Optiaml Resource Regime in Natural Resource Management: A revised economic theory of commons

The economic theory of natural resource management has its roots in the conventional economic theory of commons that overlooked the role of the institutional structures and the associated transaction costs. Hence, it has not been able to explain the outcomes of the cases of successful management of natural resources, such as forests, as common property. The possible economic optimality of community regimes has been recognised in the empirical literature, but it has not yet been incorporated in production models that would help to elucidate the reasons for its relatively superior performance in selected contexts. In this paper, we incorporate institutional structure into a static analysis of optimal resource management regimes which aims to correct this neglect. Resource regime is included as one variable input in natural resource production models that leads to determine global optimum resource regime. The other specific features of this paper are: i) a continuous array of possibilities varying from open access at one extreme to private regime at the other rather than just the two extreme options of state and private regimes; (ii) the socio-economic characteristics of the resource's "user group" as the main determinant of the relative efficiency of different regimes; and (iii) a specific mathematical form for the transaction function, in order to facilitate empirical studies in this area. Static models for general separable and non-separable transformation and transaction functions are discussed. The possibility of different resource regimes being optimal in different socio-economic conditions is highlighted.