New Forms of Private Property: Property Rights in Environmental Goods

This entry examines the relationship between property rights and environmental protection. According to the ‘tragedy of the commons’ model, environmental pollution and resource depletion result from the inadequate specification of property rights in environmental goods. Two solutions typically are offered for averting the ‘tragedy’: (1) specify property rights (that is, privatize the commons) or (2) regulate entry and use. For some environmental goods, such as land, privatization has been the preferred (though not an exclusive) approach. For other environmental goods, such as air and water, regulation has been the preferred (though, again, not an exclusive) approach. Each of these approaches involves the imposition of property rights on formerly ‘open access’ (nonproperty) resources. Public regulations of entry and use increasingly rely on property ‘rights’-based mechanisms, such as tradeable pollution ‘rights’, to improve regulatory efficiency. Some law and economics scholars maintain, however, that better protection could be achieved at still lower cost by replacing regulatory regimes altogether with a system of completely-defined private property rights in environmental goods. They advocate a combination of resource privatization and deregulation as both a necessary and a sufficient remedy for environmental problems. This position is controversial, even within the law and economics literature. This entry assesses the arguments for and against the complete privatization of environmental goods. JEL classification: K11, K23, K32, Q20