Transferability of Collective Property Rights: Does Trade Destroy Trust?

Many traditional systems of common property (such as forests, pastures and irrigation systems) have differed from modern systems of common property (such as firms) not just in the typically greater informality of the rules governing their management, but also in that it is less easy for the right to share in the duties and benefits of the common property resource to be transferred from one individual to another. The ownership of traditional systems has often been defined in terms of collective entities: a forest belongs to a given tribal group, or a pasture belongs to a particular village. The identities of the individuals who thereby qualify to exercise collective rights may change: some members of the tribe or the village may die or migrate, but it is often difficult and sometimes impossible for them simply to transfer their rights to somebody else. Not only do modern systems typically differ in this respect — for example, someone owning a share in a firm may transfer this share to a third party for a financial consideration — but it is a common ingredient of many structural policy reforms to seek to increase the ease with which such transfers are made. Whether it is the World Bank recommending the privatization of common land, or the financiers of the UK and the USA calling on countries such as Germany, France and Japan to remove some of the constraints limiting free trade in the shares of firms on their stock markets, such proposals are often viewed as facilitating the more efficient matching of owners to assets.