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ECON 260 C
Environmental and Natural Resource Economics: Collective Action
and Open Access
Winter 2015
MW, 2:00-3:15
North Hall 2212
January 5, 2015
Professor: Gary Libecap
Office: 4412 Bren Hall
Phone: 520-444-1695
Email: glibecap@bren.ucsb.edu
Office hours: M 1-2 or by appointment
Course Objective
The objective is to understand if, when, and how the losses of open access or
common pool
resource (CPR) resource problems are addressed via cooperation and collective
action and
how distributional issues shape outcomes.
Many CPR problems persist and the institutions or remedies adopted often are
not those
predicted or fit stylized models. Rents appear to be left on the table and
what transaction
costs block mutually-beneficial agreement and what are the sources of those
transaction
costs? The process requires greater analysis. In the class we will examine
when cooperation occurs and when it breaks down—by focusing on local and
broader, international environmental externalities. There are over 700
international environmental agreements, IEAs,
many of which are routine, but others involving climate change and wild ocean
fisheries
seem intractable. What are the determinants of cooperation to confront local
CPR problems and can those lessons be scaled up?
We will begin with an article published in the Journal of Economic Literature
“Addressing
Global Environmental Externalities: Transaction Costs Considerations,” to
outline the general issue at hand. Then we will turn to specific topics.
During the term, each student will
lead the discussion of the readings and all will turn in reviews of the
relevant reading. In
addition, each student will give two short presentations about how the course
material
blends or informs their research interests. These will be 5-10 minutes each,
no slides. At
the end of the term, there will be a paper due.
Course Administration and Student Assignments. Each student is responsible
for the
readings. The class will be conducted by student led overviews of the
problems and reviews/critiques of the readings. Although individual students
will lead the discussion, all
must turn in summaries/critiques of the literature being discussed. These are
to be 1-2 pages total and are due 8 am day of class. In addition, as noted
above you will give 2 short
presentations on how the subject material blends with or informs your
research. Additional
readings are not mandatory, but rather more information that you can examine.
1
The final project is a paper (maximum of 20 pages with references and
footnotes) that
takes some aspect of the course material—approach, topic, issue and applies
it to your proposed (or possible) dissertation topic. Those papers will be
due March 13, 2015 by 8
am by email to me.
Grades. Student grades will be based on class written
summaries/reviews/critiques (30%);
formal class presentations and discussion leadership (30%); and the final
paper (40%).
Presentations will be randomly assigned at the start of each class. Any
student missing the
class without notifying me in advance or being ready to lead discussion will
have one pass.
Two misses lack of preparation will result in your grade being lowered by one
grade and
three will result in the assignment of a C.
Readings. All of the course material will be drawn from journal articles,
loaded on Gauchospace.
.
1/05 Collective Action and Environmental Externalities: Overview of Issues.
Libecap will lead. Read in advance.

Gary D. Libecap, 2014, “Addressing Global Environmental Externalities:
Transaction Cost Considerations,” Journal of Economic Literature, NBER
working paper
19501.
1/07 Collective Action and Environmental Externalities: Overview of Issues.
Libecap will lead

Gary D. Libecap, 2014, “Addressing Global Environmental Externalities:
Transaction Cost Considerations,” Journal of Economic Literature, NBER
working paper
19501.
1/12 The Problem of Open Access


Garrett Hardin, 1968, “The Tragedy of the Commons,” Science 162: 1243-8.
H. Scott Gordon, 1954, “The Economic Theory of a Common Property Resource:
The Fishery,” Journal of Political Economy 62(2): 128-42.
1/14 Transaction Costs and Bargaining





Ronald Coase, 1960, “The Problem of Social Cost,” Journal of Law and
Economics
3: 1-44.
Carl Dahlman.1979. "The Problem of Externality." Journal of Law and Economics
22: 141-62.
Additional: James M. Buchanan and William Craig Stubblebine. 1962.
“Externality,” Economica 29(116): 371-84.
Additional: Douglas W. Allen. 1991. “What are Transaction Costs?” Research in
Law and Economics 14: 1-18.
Additional: Yoram Barzel.1982. “Measurement Costs and the Organization of
2

Markets.” Journal of Law and Economics 25 (1): 27-48.
Additional: Ronald Coase. 1992. "The Institutional Structure of Production",
American Economic Review 82 (4): 713–719.
1/19 No class university holiday
1/21Coasean Bargaining and Transaction Costs

Kerry Krutilla and Rachel Krause 2010. “Transaction Costs and Environmental
Policy: An Assessment Framework and Literature Review,” International Review
of Environmental and Resource Economics 4: 261-354
 Oliver E. Williamson, 2005, “The Economics of Governance,” American Economic
Review 95(2): 1-18.
 Harold Demsetz. 1968. “The Cost of Transacting.” Quarterly Journal of
Economics
82 (1): 33-53.
 Additional: Oliver E. Williamson, 1979. “Transaction Cost Economics: The
Governance of Contractual Relations.” Journal of Law and Economics 22 (2):
233–61.
 Additional: Oliver E. Williamson, 2010. “Transaction Cost Economics: The
Natural
Progress.” The American Economic Review 100(3): 673-90.
1/26 Cooperation




Elinor Ostrom, 2000, “Collective Action and the Evolution of Social Norms,”
Journal of Economic Perspectives, 14(3): 137-58.
Robert Axelrod and William D. Hamilton, 1981, “The Evolution of Cooperation,”
Science 211: 4489, March, 1390-96.
Robert Axelrod and Douglas Dion, 1988, “The Further Evolution of
Cooperation,”
Science 242: 4884, 1385-90.
Ernst Fehr and Klaus M. Schmidt. 1999. “A Theory of Fairness, Competition,
and
Cooperation.” Quarterly Journal of Economics 114 (3): 817 -68.
1/28 Short presentations and discussion on Transaction Costs and Research

Short student presentations on how transaction costs might inform their
research
2/2 Cooperation Conditions in Low Transaction Cost Settings



Elinor Ostrom, 2010, “Beyond Markets and States: Polycentric Governance of
Complex Economic Systems,” American Economic Review, 101: 641–672.
Michael Cox, Gwen Arnold, and Sergio Villamayor Tomás. 2010. A Review of
Design Principles for Community-Based Natural Resource Management. Ecology
and
Society 15(4): 38-52, http://www.ecologyandsociety.org/vol15/iss4/art38.
Lore M. Ruttan, 2008. “Economic Heterogeneity and the Commons:
Effects on Collective Action and Collective Goods Provisioning.”
World Development 36 (5): 969-85.
3
2/4 Coasean Bargaining, Conditions for Successful Collective Action,
State Actions to Lower Transaction Costs


Avinash Dixit, 2009, “Governance Institutions and Economic Activity,”
American
Economic Review 99 (1): 5-24.
Gary D. Libecap and Dean Lueck. 2011. The Demarcation of Land and the Role of
Coordinating Property Institutions. Journal of Political Economy, Vol. 119,
No. 3
(June 2011), pp. 426-467
2/9 Coasian Bargaining Outcomes in Low Transaction Cost Settings

Avner Greif, Paul Milgrom, and Barry R. Weingast, 1994, “Coordination,
Commitment, and Enforcement: The Case of the Merchant Guild,” The Journal of
Political Economy 102 (4): 745-776.
 James M. Acheson and Roy Gardner, 2005, “Spatial Strategies and
Territoriality in
the Maine Lobster Industry,” Rationality and Society 17(3): 309-41.
 Robert C. Ellickson, 1986, “ Of Coase and Cattle: Dispute Resolution among
Neighbors in Shasta County,” Stanford Law Review 38 (3): 623-29, 671-87 only.
 Additional: Jeremy Edwards and Sheilagh Ogilvie. 2012. “What Lessons for
Economic Development Can We Draw from the Champagne Fairs? Explorations in
Economic History 49(2): 131-48.
 Additional: Nicolás L. Gutiérrez, Ray Hilborn, and Omar Defeo, 2011,
“Leadership, Social Capital and Incentives Promote Successful Fisheries,”
Nature February 17, 470: 386-389.
2/11 Coasean Bargaining Outcomes in Higher Transaction Cost Settings

Steven N. Wiggins and Gary D. Libecap, 1985, “Oil Field Unitization:
Contractual
Failure in the Presence of Imperfect Information,” American Economic Review
75(3): 368-85.
 Gary D. Libecap and James L. Smith, 1999, “The Self-Enforcing Provisions of
Oil
and Gas Unit Operating Agreements: Theory and Evidence,” Journal of Law,
Economics and Organization, 15(2): 526-48.
 Gary D. Libecap and James L. Smith. 2001. “Regulatory Remedies to the Common
Pool: the Limits of Oil Field Unitization,” Energy Journal 22 (1): 1-26.
 Additional: Gary D. Libecap and Steven N. Wiggins, 1984, “Contractual
Responses
to the Common Pool: Prorationing of Crude Oil Production,” American Economic
Review 74(1): 87-98.
 Additional: Gary D. Libecap and Steven N. Wiggins, 1985, “The Influence of
Private Contractual Failure on Regulation: The Case of Oil Field
Unitization,” Journal
of Political Economy, 93(4): 690-714.
2/16 No class university holiday
2/18 Coasean Bargaining Outcomes in Higher Transaction Cost Settings
4
Continued



Ronald N. Johnson and Gary D. Libecap, 1982, “Contracting Problems and
Regulation: The Case of the Fishery” American Economic Review 72 (5): 100522.
Robert T. Deacon, Christopher Costello, and Dominic Parker. 2013. “Reforming
Fisheries: Lessons from a Self-Elected Cooperative.” Journal of Law and
Economics 56(1): 83-125.
Ray Hilborn 1985. “Fleet Dynamics and Individual Variation: Why some People
Catch More Fish than Others.” Canadian Journal of Fisheries and Aquatic
Science
42: 2-13.
2/23 Coasean Bargaining Continued


Zeynep K. Hansen and Gary D. Libecap, 2004, “Small Farms, Externalities, and
the
Dust Bowl of the 1930s,” Journal of Political Economy 112(3): 665-694.
Gary D. Libecap, 2011, “Institutional Path Dependence in Climate Adaptation:
Coman’s “Some Unsettled Problems of Irrigation” American Economic Review
101 (February 2011): 64–80.
2/25 Coasean Bargaining Outcome: Private Property Rights Solutions

Harold Demsetz, 1967, “Toward a Theory of Property Rights,” American Economic
Review 57(2): 347-59.
 Gary Libecap, 1989 Contracting for Property Rights, New York: Cambridge
University Press, Chapter 2, “Analytical Framework,” 10-28 only.
 Yoram Barzel, 1997, Economic Analysis of Property Rights, New York:
Cambridge
University Press, 2nd ed, Chapter 1, “The Property Rights Model,” 3-11 only
 R. Quentin Grafton, Dale Squires, and Kevin Fox, 2000, “Private Property and
Economic Efficiency: A Study of a Common-Pool Resource,” Journal of Law and
Economics. 43(2): 679-713.
 Corbett A. Grainger and Christopher J. Costello. 2014. “Capitalizing
Property
Rights Insecurity in Natural Resource Assets.” Journal of Environmental
Economics and Management 67: 224-40.
 Additional: Christopher Costello, Steven Gaines, and John Lynham, 2008, “Can
Catch Shares Prevent Fisheries Collapse?” Science 321., September 19: 167778.
3/2 Coasean Bargaining: Political Solutions—Tax and Regulation





Craig Volden and Alan E. Wiseman. 2007. “Bargaining in Legislatures
over Particularistic and Collective Goods,” American Political Science
Review, 101 (1): 79-92.
Gary S. Becker, 1983. “A Theory of Competition among Pressure Groups for
Political Influence.” Quarterly Journal of Economics 98 (3): 371-400.
Sam Peltzman. 1976. “Toward a More General Theory of Regulation,”
Journal of Law and Economics 19 (2): 211-40.
Dani Rodrik. 2014. “When Ideas Trump Interests: Preferences, Worldviews, and
Policy Innovations.” Journal of Economic Perspectives 28(1); 189-208.
Additional: Smith, V. K. (1985). A Theoretical Analysis of the" Green Lobby".
The
5
American Political Science Review, 132-147.
3/4 Coasean Bargaining? The Role of Bureaucracy in Regulation and Tax
Policy.



Toke S. Aidt, T. S. 1998. “Political Internalization of Economic
Externalities and
Environmental policy.” Journal of Public Economics, 69(1):1–16.
J.J. Laffont, and Jean Tirole, 1991. “The Politics of Government DecisionMaking:
A Theory of Regulatory Capture. The Quarterly Journal of Economics,
106(4):1089–1127.
Stephenson, M. C. (2007). Bureaucratic Decision Costs and Endogenous Agency
Expertise. Journal of Law, Economics, and Organization, 23(2), 469-498.
3/09 Coasean Bargaining: Bureaucracy and Distribution Implications




Amy W. Ando, 1999. “Waiting to Be Protected Under the Endangered Species Act:
The Political Economy of Regulatory Delay. The Journal of Law and Economics,
42(1):29–60.
Clare Leaver 2009. Bureaucratic Minimal Squawk Behavior: Theory and Evidence
from Regulatory Agencies. The American Economic Review, 99(3): 572–607.
PAGES 572-75, 599-601 ONLY.
Canice Prendergast,. 2003. The Limits of Bureaucratic Efficiency. Journal of
Political Economy, 111(5):929–958. PAGES 929-933, 951-53 ONLY.
Canice Prendergast. 2007. “The Motivation and Bias of Bureaucrats. The
American
Economic Review, 97 (1) : 180–196. PAGES 181-2, 191-95 ONLY.
3/11 Student Paper Presentations
3/13—Final paper due 8 am
6
7
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