The Optimal Commons

The first topic that Amy and I examined for this course was outlined by Barry C. Field in an article titled "The Optimal Commons." The main objective presented within the article is developing a method to find the most productive use of common access land or natural resources by finding the optimal balance between individual and common ownership. Over the past few centuries, a gradual shift has occurred from mostly common ownership to heavy individual ownership. However, since ownership of common land can never be purely individual or common, the gaps must be filled between the two distinctions in order to find the most productive combination, referred to as the optimal commons.

A good example of a common access natural resource would be the fishing industry within the Venetian lagoon. Though we have not visited the lagoon yet, we discussed how the factors from Field's model are present in that common resource, so I will refer to it as a contextual example. There are several ways that the optimal commons could be modeled, however Field focuses on one possible way to model this phenomenon. A main idea in Field's model is how a change in the number of land plots or divisions in a commons has three main impacts on its costs and outputs.

First, there is a change in the way private rights are defined and enforced on the land and within the plots, which are referred to as exclusion costs. Some examples of these costs are fencing costs, legal costs of determining title for the land, or the cost of stopping encroachments from other firms. Thus, if exclusion costs are low it is likely that the number of plots will decrease because it fosters a more collaborative and open environment, and vice versa. Fishing permits would serve as an exclusion cost in the Venetian lagoon, keeping out those fishermen who do not have a permit or simply cannot afford one.

Second, there is a change in the total value of common property externalities. The smaller the number of firms that are allowed to access the resource, the lower the overuse will be and thus the land can be more productive. In the lagoon, there are limits on the number of fishermen who can access the resource as well as the amount of catch they can keep in order to avoid overfishing.

Finally, there is a change in transaction costs on the variable inputs to the resource. As the number of users decreases, reaching limitation agreements should have lower transaction costs because fewer parties are involved. As more firms begin to use the commons, transaction costs will increase as a way to limit the variable inputs on the resource. Transaction costs would be necessary in the Venetian lagoon because it is a very fragile resource that could be easily harmed if the variable inputs, such as pollutants, were too great and became harmful.

The bottom line, put most simply, is that the optimal commons is determined by finding a balance between the three factors described above: exclusion costs, common property externalities and transaction costs. We look forward to learning more about these concepts, as well as the fishing industry, during out upcoming visit to Venice.