized in the constitution (Hyndman 1993).
Alternatively, much of neighboring Indonesia is
open-access. However, in some northern and
eastern regions of Indonesia (i.e., parts of Muluku,
North Sulawesi, and West Papua provinces), de
facto marine tenure systems still govern local access
to marine resources (see Polunin 1984, Mantjoro
1996, Ruttan 1998, Harkes and Novaczek 2002).

In response to the degradation of inshore marine
resources in many Pacific countries, governments
and conservation groups are examining whether and
how CMT regimes can be integrated into the modern
conservation context (Cooke et al. 2000, Hoffmann
2002, Johannes 2002). CMT is particularly
important in the context of resource management
because it can serve as the legal and cultural
foundation for other taboos such as gear
prohibitions and spatial restrictions (Ruddle 1998,
Aswani and Hamilton 2004). Where CMT is
recognized, the highly decentralized authority over
marine resources can also facilitate rapid adaptive
response to changes in ecological or social
conditions because decisions about limiting
resource use can be made without the process of
involving a centralized bureaucracy. Basing
resource conservation initiatives around marine
tenure regimes is particularly attractive to
conservation organizations and donors because
enforcement of specific fishing regulations within
a tenure is generally the responsibility of the
resource owner (Asafu-Adjaye 2000). By
empowering community self-enforcement of
fisheries regulations, CMT may provide a cost-
effective means to reduce the burden on government
intervention, regulation, and enforcement (Johannes
1981, Hviding 1996, Ruddle 1998). This is
particularly important in the economic context of
the Pacific where fisheries departments are typically
understaffed and under-funded (Johannes 1981).

Customary tenure regimes are the foundation of
marine governance in much of the Pacific, but they
must be better understood if they are to be
effectively incorporated in resource management
and development initiatives. In particular, very little
is known about the social and economic frameworks
that allow communities to employ or maintain CMT
regimes. An array of theoretical and empirical
research has shown that common property
governance systems can be affected by
socioeconomic factors such as religious or cultural

homogeneity (Ostrom 1990), market influences
(Hviding 1996, Henrich et al. 2001), transaction
costs of decision-making (Ostrom 1990, Sumalde
2004), dependence on resources (Lise 2000,
Agrawal 2001, Zanetell and Knuth 2004), social
capital (Pretty and Ward 2001, Pretty 2003, Pretty
and Smith 2004), conflicts (Polunin 1984, Adams
et al. 2003) settlement patterns (Aswani 2002,
Aswani and Hamilton 2004), and resource
variability (see Agrawal 2002 for a comprehensive
review of the factors influencing the emergence and
successful functioning of common property
institutions). The studies specific to CMT suggest
that many of these social and economic factors can
influence the nature and function of marine tenure
institutions (Pollnac 1984, Polunin 1984, Baines
1989, Watson 1989, Hviding 1996, Cooke et al.
2000, Foale and Macintyre 2000, Aswani 2002),
although specific relationships between socioeconomic
conditions and CMT are sometimes contradictory
and are still not well understood. For example,
Watson (1989) discusses how changing socioeconomic
conditions can render resource management
strategies ineffective and inappropriate. Alternatively,
Hviding (1996) documents how marine tenure rules
became more exclusive for both commercial and
subsistence activities in the Morovo Lagoon in
response to increased prices of particular shells.

Here I ask the following questions: Which
socioeconomic factors are related to the presence of
CMT regimes? How might these socioeconomic
factors influence the ability of communities to
employ or maintain CMT regimes? To date, most
research examining the social, economic, and
cultural factors influencing CMT has utilized a
relatively small number of cases or examined these
issues over a very limited geographical area. Despite
the important contributions that small n case studies
have made toward understanding CMT regimes, a
fundamental limitation of this approach is that it
does not allow us to discern larger patterns in how
CMT regimes may respond to social and economic
factors over a wider geographical context. In this
paper, I seek to complement the more detailed case
studies on the subject by using a comparative
approach to examine the potential socioeconomic
factors influencing viable CMT institutions in 21
coastal communities in Papua New Guinea and
Indonesia.

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METHODS

Data collection

Between October 2001 and January 2003, research
was conducted in 15 villages in Papua New Guinea
(PNG) and six villages in North Sulawesi, Indonesia
(Fig. 1). A number of criteria were used to select
the study sites. Research was conducted as part of
an interdisciplinary Wildlife Conservation Society
project that assessed the effectiveness of coral reef
conservation in the Indo-Pacific (Cinner et al. 2003;
Cinner et al. in press b, McClanahan et al.
unpublished data). Agrawal (2001, 2002) suggests
that purposively selecting sites that have variation
in theoretically significant variables is a defensible
sampling methodology in a common-property
research context. Study sites were purposively
selected to encompass a wide range of social,
economic, demographic, and resource governance
conditions (e.g., varying degrees of remoteness,
marine tenure, market influence, dependence on
marine resources, etc.). However, as a result of the
project’s intent to integrate both socioeconomic and
ecological data, site selection was constrained
somewhat by the need to have comparable
ecological parameters at each site (coral reef habitat,
current regimes, exposure, etc.), access to SCUBA
facilities (although live onboard dive boats were
used to access two remote study sites in PNG and
two in Indonesia), and project goals of examining
several specific conservation sites of regional
importance (e.g., Bunaken and Kilu). Based on the
fact that the villages were not randomly selected, a
cautious approach to interpreting the results would
suggest that the conclusions drawn from this study
are not necessarily applicable outside of the study
sites.

Research was conducted over an one to three week
period per village using one to four trained local
assistants to aid in data collection. I used theoretical
and empirical research (e.g., Ostrom 1990, Carrier
and Carrier 1991, Agrawal 2001, Aswani 2002;
Pollnac and Johnson in press) and socioeconomic
assessment methodologies designed for coastal
communities (Pollnac 1998, Bunce et al. 2000,
Pollnac and Crawford 2000) to select indicators that
were expected to be related to marine resource
governance in the Indo-Pacific and that were also
feasible to collect during the limited research time
at each site. These were: population, distance to
markets, the percentage of fish bartered or sold in

the market, the type of settlement pattern,
dependence on marine resources, immigration, the
presence of conflicts over marine resources, and the
exclusivity of marine

tenure regimes.

A combination of systematic household surveys (for
example, surveying every second or third
household), semi-structured interviews with key
informants (community leaders and resource users),
recording of oral histories, transect walks (walking
through the community with a local to identify and
verify issues), participant observations, descriptions
of daily and seasonal time-use, women’s focus
groups, and analyses of secondary sources such as
population censuses and fisheries records were all
used to gather information and triangulate results.
A total of 954 household surveys were collected.
Sampling within villages was based on a systematic
sample design, where a sampling fraction of every
ith house (e.g. 2nd, 3rd, 4th) was determined by
dividing the total village population by the sample
size (Henry 1990, de Vaus 1991). Variance from
the systematic sample was assumed to be equal to
the estimated variance based on a simple random
sample (Scheaffer et al. 1996). The number of
surveys per community ranged from 15-84 (Table
1), depending largely on the population of the
village, the number of available research assistants,
and the available time per site (this was influenced
by factors such as weather, the availability and
frequency of transportation to certain sites, and
budget requirements such as the cost of the boat
used to access remote sites).

The head of the household was interviewed. If the
head of the household was not available, the
household was revisited later. If the head of the
household was still not available, another adult from
the household was interviewed. The head of the
household could have been either a male or female.
In instances where it was appropriate, more than one
member of the household was interviewed to obtain
the most accurate information about specific
subjects (for example, if a female headed the house
but her eldest son was more knowledgeable about
the household’s fishing activities and practices, then
he would be asked about the proportion of fish catch
bartered or sold).

Household surveys were used to gather the
following indicators: dependence on fishing,
immigration, population of the village, and the
percentage of fish sold in the market. Dependence

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Fig. 1. Map of study sites.

on fishing was determined by having respondents
list all the occupations the household engaged in for
food or money. Respondents were then asked to rank
these activities in order of importance. Those who
regularly engaged in fishing estimated the
percentage of their fish catch sold or bartered.
Respondents were asked where they were from and
were considered immigrants if they came from
another village. Population was determined by: (1)
counting the number of houses, (2) determining the
average number of persons per household (adults
and children) from the household surveys, and (3)
multiplying this by the number of houses in the
community. This was thought to be more accurate

than relying on census information because the
census record in one community reported almost
twice as many houses as were actually counted.

Key informants were selected using non-probability
sampling techniques, including convenience
sampling (for example, a respondent may be
approached during resource use activities) or
snowball sampling (where community memb

ers

will suggest appropriate respondents) (Henry
1990). Between two and fifteen key informants were
interviewed per village. Key informants also
provided information on how exclusive the marine
tenure was. Based on the key informant interviews

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Table 1. Summary of study sites.

Village Exclude
non-own-

ers

Settlement
pattern

Conflicts over
marine res-

ources

Population Distance
to market

(km)

%
immigrants

% of fish
bartered
or sold

% ranked
fishing as

primary occ-
upation

# of
household

surveys

Ahus yes nucleated yes 544 21 3.9 68 77 51

Andra yes nucleated yes 479 31 13.6 75 55 44

Gabagaba yes nucleated yes 1708 58 2.6 66 51 38

Kakarotan yes nucleated yes 730 100 2.0 24 27 48

Madina yes dispersed no 564 70 35.0 13 0 32

Muluk yes nucleated yes 333 69 7.5 44 5 41

Para yes dispersed yes 1513 46 27.0 69 56 59

Airbanua no dispersed no 687 45 32.6 52 12 43

Blongko no nucleated no 1332 32 51.9 44 8 77

Bunaken no dispersed yes 3122 16 20.5 72 37 73

Enuk no nucleated no 272 14 27.3 64 24 33

Fissoa no dispersed no 287 85 14.0 18 0 31

Kapitu no dispersed no 1791 60 57.1 66 18 84

Kilu no dispersed no 584 17 25.0 31 0 40

Kranget no nucleated no 2127 1 29.7 67 35 37

Mongol no nucleated no 493 0 64.3 35 18 28

Nusa Lik no nucleated no 273 1 46.2 69 54 15

Patanga no dispersed no 421 20 26.8 26 0 41

Riwo no dispersed no 1136 7 10.8 56 24 37

Tubuseria no nucleated no 5000 25 12.8 NA 18 61

Wadau no nucleated no 324 66 10.0 38 2 41

NA= not available

and confirmed observations, villages were
classified based on whether they: (1) practiced
highly exclusive marine tenure regimes in which
non-owners had to ask permission to access marine
resources (classified as “strong” or “highly
exclusive” marine tenure), or (2) had less exclusive
or no marine tenure regimes in which non-owners

regularly and openly accessed marine resources
without asking permission (classified as “weak” or
“less exclusive” marine tenure). Situations in which
neighboring villages (non-owners) had been
granted revocable use privileges and regularly
accessed marine resources were also classified as
less exclusive. Although this compartmentalization

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of a wide range of marine tenure regimes into
comparable categories have undoubtedly lead to
overly simplistic interpretations of their true
complexities (Hviding 1996, McCay and Jentoft
1998), it is hoped that this will be outweighed by
the ability to examine how marine tenure is related
to different social and economic factors that can be
captured best through a broader-scale comparative
study.

Key informants and secondary sources provided
information on the presence of serious or significant
conflicts over marine resources. I defined conflicts
as intense verbal confrontations, use of violence, or
court cases. Communities that reported conflicts
over the previous 12 months or had court cases
pending were considered to have conflicts. Key
informants also provided information on the nearest
market where marine products were regularly
bought and sold. The distance from the village to
markets were measured on topographic maps and
nautical charts. Communities were grouped into two
types of settlement patterns: dispersed or nucleated.
Dispersed settlements were communities that were
spread out and contained distinct sub-villages that
were geographically separated. For example, the
community of Riwo in Madang, PNG, had sub-
villages on two separate islands and was thus
considered a dispersed settlement. Nucleated
settlements were communities that were relatively
contiguous.

Analyses

The socioeconomic characteristics of communities
that excluded all non-owners from accessing
resources within their tenure were compared to the
characteristics of communities where non-owners
were allowed to access marine resources. Four types
of analyses were performed to discern whether the
presence of highly exclusive marine tenure was
related to socioeconomic factors: the Mann Whitney
U test, Fisher’s Exact test, effect size, and statistical
power.

The SPSS 11.01 statistical program was used to
determine statistical significance with the Mann-
Whitney U and Fisher’s Exact tests. The Mann-
Whitney U test is a non-parametric alternative to
the T-test, which is used to test whether two samples
are independent (Siegel and Castellan 1988). The
Mann-Whitney U test was used to examine whether
ordinal or interval socioeconomic characteristics of

communities with highly exclusive tenure were
significantly different from communities with low
excludability. For example, I used the Mann
Whitney U test to compare the mean (rank of)
percentage of immigrants in communities with
highly exclusive marine tenure to the mean (rank
of) percentage of immigrants in communities with
weaker marine tenure. The frequency of
dichotomous data (i.e., settlement patterns and the
presence of conflicts) in communities with strong
marine tenure was compared to communities with
weak marine tenure using a Fisher’s Exact test. The
Fisher’s Exact test is a non-parametric analysis used
to discern whether two samples are independent
based on the frequency of observed responses in a
2 x 2 contingency table with small independent
samples (Siegel and Castellan 1988). Liberal p
values were accepted for determining statistical
significance (p<0.1), because this is an exploratory analysis and, based on the moderate sample size of 21 villages, I did not want to exclude any variables that might be important (i.e., I thought the consequences of committing a type I error were more grave than a type II error). To ensure national- level differences were not driving any of the patterns, significant differences between socioeconomic characteristics for Indonesian and New Guinean sites were tested for as well.

Effect size is a standardized measure of the strength
of the relationship between independent and
dependent variables (Vaske et al. 2002). The
Hedge’s effect size was calculated as the difference
between the mean socioeconomic conditions of the
two groups (e.g., mean distance to market of the
communities that employed exclusive marine
tenure regimes minus the mean distance to market
of the communities that did not) divided by the
pooled standard deviation of both groups (Gliner et
al. 2001). Statistical power is the probability of
finding a statistically significant result when there
is a real effect in the population being studied (i.e.,
rejecting the null hypothesis when a research
hypothesis is true) (Cohen 1988). The power of
these relationships was calculated using Statistica
6.0 statistical program.

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RESULTS

Socioeconomic characteristics of communities

The 21 communities varied considerably in the
socioeconomic and governance indicators (Table
1). Communities ranged from small hamlets with
only 272 people to large villages of 5,000 people.
The importance of fishing as a livelihood strategy
varied considerably in the communities examined.
The percentage of households that ranked fishing
as the primary occupation varied from 0-77%, with
a mean of 25%. There was also a considerable range
in the market influence (measured as distance to
market and the percentage of fish bartered or sold)
on the communities. Communities ranged from
0-100 km from markets. The mean distance to the
nearest regular market for marine products for all
sites was 37 km and the median distance was 32 km.
The percentage of fish bartered or sold ranged from
13-72% and had a mean of 50%. The percentage of
immigrants ranged from 2-64%, with a mean and
median of 25%. Twelve of the 21 sites were
nucleated settlements and only seven sites reported
conflicts over marine resources. Seven of the 21
communities regularly excluded non-owners from
accessing marine resources. High excludability
occurred in the Sangihe-Talaud part of North
Sulawesi, Indonesia ( Para and Kakarotan
communities), but not the southern communities on
or near the main island. In New Guinea, high
excludability was reported throughout the country.

Socioeconomic factors influencing marine
tenure

Only the population indicator differed significantly
between the sites in New Guinea and Indonesia. The
mean population for the New Guinean sites (970)
was significantly lower than the mean population
for the Indonesian sites (1530) (U = 17, p<0.05). This lack of difference between countries for other indicators suggests that national-level differences in marine tenure or socioeconomic conditions did not overly influence the analysis.

Four out of seven variables differed significantly
between villages with highly exclusive marine
tenure and those with less exclusive tenure regimes
(Table 2). The presence of conflicts over marine
resources was correlated to the presence of highly

exclusive marine tenure. The percentage of
immigrants was lower in communities with
exclusive marine tenure, the distance to market was
higher in communities with exclusive marine
tenure, and the percentage of households dependent
on fishing was higher in communities with
exclusive marine tenure (although this relationship
was only significant at the p<0.1 level). The large effect size of these latter three relationships (d>0.93)
suggests that substantial relationships exists (Vaske
et al. 2002) (Table 2). No statistically significant
differences were found in settlement pattern,
population, or the percentage of fish sold in market
between communities with strong and weak marine
tenure. The effect size of the percentage of fish sold
in markets (d=0.1) was very low, suggesting a
minimal relationship (Vaske et al. 2002). However,
the power of this relationship was also very low
(0.05), so it would be difficult to detect differences.
The effect size of population (d=0.37) was
approaching a typical relationship found in the
social sciences (d=0.5) (Vaske et al. 2002), and the
power of this relationship was low (0.12) so the
effect of population may have been real but not
detectable with the sample size used. Note that effect
sizes and power are not computed for dichotomous
indicators (such as settlement pattern and conflicts).

DISCUSSION

This is one of the first studies to quantitatively
explore relationships between socioeconomic
factors and marine tenure over a large spatial scale
with a moderate sample size. This paper found that
communities with strong marine tenure were further
from markets, had lower migration, but had higher
dependence on fishing and conflicts over marine
resources. This study is an important compliment
to the more localized case studies and helps put such
research into a broader context. For example,
Aswani’s comparison of marine tenure in the
Roviana and Vonavona lagoons in the Solomon
Islands provide a model for how socioeconomic and
historical factors can result in three marine tenure
patterns (Aswani 1999, 2002, Aswani and Hamilton
2004). Aswani’s interpretations of how historical
processes, socioeconomic factors, and demographic
changes affect marine tenure in two coastal villages
in the Solomon Islands suggest market forces and
other exogenous pressures will not necessarily
transform CMT institutions into open-access
regimes (Aswani 1999, 2002). This study found that
the distance to the market was negatively related to

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Table 2. Differences in socioeconomic characteristics of communities with and without exclusive marine
tenure.

Variable Z score P Standardized
effect size (d)

Power

Distance to marketA -2.24 0.03** 0.97 0.51

ImmigrationA -2.16 0.03** 0.97 0.51

Fishing as primary occupationA -1.69 0.09* 0.93 0.50

ConflictsB NA 0.001*** NA NA

Percentage of fish
sold in marketA

-0.59 0.44 0.1 0.05

PopulationA 0 1 0.37 0.12

Settlement patternB NA 0.32 NA NA

AComputed using Mann Whitney U test.
BComputed using Fisher’s exact test.
*** Indicates a statistically significant relationship at alpha?= 0.001
** Indicates a statistically significant relationship at alpha?= 0.05
* Indicates a statistically significant relationship at alpha?= 0.1
NA= not applicable because the variables were dichotomous.

the exclusivity of marine tenure regimes, but
whether the fishery was market or subsistence-
based (measured in the percentage of fish bartered
or sold) was not significant. This suggests that the
strength of marine tenure institutions may be
undermined by connectivity to larger markets,
perhaps by introducing new ways of providing
credit and generating prestige (Agrawal 2002).
Commercial or market value for marine products,
however, may not necessarily diminish the strength
of tenure institutions.

To date, conclusions about how heterogeneity
influences the development and maintenance of
common property institutions remain inconclusive.
Heterogeneity (which can include the often
interrelated economic, cultural, religious, and
resource use differences in a society) has been
shown to have positive, negative, or minimal effects
on common property management (Ruttan and
Borgerhoff Mulder 1999, Glaesel 2000, Pollnac et
al. 2001, Bardhan and Dayton-Johnson 2002;
Pollnac and Johnson in press). This study found a
lower proportion of immigrants in communities

with highly exclusive marine tenure institutions,
which is consistent with notions of high social
capital being an important component of
maintaining common-property management regimes
(Pretty 2003). Cultural heterogeneity associated
with immigration may act to increase the transaction
costs of developing, maintaining, and enforcing
marine tenure regulations (Aswani and Hamilton
2004). Trust, reciprocal arrangements, and
consistent norms are important components of
social capital (Pretty and Smith 2004) that may be
affected by a high proportion of immigrants.
Likewise, immigrants may not perceive the rules,
processes, and authorities governing marine tenure
to be legitimate, and thus may not comply with
established rules (Sutinen and Kuperan 1999).

The relationship found between high dependence
on marine resources and the exclusivity of marine
tenure regimes is consistent with research on an
array of common pool resources that suggests a
positive relationship may exist between resource
dependence and participation in common property
arrangements (Lise 2000, Agrawal 2002, Zanetell

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and Knuth 2004). Communities with high
dependence on marine resources may employ
exclusive marine tenure regimes to increase
livelihood security. For example, the Andra and
Ahus Island study sites in Manus, PNG, are small
infertile islands surrounded by large (>5 km2) reef
lagoons. Islanders have limited access to essential
terrestrial resources (e.g., vegetables and firewood)
and consequently their dependence on marine
resources is very high (Cinner et al. in press a).
These communities claim exclusive rights to marine
resources on the reefs surrounding their islands and
reefs along the coast of the main Manus Island
(Carrier 1987, Carrier and Carrier 1989; Cinner et
al. in press a), preventing mainland communities
from accessing marine resources. These exclusive
marine tenure regimes help to create an economic
monopoly on marine resources among fishing
communities (Malinowski 1935) and help to ensure
that island communities have desirable goods to sell
or trade in local markets (Carrier 1987; Cinner et al.
in press a), thereby improving their livelihood
security.

There are several possible explanations for the
relationship between the presence of conflicts and
exclusive marine tenure regimes. Some researchers
suggest that marine tenure regimes may have
developed in response to conflicts and may serve to
mitigate them (Pollnac 1984, Polunin 1984). On the
other hand, the complexity of use rights associated
with marine tenure institutions can cause them to be
continually challenged (Foale and Macintyre 2000).
In Indonesia, the lack of legal recognition of marine
tenure also seemed to cause conflicts over marine
resources. For example, while researching in Para
Island, North Sulawesi, long-standing tenure rights
were challenged by neighboring communities who
claimed that exclusive tenure rights were not legal
under Indonesia’s constitution and attempted to fish
in Para’s fishing grounds. The Para community
responded by brandishing a firearm to chase off
fishers from the other community. Interrelationships
among indicators may also help to explain the
relationship between conflicts and exclusive marine
tenure regimes. For example, communities with
exclusive marine tenure regimes (with high
dependence on marine resources) used confiscation
of fishing equipment, intimidation, and even
violence to enforce their tenure. Communities with
lower dependence on marine resources may find the
additional livelihood security that might be gained
from employing exclusive marine tenure is not
worth engaging the conflicts associated with this

type of territory defense.

Several of the factors expected to be related to the
presence of CMT did not demonstrate significant
relationships, including population and settlement
patterns. In a review of the factors influencing the
sustainability of common property institutions,
Agrawal (2002) notes that debates concerning the
effect of population on common property
institutions are highly polarized.

  • Results
  • from this
    study as to the effect of population on the presence
    of exclusive marine tenure regimes are
    inconclusive. The possibility exists that the sample
    size used here was too small to detect differences in
    these indicators, particularly considering the effect
    size for population was approaching a moderate
    effect. More interestingly though, is the possibility
    that the populations in the communities studied
    were too small to detect any effect. Gabagaba and
    Para were two of the five largest communities in my
    study (the 4th and 5th largest populations,
    respectively), but employed CMT (Table 1). These
    communities had populations of fewer than 2,000
    and the largest population of any community studied
    was 5,000 residents. Harkes and Novaczek (2002)
    found that traditional management in Indonesia
    (called Sasi) dies out in villages greater than 3,000
    people. However, Evans et al. (1997) noted that Sasi
    was present in a community larger than 14,000
    people. Therefore, based on previous research, the
    critical population size at which CMT may cease to
    function effectively may not have been reached in
    this study (or reached by only the two sites with
    populations >3,000). The population levels of many
    of the study sites were similar to many rural coastal
    areas in the provinces studied (e.g., National
    Statistics Office 2002a, b), however, urbanized
    areas with high populations were not examined. An
    interesting area of further inquiry would be to
    examine whether or how communities with tens of
    thousands of residents could support highly
    exclusive marine tenure regimes. Aswani (2002),
    and Aswani and Hamilton (2004) also speculated
    that nucleated and dispersed settlement patterns
    influenced whether and how communities in the
    Solomon Islands could develop and maintain
    marine tenure regimes. Although this study was not
    able to explore in-depth ethnographic accounts of
    settlement histories, no relationship was found
    between settlement patterns and the strength of
    marine tenure institutions. In the broader context,
    this suggests that whether communities are
    nucleated or dispersed may be less important than
    other socioeconomic factors in maintaining marine

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    tenure regimes.

    One of the initial concerns with this study was that
    national or regional factors might overshadow the
    village level factors examined. However, this did
    not appear to be the case: there were few significant
    differences in socioeconomic characteristics
    between the two countries and several adjacent or
    nearby communities reported different marine
    tenure regimes, supporting the notion that marine
    tenure can vary in response to village-level factors
    and is not only a product of regional sociocultural
    influences. For example, Madina and Fissoa were
    nearby communities of a common language group,
    but Madina had high excludability and Fissoa had
    low excludability. Another potential concern was
    that intersite variability in the resource might have
    been very high, which could conceivably influence
    the nature of the marine tenure institutions.
    Incorporating the ecological criteria in site selection
    provided a reasonable assurance that relatively little
    variance existed in the resources within each tenure
    (i.e., the tenure areas all contain comparable coral
    reefs in similar ecological zones). Furthermore, we
    can infer from other analyses of the resources within
    these sites (Cinner et al. unpublished data; Cinner
    et al. in press-b; Cinner and McClanahan
    unpublished data) that many of the commercially
    valuable species harvested within the tenure sites
    such as trochus, beche de mer, and reef fish have
    small home ranges (e.g., on the scale of hectares to
    kilometers) (Kramer and Chapman 1999) congruent
    to the scale of the tenure areas. Therefore, the
    possible variance in resource conditions is expected
    to have relatively little influence in the observed
    tenure institutions.

    Speculation

    This study was able to tease out several indicators
    that were of more importance than others and
    provide qualitative descriptions of how these factors
    may be related to the presence of CMT. The
    limitations inherent in the non-random design of this
    study mean these results apply only to these study
    sites and should not be generalized to the wider
    region. Keeping in mind the limitations of this
    study’s methodology, it is important to speculate on
    whether and how these regimes will be able to adapt
    and respond to changes in socioeconomic
    conditions.

    Marine tenure systems are dynamic institutions that,

    through adaptation to changing scenarios, have
    proven relatively robust to population pressures and
    aspects of economic and political modernization
    (Hviding 1998). However, Asia-Pacific is a region
    undergoing profound social, economic, and
    demographic changes (UNEP 2002), and there may
    be social forces that marine tenure regimes are
    unable to adapt to. Results from this study suggest
    that socioeconomic changes that will increase
    immigration, open new markets, and decrease
    dependence on marine resources may influence the
    ability of communities to employ or maintain
    exclusive marine tenure regimes. Under these
    scenarios, conservation and development strategies
    that rely on high excludability in a community’s
    tenure may become challenged at their foundation.

    Alternatively, results from this study also suggest
    CMT may be somewhat resilient to other
    socioeconomic factors such as population growth.
    Highly exclusive CMT can operate in communities
    with populations of 1,700, but strong CMT is related
    to low levels of immigration. This suggests that high
    endogenous population growth (i.e., not from
    immigration) in smaller communities may not affect
    the ability to employ viable marine tenure.

    The next research challenge is to address the
    applicability of these results to the wider region. A
    random selection of villages that could be
    considered representative of the region would be
    desirable for future studies. Another research
    priority is determining what specific aspects of these
    variables influence marine tenure. For example,
    high immigration may cause confusion over use
    rights, disrupt traditional information exchange
    mechanisms, and/or introduce new ideas that
    challenge traditional practices. A better understanding
    of how these factors influence marine tenure
    regimes will allow development and conservation
    organizations to target capacity building and other
    activities to potentially increase the resilience of
    Pacific conservation strategies against the forces of
    social change.

  • Responses to this article
  • can be read online at:
    http://www.ecologyandsociety.org/vol10/iss1/art36/responses/

  • Acknowledgments
  • :

    I thank the people and leaders of all 21 villages for

    http://www.ecologyandsociety.org/vol10/iss1/art36/

    http://www.ecologyandsociety.org/vol10/iss1/art36/responses/

    Ecology and Society 10(1): 36
    http://www.ecologyandsociety.org/vol10/iss1/art36/

    allowing me to work in their communities. Thanks
    to LIPI, the PNG National Research Council, PNG
    Department of Environment and Conservation, and
    the PNG National Fisheries Authority. The David
    and Lucille Packard Foundation supported this
    research through the Wildlife Conservation Society.
    Thanks to S. Sutton, R. Arthur, J. Carrier, and three
    anonymous reviewers for reviewing this manuscript
    and providing extremely helpful and constructive
    comments.

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    • Title
    • Abstract
    • Introduction

    • Methods
    • Data collection
      Analyses
      Results
      Socioeconomic characteristics of communities
      Socioeconomic factors influencing marine tenure

    • Discussion
    • Speculation
      Responses to this article
      Acknowledgments

    • Literature cited
    • Figure1
    • Table1
    • Table2

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