The Economic Rationale of Communal Resources

Abstract

"We are concerned in this paper with the logic of economic organization when several independent producers jointly draw inputs from a natural resource which they share and to which they hold exclusive rights. We use the term communal property to refer to this arrangement and distinguish it from situations where exclusive rights to a resource do not exist and access to the asset is open.

"The structure of organization is a chief concern of the economics of institutions which attributes forms of organization not only to economies of scale but to problems of information and costly enforcement of contracts. In explaining the emergence of property rights and alternative forms of organization, most economists have followed an approach that has been called the naive model. The naive model explains the structure of institutions and organizations in terms of the demand for these arrangements by rational individuals, who are constrained by information and other transaction costs and seek arrangements that maximize the joint value of their assets. The approach is naive because it does not seek to explain the supply of property rights, which is the domain of social and political organizations. Our initial discussion is based on versions of the naive model, but we go on to consider the role of social and political organizations in shaping property rights."