Book review: Cai, M., Murtazashvili, I., Brick Murtazashvili, J., and Salahodjaev, R. (2022). Toward a Political Economy of the Commons: Simple Rules for Sustainability. Edward Elgar.
1. Introduction
Ever since Nobel Laurate Elinor Ostrom (1990) wrote her magnus opus Governing the Commons, there has been a growing interest in the challenges that situations of the commons pose to human societies and collective action. ‘The commons’ can be defined as the tangible or intangible resources that, given their natural or physical structure, are easily accessible to, or can be consumed by, a large portion of society (i.e., it is difficult to exclude people from using the resource).[1] Commons could include natural materials such as the air, oceans, fisheries, lakes, water resources, minerals, and land, to mention a few. A commons, or a common pool resource (CPR), arises when a group of people or collectivity seeks to jointly own and manage a resource by establishing certain boundaries for exclusion (Ostrom and Ostrom, 2002).
The situation of the commons is basically a governance challenge that requires some form of collective action to organize and distribute the ownership via rules; monitor and enforce the rules; and sustainably use and distribute the resources over time. Given the complexity of the modern world and recent environmental challenges, the commons are now being considered as possible alternatives in several fields, to manage key resources and productive activities (Paniagua, 2021). All this—in concomitance with E. Ostrom (2010) receiving the Nobel Prize in Economics in 2009—has generated an intense interest in the field and in how to delineate a theory of the commons (or a theory of common pool resources). A journal has even emerged that is dedicated exclusively to these issues: the International Journal of the Commons, published by the The International Association of the Commons (IASC).[2]
Nonetheless, the literature on the commons has thus far focused on only three aspects: the history of certain local commons, niche experiences and empirical accounts of local ecological-common situations, and circumstantial examples of successes or failures of the commons. Such narrow focuses obscure the most general principles and key aspects of the governance of the commons and its main properties. Paradoxically, the modern literature of the commons has slightly deviated from the broader quest delineated by Elinor Ostrom (1990; 2010) of trying to illuminate the general political, economic, and institutional analysis of the governance properties and principles found within successful commons situations. In short, the scholarship of the commons remains niche and too narrowly focused on local experiences, in turn disregarding the more general aspects related to institutional analysis, property rights, and governance.[3]
What seems to be missing is a broader political economy of the commons. This is exactly what the book Toward a Political Economy of the Commons: Simple Rules for Sustainability attempts to do, making it a highly relevant and valuable book. It is useful for social scientists interested in the commons and political economists interested in governance dilemmas, property rights, and institutional analysis. Given the book focuses on resource and natural commons, it is also relevant for teaching development economics, ecological and natural resource economics, and sustainability and environmental economics.
2. The main thesis and takeaways of the book
Following Richard Epstein’s (2009) idea of ‘simple rules for a complex world’ and Elinor Ostrom’s (1990) ‘design principles’ for successful governance of commons dilemmas, Toward a Political Economy of the Commons seeks to propose simple rules for achieving successful governance of the commons and, thus, simple rules to promote the sustainability of natural resources. Its main thesis is that a political-economic approach is necessary to understand varying levels of success of overcoming commons dilemmas. The authors claim that successful commons governance always requires the following simple, yet key, economic, political, and social principles:
1) Concerning economic aspects, focus must be placed in a) defining and enforcing property rights, b) creating (direct or adjacent) markets to appropriately value resources and the environment, and c) establish institutions that encourage wealth creation whilst upholding responsible conservation.
2) The political aspect must include establishing polycentric and nested political institutions that enable local participation in governing commons challenges.[4]
3) The social aspect must include encouraging the development of social capital features such as trust, patience, and an appropriate form of individualism.
In a nutshell, the main takeaway of this book is that:
“… successful governance of resource commons arises from polycentric political institutions, clearly defined property rights, the presence of markets for goods and services produced from commons as well as markets for pollution… and supportive social institutions, especially trust, patience, and individualism.” (Cai, et al., 2022, p. 4)
One of its greatest contributions is that the book shows that the tragedy of the commons is not inevitable and environmental and natural degradation is not the only alternative; instead, the aforementioned principles guide us to define and enforce property rights in response to local conditions, establish adjacent markets that generate information and the correct incentives to conserve resources, and promote local-level public policies that encourage trust, patience, and individualism. This remains challenging since having simple principles does not mean easy solutions.
Leaning on these principles, the book highlights a crucial corollary for environmental policy and conservation of the commons, involving mostly the crucial properties of capitalism—markets and property rights—as the key to good governance of the commons. While this might seem like a controversial claim, the authors provide substantive evidence throughout the 7 chapters showing that well-designed markets and clearly established and enforceable property rights (i.e., that adapt well to local conditions) are always behind successful conservation and management of natural commons. Consequently, whenever we find environmental degradation or the destruction of natural commons, we usually also find either badly priced resources—due to the absence of markets or poor regulations that impede exchanges—or nonexistent or non-enforceable property rights.
Therefore, markets, prices, and property rights are on our side; they should not be portrayed as intrinsically negative but rather as political economy instruments that can help generate better incentives and knowledge to sustain more successful governance of resources. This parallels another key corollary of the book: environmental degradation and the tragedy of the natural commons are not problems associated with abstract notions such as ‘capitalism’ or ‘greedy corporation’, but rather usually associated with specific fragile institutions and a lack of enforceable property rights.
One of the most interesting ideas of the book is the concept of creating adjacent markets around natural resources so that they can lead to better pricing of the commons and, subsequently, create a market-driven need for establishing new and better property rights. In other words, “the expansion of markets put in motion the creation of property rights” (ibid., p. 8). Using a simple example, imagine that we share a piece of land which is an open-range pasture that might be affected by the ‘tragedy of the commons’; if we create adjacent markets for cattle and meat and dairy products, then we also generate economic incentives to better manage the open range, and, thus, to price land better and to internalize the externality of the tragedy. This scenario may lead cattle owners to attempt to develop a system of property rights for the land and a system of governance to maintain a sustainable herd size, since the adjacent markets signal to them the value of doing so. As such, well-crafted markets can be part of the environmental solution rather than part of the problem (Romer, 2018).
The book develops many such interesting themes and ideas, of which I will highlight another four. First, there is the idea that successful governance of the commons and sustainability depend crucially on economic, political, and social aspects of the commons. The authors strive to distill and simplify the political economy of the commons by refocusing attention onto key (yet neglected) ideas, boiled down to, “the definition of property rights is key to managing a commons; so is a responsible political apparatus. Those factors, along with social capital, go a long way to overcoming the tragedy of the commons” (Cai, et al. 2022, p. vi).
Second, an underlying theme of the book is that the sustainability of natural resources ultimately depends mainly on institutions. As E. Ostrom (1990, p. 22) reminds us: “institutional details are important” since they determine, 1) incentives, 2) information, and 3) the monitoring and punishment mechanisms that affect decisionmakers within a collective action situation. Institutions and their properties are extremely important in every governance challenge. The authors recognize, “in the end, institutions are all we have. Governing the commons is always a question of institutions, but the best institutions tend to be decentralized ones” (Cai, et al. 2022, p. vii). This underlying theme is strongly Ostromian in orientation; it is ultimately a plea for institutional and comparative analysis, while also signaling to avoid ideology and abstract panaceas (Ostrom et al., 2007).
Third, the book underlines the crucial analytical distinction between private property and bundles of property rights, by building on Schlager and Ostrom (1992) and Libecap (1989). Standard forms of private property that we use daily are only one form of ‘property rules’, which are not the only way to solve commons dilemmas. The need for establishing property rights does not mean necessarily the need for creating exclusive private property. Importantly, “the simple rule is not that private property is necessary, but that property rules must reflect the local conditions” (ibid., p. 13). This is a crucial point in political economy since it suggests that strict forms of private property are not panaceas, nor the best ‘property rule’ for all situations (Leeson and Harris, 2018). Different systems of property rights need to be well-defined, credible, and enforceable, while also reflecting the local conditions relevant to the problem at hand. Thus, “conserving or preserving the commons always requires property rights, with the proviso that the specific form is always determined by the context” (ibid., p. 34). To conclude, what is always necessary is aiming for a nuanced and less ideologically driven analysis of property and property rights and focusing on how they can be institutionally crafted to fit the local conditions.
Finally, an important message that the authors communicate is that sound political economy requires engaging in interdisciplinary social sciences grounded in empirical evidence. Cai and colleagues (2022) engage in a very rigorous form of political economy while borrowing insights from property rights economics, institutional economics, public choice, market process theory, comparative political economy, ecological and land economics, and empirical analysis. The book delineates a valuable way forward for developing relevant political economy studies. Young scholars and students interested in political economy should follow the analytical framework and the multidisciplinary approach presented in this book.
3. A brief overview of the book and its empirical cases
The book is divided in seven chapters. Chapter 1 provides a brief account of the political economy of the commons by presenting its main thesis and the simple rules for correct governance of the commons.
Chapter 2 presents a more detailed political economy framework for analyzing the governance of the commons. The authors’ framework relies heavily on property rights economics, institutional economics, and Bloomington public choice. The framework is thereafter used to analyze four cases of natural challenges and commons: deforestation challenges, inshore and offshore fisheries, mining resources and mines, and global climate change and greenhouse gas (GHG) emissions.
Chapter 3 reviews the evidence from deforestation and land economics studies. The authors analyze this vast literature using their framework and conclude that deforestation is likely to be mitigated through a better definition and enforcement of property rights, greater wealth generated by capitalist institutions, deeper democracy through polycentrism, and supportive social institutions, such as trust. Through this lens, deforestation, “is a consequence of bad institutions, not capitalism: poorly defined and enforced property rights; political institutions that enable rent-seeking by interest groups and prevent local groups from participating in shared governance; and deficits in social capital” (Cai, et al., 2022, p. 14).
Chapter 4 explores the political economy of inshore and offshore fisheries. The authors explore first the cases of salmon fishing in the Pacific Northwest, focusing on how indigenous tribes created and enforced property rights over salmon, and second, the case of lobster fisheries in the United States (US). These examples highlight how property rights can be created and enforced endogenously by local communities, with minimum interference from outside forces such as the State. The cases are relevant also by showing the significance of self-governance in properly governing common challenges and why polycentric institutions that account for local situations and communities can improve the governance of fisheries. The cases finally illustrate how strong bottom-up social norms and social capital can sustain sound forms of governance, even in the absence of formal rules.
Chapter 5 describes how miners have avoided the tragedy of the commons. Focusing particularly on the US, they review gold mining in California during the gold rush, the emergence of agreements for governing oil and gas reservoirs, and the evolution of rules for governing hydraulic fracturing (i.e., ‘fracking’, or the extraction of gas and oil from shale). These cases shed light on understanding that successful governance of natural resources always depends on economic factors (e.g., increasing mine value and prices of minerals), political factors (aligning interests, particularly those of bureaucrats and politicians in correctly regulating mining), and social factors (shared mental models and values concerning the relevance of property rights and who is part of the local community).
Chapter 6 reviews the final case of the political economy of the commons through examining climate change. The authors explore GHG emissions, climate change mitigation, climate change adaptation, and climate justice. They conclude that, “even for advocates of climate justice, market mechanisms should be preferred to command-and-control policies. Polycentrism is [also] increasingly recognized as significant in fighting climate change. Capitalist countries are also reversing patterns of GHG emissions… [t]he central question is how to design policies to encourage business to invest in greener technologies. … There are no panaceas as far as political institutions are concerned, though there are good reasons to prefer polycentric to centralized ones for mitigating climate change and adapting to its consequences” (ibid., p. 16).
Ultimately, partial alleviation of climate change and what is needed from societies could reside in the political economy of the commons at various levels: at the meta level, introducing incentives in the form of a ‘climate club’ associated with trade treaties (Nordhaus, 2015); at the local level, polycentric political institutions could adapt to climate change at different scales, while respecting local conditions (Dorsch and Flachsland, 2017); and lastly, markets for pollution and economic incentives (and costs) would be needed to stir innovation and profit-oriented entrepreneurship directed toward cleaner and better sources of energy (Romer, 2018).
Chapter 7 concludes the book by merging the themes shared by these four commons dilemmas, with the aim of helping us to better grasp the simple rules for sustainability, based on the applied political economic framework. One of the final takeaways is that population does not tell us much about the success or failure of managing the commons; instead, the focus should be on institutions and property rights. Another important lesson is that polycentric governance, rather than centralized responses, are more likely to successfully manage complex and nested problems and, thus, better able to alleviate commons dilemmas and externalities (see also Paniagua, 2022). In this sense, government public policies that help to build social capital and sustain the social fabric of local communities (including trust, patience, civic education, and information) have beneficial spillover effects to govern the commons (see also Paniagua and Rayamajhee,2022).
Toward a Political Economy of the Commons is a much welcome contribution to the intellectual road and research agenda initiated by Elinor Ostrom (1990) nearly thirty years ago on the political economy of the commons and on defining the underlying core principles of robust governance structures to attain the conservation of our natural resources and avoid environmental catastrophe. As such, this book delineates a fruitful road that the literature on the commons and environmental economics should adopt—one marked by institutional analysis, public choice, and political economy. For these reasons, I conjecture that this book would be widely read and cited in the years to come.
Bibliography
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Cai, M., Murtazashvili, I., Brick Murtazashvili, J., and Salahodjaev, R. (2022). Toward a Political Economy of the Commons: Simple Rules for Sustainability. London: Edward Elgar.
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Endnotes [1] In other words: “Commons are scarce resources that are subject to dissipation or congestion when their use is unrestrained or unrestricted” (Cai, et al., 2022, 1). [2] The modern literature on the commons started with E. Ostrom’s (1990) book, and thus there has been nearly thirty years of scholarship on common pool resources (CPRs) and the commons. For an overview of the literature see: van Laerhoven, et al. (2020) and Berge and van Laerhoven (2011). [3] In the words of the authors, “Approaches to [commons] resources have become so descriptive that scholars have lost sight of the big picture” (Cai, et al., 2022, p. vi). [4] The authors establish that “Polycentrism, which is defined by multiple levels of governance each with autonomy to make rules, is an especially significant concept for understanding commons governance” (Cai et al., 2022, p. 3).