INTRODUCTION

The nature in which property rights are defined and enforced fundamentally impacts the performance of an economy for at least two reasons. First, by assigning ownership to valuable assets and designating who bears the rewards and costs of resource-use decisions, property rights institutions structure incentives for economic behavior within the society. Second, by allocating decision-making authority, the prevailing property rights arrangement determines who are the actors in the economic system.

Because of these very basic and critical roles in influencing economic activity and the distribution of wealth and because of the wide variety of property rights arrangements that exist, it is important to analyze how various property institutions emerge. Although these issues have been introduced in Chapter 1, to go further a framework for analyzing the development and modification of property rights institutions is necessary. In this chapter, a conceptual framework is outlined to analyze four different property rights solutions to common pool problems encountered in exploiting natural resources in the United States. While addressing these four cases, the approach taken here can be generalized for examining other property rights issues.

The analytical framework is a very microoriented one. It focuses on the political bargaining or contracting underlying the establishment or change of property institutions, and it examines the motives and political power of the various parties involved. This approach is taken because ownership structures are politically determined, and they assign both wealth and political power in a society.