Institutions, Transaction Costs, and Environmental Policy

Book excerpt: Declaring the conventional economic analysis of property rights in natural resources to be too narrow and restrictive to allow for effective comparisons between alternative institutional structures, Challen (agricultural and resource economics, U. of Western Australia) develops a conceptual framework for analyzing these structures, and illustrates them with applications to the allocation of water resources. His model analyzes the problems involved in institutional choice, taking into account constraints in institutional change imposed by history and the value of maintaining options in an uncertain future. It shifts the emphasis from assessing the benefits of particular property rights regimes in isolation to the distribution of property rights between levels of governments, communities, and individuals in an institutional hierarchy. Annotation copyrighted by Book News, Inc., Portland, OR