Question

Explain the propertu right approacj to environment problem

Answer 1

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This concept is one that is often difficult to understand and, therefore, can vary in definition. The most complete property rights systems have four underlying qualities: the right to possess a resource or asset, the right to determine its use, the right to sell and receive profits from it or its outputs, and the ability to exclude others from using it. In short, property rights are legal rights an owner has entitling them to the use, benefit, sale, and exclusion of others for a given resource.

An example would be a farmers market, where it is pretty clear who owns what. The farmer owns the tomatoes until a shopper pays for them. The shopper understands they are not allowed to simply take the tomatoes, just as the vendor in the next stall recognizes that they are not his tomatoes to sell. When the shopper purchases the tomatoes and walks away, the tomatoes then belong to the shopper; the farmer knows that he cannot just take them back. This is an illustration of property rights—common understandings backed with formal laws that allow the farmer to exert exclusive ownership of the tomatoes.

Property right arrangements can stretch beyond conventional notions of a single owner possessing a physical object for an indefinite amount of time. It is not only possible, but fairly common, for groups and governments to own resources. Property rights can also be held temporarily and can also be held over something intangible, like an idea. The most important consideration is not ‘who’ has property rights to the specific resource, but that someone, or some organization, does in fact have those rights. These rights can also be held in common, as with a tribe or village.

A clear definition, consistent enforcement, and easy divestment of property rights are paramount to their effectiveness. Clearly defining a resource and delineating ownership is required for any legitimate transaction to be made. Consistently enforcing or defending ones right to the resource is essential to give ownership meaning. Finally, being able to divest (sell off) one’s property is necessary if resources are to be used in the most efficient manner.

At their most basic level, property rights serve as the market’s organizing force, creating rights to resources and compelling resource owners to fully consider the opportunity cost of any actions. A market’s relation to property rights may be thought of as serving a similar purpose to the rules of a football game. If both teams play by standard, well-known rules, there will be less stoppage for penalties and/or explanations. However, the rules are less likely to be obeyed unless a referee—think the legal system—enforces them. A strictly and consistently enforced game will raise fewer disagreements and be significantly more enjoyable to participate in than a lax one. With the rules of the game clearly established, the players are free to focus on playing the game of football. In the market, when property rights are present, entrepreneurs and business people are able to concentrate on being productive, i.e. to develop new products, create new services, and plan for the future.

The issue of property rights can become particularly significant when dealing with environmental issues because many natural resources do not typically lend themselves to clearly defined and easily enforceable property rights. Air and water are good examples in which property rights are not usually well-defined. In these cases, pollution costs may be dispersed across all that use the air and water; a polluter does not pay any more than anyone else for additional pollution emissions. Since the costs the polluter pays is a fraction of the total cost, they have little reason to emit less. Any situation where participants do not bear the full cost of their actions, the extra cost is known as an externality. The establishment of property rights can help to internalize externalities. However, lawsuits are also possible where damages occur. For example, the Valdez oil spill resulted in the polluter paying both compensation for damages and punitive fees.

Similarly, when property rights are not defined, it can lead to a tragedy of the commons. This occurs when resources are degraded because individuals have the incentive to utilize the maximum amount before someone else does. An example of this can be illustrated by saltwater fish stocks, the Atlantic bluefin tuna in particular. Since no one owns the fish, fishermen take until the population is nearly depleted; putting a fish back—even a small one—simply means someone else will catch it. In many cases of tragedies of the commons, environmental stewardship is often not practiced because it is difficult to exclude others from benefiting from the responsible practices. Yet, New Zealand is an example where a system of fishing property rights has been developed in order to reduce externalities.

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