Coase Colored Glasses

Coase Colored GlassesToday's class discussion helped me remember a short piece I wrote in 1997 about solutions to the commons. You can find it here. I point out that Hardin argues, "the commons is a trap-an individual acting in his self-interest makes himself, along with everyone else, worse off in the long run. Yet acting in the group interest cannot stop the inevitable ruin." But, people have figured out many ways to avoid the tragedy of the commons. Many of them rely on different ways of making people responsible for their own actions. Thus, in Rothenberg's terms, part of the demand for solving commons problems is to find a supply of responsibility-enhancing policies. The problem is, how do we discover the right kinds of policies or rules?

Go back to Postrel's discussion of kinds of rules. She suggests reputation os a rule, but notes that "for reputation to work, the rules must allow ostracism." But in what situations will ostracism work? What else is necessary for rules to work? Are there ways for reputation to work in large groups? Yandle suggests at teh end of Chapter 5 in Who Owns the Environment that it can. Is he right?

What about environmental rules--do they allow for a dynamic learning system? Think about Rothenberg's description of the U.S. political system. On page 17 he says, "Another implication of how choices are made in this fragmented political system is that adopted policies tend to be highly durable and very slow-changing. Ask yourself which types of durable rules allow for innovation and thinking about the long term. Postrel sugggests a well-functioning legal system that protects contract and property rights. Rothenberg suggests much of the same on the top of page 18.

But what about rules like the Endangered Species Act? What happens when a rule (law) is too rigid to allow for experimentation and learning? Ask yourself when durability is a bad, not a good.