Property rights incentive stewardship because property owners benefit economically and environmentally from taking care of the asset they own. In explaining why property rights are so important, Larry Diamond writes, “The existence of private property constitutes a check on tyranny, and this is why so many incipient dictators seek to eliminate or politically subjugate it once they consolidate power.” The same holds true for intellectual property rights. Well-protected intellectual property encourages more innovation, including for cleaner energy, agriculture and manufacturing.
Property Rights and Environmental Performance Index
This chart shows the relationship between a country’s degree of freedom when it comes to property compared to their EPI score.
Conversely, when everyone owns something, no one does. Property rights are why the fridge in your home is likely to be much cleaner than the fridge in your office. The tragedy of the commons illustrates the environmental and economic harm caused by the absence of rights. For instance, consider a river flush with salmon that people can fish for commercial sale. Without a system of property rights in place, the incentive for the fisherman is to pull out as many salmon as possible because if he doesn’t, another fisherman will. The result may be a temporary gain but will eventually result in overconsumption and a full depletion of the resources. Property rights incentivize sustainable consumption so that the resource can be a productive asset well into the future.
Well-defined and legally enforced property rights have prevented overgrazing, overfishing, deforestation, and animal poaching. Countries with protected property rights have more access to clean drinking water, sanitation systems, and less poverty.
Well-defined and legally enforced property rights have prevented overgrazing, overfishing, deforestation, and animal poaching. Countries with protected property rights have more access to clean drinking water, sanitation systems, and less poverty. Economist Elinor Ostrom won the Nobel Prize for her work demonstrating how collective property rights at the community level prevent such problems by empowering the people who are best incentivized to manage the resources properly. Much like economic freedom, a strong, positive correlation exists between property rights and environmental outcomes.
- Kathryn Baragwanath and Ella Bayi, “Collective property rights reduce deforestation in the Brazilian Amazon,” Proceedings of the National Academy of Sciences of the United States of America, August 25, 2020, https://www.pnas.org/content/117/34/20495[↩]
- Michael‘t Sas-Rolfes, “Saving African Rhinos: A Market Success Story,” The Property and Environment Research Center, 2011, https://www.perc.org/wp-content/uploads/2011/08/Saving-African-Rhinos-final.pdf[↩]
- Richard L. Stroup, “Economic Freedom and Environmental Quality,” Federal Reserve Bank of Dallas, October 2003, https://www.dallasfed.org/~/media/documents/research/pubs/ftc/stroup.pdf[↩]
- Elinor Ostrom and Charlotte Hess, “Private and Common Property Rights,” Encyclopedia of Law & Economics, 2008, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1304699[↩]