The Endogenous Evolution of Common Property Management Systems

Highlights

• Common pool resource regulations typically apply uniformly to all users.

• An emerging alternative allows sub-groups of users to manage an allocation.

• When a group selects individual property right, higher profits attract other users.

• Taste for competition limits complete adoption of individual property rights.

• A weak collective right with a self-governance pathway can facilitate efficiency.

Abstract

Traditional co-management of common property resources involves stakeholders contributing knowledge and ideas about rules for access and extraction, which are analyzed and implemented by the regulator. We examine an emerging alternative system, in which self-identifying clubs of users are allocated a share of a total allowable extraction, that they manage with considerable autonomy. When multiple clubs concurrently extract under different self-selected rules, users gravitate toward more profitable regulations in subsequent seasons, putting evolutionary pressure on less profitable systems. We show experimentally that strong individual property rights, and the efficiencies associated with them, emerge endogenously from this process. A taste for competition among some individuals limits realized efficiency, but not extensive adoption of individual rights. Thus, regulators need not directly implement strong individual rights to achieve their benefits; regulators may instead assign a collective property right and provide a self-governance pathway toward management that supports better outcomes.

Introduction

In order to leverage the local knowledge and legitimacy benefits of involving resource users in the governance process (McCay and Acheson, 1987; Ostrom, 1990; Ostrom et al., 1999), managers have worked to formally engage users in co-management processes that identify regulations that govern access to and exploitation of water, forests and fisheries. These processes allow regulations to incorporate the needs and preferences that dominate within user communities (Agrawal, 1994; Blomquist, 1994; Blomquist, 1992; Trawick, 2001). However, uniform regulations, by their nature, do not reflect heterogeneity in user preferences over management methods, which may impede implementation of effective community management.

An emerging approach to co-management seeks to reflect differences among users by allowing sub-groups to claim collective resource use allocations, which they can manage with considerable flexibility. For example, outcomes improved among Mexican forest ejidos when individual communities were allowed to self-determine configurations of private and collective rights systems (Barnes, 2009; Barsimantov et al., 2010). Fisheries that allocate target or non-target harvest quota to cooperatives experienced better bycatch management (e.g., Abbott et al., 2015; Stram and Ianelli, 2015) or improved safety (North Pacific Fishery Management Council, 2016; Pfeiffer and Gratz, 2016). Increased profitability was observed among subsets of users who manage a collective allocation, while others participate in a common pool (e.g., Georges Bank Cod Fixed Gear Sector, 2010; Knapp, 2008; Pinto Da Silva and Kitts, 2006; Scheld et al., 2012; Verani, 2006).

The Northeast (US) Multispecies Groundfish Fishery is extending this approach by encouraging the formation of multiple “sectors”, or new self-identifying clubs of users. Importantly, cooperative self-governance has not emerged in this fishery, and harvesters preferring a competitive fishery have politically blocked efforts by other harvesters to establish fishery-wide individual quota allocations (Scheld and Anderson, 2014; Scheld et al., 2012). Sectors, however, can manage their allocated shares—proportional to their joining members' historical share of catch—in different ways while pursuing the same resource. Thus, harvesters pursuing individual allocations can form a sector and subdivide their collective allocation, while those preferring competitive pursuit can do so with their allocation, allowing innovation without establishing a political consensus for any particular change (Jenkins et al., 2017). The Multispecies fishery has seen improvements in economic outcomes (Scheld and Anderson, 2014) and social capital (Holland et al., 2015), raising the general question of whether and how innovations can effectively diffuse among sectors exercising autonomy beyond the specific control of regulators. This diffusion does not require coordination within or among sectors; users can simply switch to a sector that uses a different system, taking their associated allocation with them. Effective management strategies can expand in two ways: when additional sectors adopt them, or when users switch into sectors using them.

This policy experiment is unfolding in the absence of a framework for predicting the properties of the management that will emerge. There is no general theory of institutional selection, and previous experimental work has focused on the emergence of market institutions (Crockett et al., 2009; Jaworski and Wilson, 2013; Kimbrough et al., 2008). As such collective catch share programs expand, it is necessary to predict the evolution of self-management, to support biological and social evaluation mandated through the Regulatory Impact Review process. Given the range of alternative institutions, and potential mechanisms through which they might emerge and transform, addressing this need comprehensively requires a broad research program.

As a first step, we investigate individual resource users' choice of a management system under a certain circumstance, which mirrors a number of recent catch share programs in US (Scheld and Anderson, 2014; cf., Georges Bank Cod Fixed Gear Sector, 2010; Pinto Da Silva and Kitts, 2006; Scheld et al., 2012; Verani, 2006). Specifically, the role of expected profitability is highlighted, when resource users are presented with a choice between an institution that provides a secure individual extraction right, and an institution with competitive extraction. The Rhode Island Fluke Sector Pilot Program is a representative example (Scheld and Anderson, 2014), featuring a club managed by individual quota, and a limited entry derby for other harvesters. We design a controlled economic experiment in which harvesters are allowed to choose whether to join the individual quota club before each season, drawing on their experiences from previous seasons. Communication within and between clubs is not allowed, reflecting the historic failure of New England fishermen—and stakeholders in many other fisheries—to coordinate collective action around improved management. We test the hypothesis that the individual quota system, which supports the efficient harvesting strategy as a Nash equilibrium (cf., Gürerk et al., 2006), yields higher profits and attracts more participants than the less restrictive common pool institution (e.g., Agrawal, 2002). If true, this would imply the eventual efficiency and distributional outcomes of decentralized, club-based management will be well predicted by models of an individual quota system. We then associate individual variation in the rate of moving to the individual quota system with individual social preferences, risk preferences, and a taste for competition.