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Journal Title

Ecology Law Quarterly




Garrett Hardin's classic description of the tragedy of the commons tells us that all environmental problems require a property rights solution. The property solution or rule may call for the definition and enforcement of common, public, or private property rights, but any escape from the tragedy requires some rationing mechanism that allocates a form of property rights to some entity. These solutions fall into one of two broad traditions within economics: the Pigouvian, or regulatory tradition, and the Coasean, or market-based tradition. Any proposal for action in either tradition implies some definition of property rights. The difference lies in the type of property rights required. If the recommendation follows the Pigouvian tradition, it will call for government taxation or regulation, and the politically determined rules will form a public or regulatory property regime. A recommendation in the Coasean tradition, on the other hand, will rely on markets and a system of private property rights to solve the tragedy. Defining property rights is central to solving any tragedy of the commons. Thus, understanding the factors that influence how property rights are defined is critical to understanding the solutions to environmental problems. In this Article, we propose a framework for examining how technology influences the definition of property rights. This framework, depicted in Figure 1, clarifies the differences between Coasean and Pigouvian solutions to commons problems and assists with the choice between them. Technologies that reduce transaction costs allow individuals to engage in increased wealth-increasing trades. When such technologies allow the creation of private property rights, entrepreneurs facilitate the creation of new bundles of property rights to meet the demand for property. Such entrepreneurs can play an important role in delivering environmental goods. At the same time, equally powerful incentives exist for individuals to use the power of government to capture property rights. Such rent-seeking disrupts the entrepreneurial process and prevents the development of new solutions to new problems. Our theory helps explain how these two conflicting impulses shape the provision of environmental goods. In Part 1, we describe the role of technology in defining possible property rights solutions. Part II utilizes a theory from industrial organization to build a conceptual model of how property rights evolve. In Part II, we discuss various kinds of transaction costs that affect the evolutionary process and show how property rights technologies address these costs. In Part III, we discuss two competing legal frameworks for solving commons problems, the common law and statutory law. Finally, Part IV discusses certain aspects of the competition between providers of property rights institutions and explains how this competition affects the resulting definition and distribution of property rights.

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University of California Berkeley School of Law

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