Managing natural resources: Coasean bargaining versus Ostromian rules of common governance

Abstract

The purpose of this paper is to explore the forms of ownership over natural resources according to the theories of Coase and Ostrom. Coase’s work is regarded as a theoretical basis for establishing private ownership over natural resources, whereas Ostrom’s theory is considered the most influential one supporting common/collective ownership. The key research question of the paper is whether the two theories are indeed opposite and contradictory. The novelty of our approach is that we account for the nature of common property rights in light of Buchanan’s theory of clubs, thereby showing that the opposition between the concepts of Coase and Ostrom is exaggerated. The point is that ownership is generally considered only in its most extreme forms – purely private and purely public. By referring to Buchanan, we show that in contexts of common/collective entitlements with varying degrees of publicness/privateness, Coasean bargaining and Ostromian rules of common/collective governance can coexist and work together effectively. On this basis, this research proposes a framework for defining policies for managing natural resources.