| chapter 14 2xtermanties ‘The charming landscape which I saw this morning is indubitably made up of some to thirty farms, Miller 0 ld, Locke that, and Manning the woodland beyon none of them owns the landscape. There isa property in the horizon which no man he ‘but whose eye can integrate all the pars, the poet. This isthe best ofthe men's farms, yr to this ther land deeds give them no tile Ralph Waldo Emerson, Notre ‘common property resources? affects the welfare of another in a way that is ou are common. Every time someone drives a car in 4 common property resource, the enjoyment of each surfer because of an incomplete and ineffective system of property rights. Because sommon and property rights so often incomplete, indeed non-existent. Consequently resources areal sare often inequitable because the party causing the ext discussion of the main policy options—the use of regulations or of mark ‘ments, The last part of the chapter discusses policies for common property resvurce. fficient and Equitable Resource Allocation In this section we dis Externalities shows the demand and supply for ty isa negative externality ere the marginal benefit from etec- jal cost of output exceeds the ing, for external of electricity would be Oy {SB = MSC. A reduction in output from Q, 10 Op would provide a welfare there isa welfare gain equal to area abe ‘Although this deserition of efficient resource allocation is accurate in so far as it ‘goes, it may not be the best approach to analysing the policy issues. For example, take production and air pollution. The analysis above suggests that the efficent “This is true if reducing the prodsot esos msn a J wos00 soe aqeatid aon Jo ssoppandou axes 24p 24 pynow auto9\NO SIKH HN I {Yos witoqyo ue anatyae pjnox sya ayeata IN Ao Ou ponae (9961) ASE HIELO, ‘ojonae snowy ® up Zeepsfousayx9 0} SuONA|OS yOITIgD sAaIyoR sUdsE a1 sw 9 “pouyjop-{jos 40 aouasqe we yo eauanbocued v 9: cians “8 afqneningua ase syd Suadoud yey sanmbas worsnjouoo stip eq) ZION, “IH990 YOUNES sonteaiarxa pue powno Sjayeaud axe spoo8 ye stx9 siyBis Auodosd yons wou “sts | {utodoad axp aoxgyua on pu “Auodoud 241 wey siyou9q, fe oF “Auadosd Kuodoud e Jo oma v Jo 950 10) 184 5, ‘1981 Auadosd y s91 9 om pue °F st uoHnyfod jo yurowe wD! OM up {onadsor soo metatege pn por soo aN Tee) ara sxe pMOZUOY ah ofr aq ‘sun jo diysoumo apoaud ayy ‘ojdurex9 20} “opts ‘vas ‘onamoH “ypounmod v go Aynuenb uumrydo a 280049 0) So jeo0s py sea fab 3 sn “Toul s pue uous auoou uaa 0 sean Would 8000 eu 8 ‘unogs sy Amba pow aes a ‘wounyjod Suionpas jo 3809 ourRa ayy pe uornjod Jo 509 avumep jour 2m og soeano om a4 euodea ° t 2S toyasow st uonsonb causiayya atoa ay, “Syponma09 & ‘mpm ut WaxoKFD oTsuN,_ Ase 7G} spremor saxo ;uorIN}OS ayqeunba ue ospe “OS PINOWP anydlas se Yons “AyeuIxo Ur “2nsst yeay 34 UO SNdQy OF HH somponaoneg sommpousnregExternalities te Externalities sion and loss of output on David's property et ‘damages. Suppose also that Charles could introduce conservation expe reduce the damages on David's property as shown in Table 1L1. Woo Charles negotiate an efficent outcome and would the amount of dams — Fr ora ikea at nats MATS ‘David's property be independent of roperty rights? eae ‘consider the marginal ‘cance unde by art ne and tht the loc ipo aux sue) il lop contrat expen yang nce uni or ory sat est tan Ge saga recton in ones yensation for any damage to his property. In tha bis house. Roger has ‘does not achieve efficient outcomes. and paying comp to David, Now suppose that David has no property rights inthis nat. ion to undertake and by accepting damages of $0.5 millon on his ‘of quiet. Roger then demands $40 000 as compen together withthe noise overhead, would make him ation. Given the compensation payable to Roger and his neighbours, the airport authority now looks for an altemative way to enhance its ca- sop The eteome would be these as whon Davi has no ope gh Dare peo pay Charles $08 ailion for conservation works and accept ei arg ont OF $3 million, The outcome efficient ver imo property gh are specified 3. H apis only he ntire of the change ‘Accordingly, when changes are large, the ibution of property rights : hhange can provide an efficient allocation of resources in sim- te are involved, even in the absence of property rights. In relevant parties are w reach agreement with ‘eal cost that he be ple cases when only a few the case of sma rights. However, borne in any eff 'y may negotiate a diff nt outcome to that predicted ui ble 11 Farm damages and expenditures (St) Sarr Js the allocation of property sights f ae - tee Ee eo come as well the distribution ‘When more than a few par- : is very difficult to obtain an efficient outcome by private exchange 02 ig ie because of high transaction costs, free riding and other strategic behaviour, 02 02 \s os un oa 0 Mi soa 1s Summary ot consunons on pvate exchange o rd ms a ‘Outcome of private exchange to a + me a “May be efficient and independent of property nights 10 02 oa 40.1 14 20 10. 02 102 22 * Cows demons his theorem