“Weal (definition): Noun, 1. (archaic) prosperity or wellbeing (now esp. in the phrases the public weal, the common weal)”
Value without ownership? Global Commons and the problems of property
“Show me a first-generation fortune and I’ll show you a successful partnership between a talented individual and society’s invisible venture capitalist, the commons.”
William H. Gates, Sr.
Capitalism, by its very nature, is dependent upon property; the right to access or use the products of property owned by someone else (usufruct), or the ability to make use of common property (the commons).
Where something lacks clear ownership, or where there is shared (or common) ownership, capitalism struggles to compute its value adequately, often meaning that it is either considered as a “free good” or is inadequately priced.
This does not mean that the unpriced object or objects in discussion do not give rise to value. For instance, the existence of air is one of the reasons why combustion works, does that mean that a substantial part of the profits of automobile companies should actually be paid to a local or global atmospheric fund to ensure the continued supply of fresh air? Perhaps it should!
Rather, that the existence and maintenance of that un/underpriced object does not appear either as an asset or as a cost (required to ensure its continuing existence) on a balance sheet. This situation frequently results in the degradation and possible destruction of the asset, undermining its ability to give rise to value.
As I have previously explored thorough the metaphor of trying to get a good price when selling your Mother, the fact that something is priceless should not equally mean that it is worthless.
The wicked problem of free goods and sustainability is a long explored one. Many approaches to developing sustainable economics and capitalism seek to price all such free goods (classified in economic terms as “externalities”) such that their value is included in economic calculations and decisions.
Common Weal – From free goods to common resources
Free goods are a property of the resources that give rise to them. These resources are known as ‘Common Pool Resources’ or, more simply ‘commons’.
Recognising the value of commons to our global economy in such a way that encourages their continued health and existence is perhaps an even bigger and more contentious challenge than the already difficult one of pricing environmental and social externalities.
Historically, economic value has generally been allied to ownership and property rights. Global commons, which are resources owned by no-one but benefitting many (through their productivity, ecosystem function or resource richness) are facing a series of pressures; from impacts upon their function, to the possibility of ‘land grabs’ and resource based conflict. It is frequently argued that the challenges facing global commons represents a market failure and that threats to them are either inevitable or can only be remedied through privatisation.
This is because to a large extent common pool resources are the birthright of every human being. Under conventional economic and capitalist theory, the only way for them to be adequately valued would be for them to be owned in some way, whether by governments (notionally in trust for their citizens) or by private interest. Under the latter scenario, the resource could be valued as it would be considered as an asset either capable of being sold, or of giving rise to continued revenue.
Is the only way for our birthright to be valued for it to be sold to someone else?
This is the sort of question that Terrafiniti has been exploring as part of our Earth IPO (Initial Public Offering) thought experiment, which is seeking to discover the capability of our current systems of value, law and finance to evolve such that they might deliver a sustainable and equitable world as a natural outcome of their existence.
The project, in partnership with the global law firm Herbert Smith Freehills and with the input of a range of professionals with an array of expertise and experience has been designed to discover the challenges that would be faced by our current systems of value if, as a species, we decided that sustainability and equity were worthwhile shared ambitions.
As part of this exploration Terrafiniti has developed an overview on the concept of Global Commons and its associated theories. In addition, I have included suggestions of our own on how to place the protection and growth of global commons at the heart of humanity’s systems of value and priority.
I thought that it might be useful to share this overview with our Towards 9 Billion readers, so here it is!
A quick primer on Commons
What are they?
Global Commons (or Common Pool Resources) are resource domains to which all nations have legal access. They may comprise land or other resources with great value and no owner, or resources of critical importance and benefit to many people – ‘stakeholders’.
Commons resources are capable of being degraded or destroyed through over-use, but also of supplying effectively indefinite benefits. They provide the ‘fertile ground’ which allows the existence of life, and of complex, interdependent social and financial systems.
Examples of global commons include the atmosphere, outer space, the High Seas (beyond territorial waters), Antarctica and International Institutions (such as the UN, the World Bank, IMF and the WTO (World Trade Organisation).
Local and scale-limited examples include literal commons such as Wimbledon Common (where the Wombles live) and the New Forest in the UK (where common rights exist/are granted), Government owned forest/land/seas (common ownership) and social infrastructure (roads, schools, hospitals etc.).
Commons are therefore resources themselves, geographic areas giving rise to resources or benefits of some kind or properties arising from the existence of resources that may have multiple beneficiaries.
Commons and commons rights (the right to have access to a commons resource or to benefit from the productivity of a commons) have long been the subject of moral, ethical and economic debate and discussion. The central theme in many of these discussions is that of the challenge of whether ‘open’ access to commons resources inevitably gives rise to their degradation and destruction.
The challenge which commons pose to us and which we pose to them was perhaps most famously framed by Garrett Hardin in his 1968 paper in Science, “The Tragedy of the Commons”. This used the metaphor of herders grazing cows on a literal common; describing a situation in which individuals acted independently and rationally according to their own self-interest. The herders continued to add more animals to achieve greater returns, eventually depleting the asset of grass in the process. In Hardin’s view, only mutual coercion or imposition by the state could prevent the destruction of the land.
However, there are competing views on whether ‘open’ access to commons inevitably gives rise to their degradation. Most notably, the Nobel Laureate Elinor Ostrom pointed to many examples of successful commons stewardship. In these examples a key part of maintaining the sustainability of the resources in question arose from a clear social compact; that those individuals accessing benefits knew and understood that they had social obligations towards other commons users. Transgressors of these social rules could be subject to a range of social penalties, including ostracism and the formal removal of rights.
Ostrom argued that there are 8 ‘design principles’ required to sustain common pool resources:
- Define clear group boundaries.
- Match rules governing use of common goods to local needs and conditions.
- Ensure that those affected by the rules can participate in modifying the rules.
- Make sure the rule-making rights of community members are respected by outside authorities.
- Develop a system, carried out by community members, for monitoring members’ behaviour.
- Use graduated sanctions for rule violators.
- Provide accessible, low-cost means for dispute resolution.
- Build responsibility for governing the common resource in nested tiers from the lowest level up to the entire interconnected system.
Hardin and Ostrom – on opposite sides?
Hardin and Ostrom are often considered to be the yin and yang of commons theorists, although it is worth pointing out that in some respects they each highlight the same truth; that certain strictures and structures are required to ensure the long term health and viability of common pool resources.
Hardin explored a number of solutions, from state control of commons to: “mutual coercion, mutually agreed upon by the majority of the people affected” (page 5 Col 1, The Tragedy of the Commons).
As a generalization however, Hardin’s analysis is frequently interpreted as calling for a privatisation of the commons, as a way of forcing stewardship though ownership, as follows:
“We must admit that our legal system of private property plus inheritance is unjust—but we put up with it because we are not convinced, at the moment, that anyone has invented a better system. The alternative of the commons is too horrifying to contemplate. Injustice is preferable to total ruin.” (Page 5 Col 1, The Tragedy of the Commons).
A key challenge which could be raised to Hardin’s arguments is not that his analysis is wrong when it comes to many common pool resources, but that the specific example of cows grazing common land is actually one where history and precedent presents many examples of just the opposite of his predicted tragedy taking place. For example, here is a link to one such in Switzerland. In addition, Ostrom and many other commons theorists pointed out that many common pool resources do not allow unrestricted access, but that access is restricted to specific rights holders.
However, there are also many global commons which do conform to the ‘free-for-all’ as described by Hardin, and which are likely to succumb to the tragedy that he describes. Resources such as air, forests and the high seas (and the functions that commons resources give rise to, such as; soil formation, nitrogen cycle, weather regulation, water purification, oxygen generation and species diversity) have tended to be considered as effectively limitless and, as such, are liable to be in danger of degradation if we do not develop structures or agree rules by which their health and viability can be assured.
Part 2 of this post explores the work of commons theorists who have built upon the work of Hardin and Ostrom, in addition to highlighting some of the ideas we have developed and identified which I believe have a contribution to make to the sustainability and longevity of our global commons.
My profuse thanks go to Ian Christie of the University of Surrey’s Centre for Environmental Strategy, for allowing me to see his amazing overview of common pool resources challenges, “Managing the Commons -theory and practice”, produced for the Centre for Environmental Strategy’s Ecological Economics Module and to Sam Adelman for being kind enough to let me refer to his work. As ever, all errors are mine.