We shall consider how different institutional forms can affect the management of environmental problems at different stages of economic development, including for managing biological resources and controlling pollution emissions. Problems of different hierarchical levels from local to global will be considered.
Key to dealing with different stages of economic development is the environmental Kuznets curve (EKC), the hypothesis that pollution increases at first during development and then declines after industrialization in an inverted U-shaped pattern of pollution emissions against time. (1) This term derives from the earlier empirical observation of a tendency for income to first become more unequal and then more equal as societies move through the industrialization process (Kuznets 1955), producing a similar inverted U shape when time is on the horizontal axis and the Gini coefficient (which rises with income inequality) is on the vertical axis. These both suggest that societies may bear temporary costs to develop. However, critics have argued that they may not generally hold, being subject to historical, institutional, geographic, and technological specificities. The socialist world saw increasing income inequality during industrialization, and India and China may leap to more advanced environmental control technologies that limit their pollution as they industrialize, if they can adopt appropriate institutions for implementation and enforcement.
Patterns of Development and Environmental Degradation
Various dynamic patterns of pollution and development relationships occur, varying by pollutant and across societies. The classic EKC pattern has been found to hold for sulfur dioxide (especially damaging to health), nitrogen oxides, suspended aerosol particulates, carbon monoxide (Selden and Song 1994; Grossman and Kreuger 1995), heavy industrial emissions of arsenic, cadmium, lead, and nickel, and also biochemical oxygen demand and fecal coliform in water (Gawande et al. 2001). Varying "turning points" of income have been found in different studies for specific pollutants. Some have even found that some of these may "re-link" with rising incomes to exhibit "N-curve" patterns, possibly fecal coliform (Shafik. 1994) and sulfur dioxide in some countries (de Bruyn and Opschoor 1997).
The EKC pattern can arise due to high income elasticity for environmental quality that leads to political action (Beckerman 1992; Dasgupta et al. 2002). Higher income countries can fund pollution control activities (Magnani 2000) and also R&D in improved pollution control technologies (Komen et al. 2000).
However, some pollutants vary inversely with income, notably basic water pollutants that affect infant mortality (Dinda 2004). Others seem to increase without limit with national income, notably carbon dioxide, the major ingredient in global warming (Holtz-Eakin and Selden 1995). Others seeming to increase monotonically include solid municipal waste, traffic volumes, and general energy consumption (Holtz-Eakin and Selden 1995; Horvath 1997). (2)
For some such as deforestation there seems to be no relationship between environmental damage and national income across countries or even within countries (Koop and Tole 1999; Bhattarai and Hemmig 2001). Regarding endangered species, political and institutional factors seem more important than income levels, especially civil liberties (McPherson and Nieswiadomy 2001).
A general criticism is that most of these studies were done on cross-sections of countries rather than on more careful panels or time-series within specific countries, which can seriously alter the results (Stern et al. 1996; Stern and Common 2001). Geographical effects can vary across countries (Ezzati et al. 2001) as can enforcement effects, even within the United States across states (Selden et al. 1999), reflecting political and cultural factors (Magnani 2000), including corruption (Lopez and Mitra 2000).
Common Property, Open Access, and the Problem of Cooperative Resource Management
Scott Gordon (1954) argued that "common property" would lead fisheries to be overexploited in the bioeconomic sense that rents would be dissipated as individual agents generate negative externalities on each other and overharvest the fishery. (3) Considering grazing commons during the enclosure movement, Garrett Hardin (1968) declared common property to bring the "tragedy of the commons" endemic to both biological resources such as fish, grazing animals, and forests and nonbiological such as oil pools.
Siegfried Ciriacy-Wantrup and Richard Bishop (1975) clarified that the problem is not common property but open access. If a well-defined group owns the resource and is able to control access to it, the group may be able to establish institutional arrangements to manage the commonly owned resource optimally (Ostrom 1990; Bromley 1991). However, even a privately owned resource will not be managed optimally if its owner cannot control access to it.
Thus in the American plains, although farmers claimed private property ownership of fields, they could not control access to them by the cowboys and their cattle grazing until after the invention of barbed wire (Libecap 1981). Feudal lords in the Middle Ages were often unable to prevent peasants from poaching in their forests. Furthermore, the Soviet Union was able to control access to the state-owned sturgeon fisheries in the Caspian Sea. However, this control of access broke down after the dissolution of the USSR and the subsequent privatizations of these fisheries, with the result that they have seriously collapsed and beluga caviar is now in danger of complete elimination (Rosser and Rosser 2004, 34-35).
Whereas open access involves a situation in which...