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Regulation and Deregulation: Property Rights Allocation Issues in De Regulation of Common Pool Resources

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  • Gary Libecap

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    Abstract

    Rights-based institutions have been adopted for certain natural resources in order to more effectively mitigate the losses of the common pool. Past central government (command and control) regulation has not proved satisfactory. In deregulation, a major issue has been the assignment of those rights and controversy over it has slowed the process. In this paper, I examine three different allocation rules: first-possession, lottery or uniform allocation, and auction and draw predic tions as to when they might be adopted and why they are controversial. I analyze the assignment and nature of the rights granted for common-pool resources where deregulation has occurred: oil and gas unit shares, emission permits, and selected fishery ITQ’s in six countries (Australia, Canada, Chile, Iceland, New Zealand, and the U.S). I find that firstpossession rules dominate where there are incumbent users. Lotteries and auctions are rarely used. I discuss criticisms of first-possession rules and argue that first-possession is likely more efficient than previously recognized. Accordingly, restrictions on such allocations as part of deregulation (rights set-asides for particular groups and exchange limitations) may be costly in the long run for addressing the problems of the common pool.

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    File URL: http://www.icer.it/docs/wp2007/ICERwp28-07.pdf
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    Bibliographic Info

    Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 28-2007.

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    Length: 24 pages
    Date of creation: Mar 2007
    Date of revision:
    Handle: RePEc:icr:wpicer:28-2007

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Gary D. Libecap, 2006. "The Assignment of Property Rights on the Western Frontier: Lessons for Contemporary Environmental and Resource Policy," NBER Working Papers 12598, National Bureau of Economic Research, Inc.
    2. Fullerton, Don & Metcalf, Gilbert E., 2001. "Environmental controls, scarcity rents, and pre-existing distortions," Journal of Public Economics, Elsevier, vol. 80(2), pages 249-267, May.
    3. Libecap, Gary D & Smith, James L, 2002. "The Economic Evolution of Petroleum Property Rights in the United States," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages S589-608, June.
    4. Pashigian, B Peter, 1985. "Environmental Regulation: Whose Self-interests Are Being Protected?," Economic Inquiry, Western Economic Association International, vol. 23(4), pages 551-84, October.
    5. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
    6. Cheung, Steven N S, 1970. "The Structure of a Contract and the Theory of a Non-exclusive Resource," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 49-70, April.
    7. Ronald N. Johnson & Gary D. Libecap, 2001. "Information distortion and competitive remedies in government transfer programs: The case of ethanol," Economics of Governance, Springer, vol. 2(2), pages 101-134, 07.
    8. Grafton, R Quentin & Squires, Dale & Fox, Kevin J, 2000. "Private Property and Economic Efficiency: A Study of a Common-Pool Resource," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 679-713, October.
    9. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
    10. Anthony Scott, 1955. "The Fishery: The Objectives of Sole Ownership," Journal of Political Economy, University of Chicago Press, vol. 63, pages 116.
    11. Lueck, Dean, 1995. "The Rule of First Possession and the Design of the Law," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 393-436, October.
    12. Doyle, Matthew & Singh, Rajesh & Weninger, Quinn, 2005. "Fisheries Management with Stock Growth Uncertainty and Costly Capital Adjustment: Extended Appendix," Staff General Research Papers 12291, Iowa State University, Department of Economics.
    13. Stavins, Robert, 2003. "Market-Based Environmental Policies: What Can We Learn from U.S. Experience and Related Research?," Working Paper Series rwp03-031, Harvard University, John F. Kennedy School of Government.
    14. Gary D. Libecap & James L. Smith, 1999. "The Self-Enforcing Provisions of Oil and Gas Unit Operating Agreements: Theory and Evidence," NBER Working Papers 7142, National Bureau of Economic Research, Inc.
    15. Dahlman, Carl J, 1979. "The Problem of Externality," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 141-62, April.
    16. Johnson, Ronald N & Libecap, Gary D, 1982. "Contracting Problems and Regulation: The Case of the Fishery," American Economic Review, American Economic Association, vol. 72(5), pages 1005-22, December.
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