Institutional Innovation in Natural Resource Management

Coordinating individual behavior for the common good in resource management situations with common property characteristics has many dimensions involving knowledge and information. The approaches used to coordinate individual behavior in such resource management situations include use of regulation and incentives, education and extension, reliance on informal social arrangements and enforcement of rules, and appeals to moral or ethical ideals. Economists commonly have favored the first set of these approaches: the use of regulation or incentives. However many economic transactions involve more complex relationships, reflecting the inadequacy of information and risks associated with the transaction. Typically, these consequences give rise to transaction costs (Coase 1937). Transaction costs include search and information costs; drafting, bargaining and decision costs; costs of safeguarding an agreement; monitoring and enforcement costs; and adaptation and haggling costs. When transaction costs are high, economic transactions are often facilitated by less formal, or other institutionalized, social arrangements.