«Dissertation Zur Erlangung des akademischen Grades Doctor rerum agriculturarum (Dr. rer. agr) eingereicht an der Landwirtschaftlich-Gärtnerischen ...»
2) the right to withdrawal can be explained as the right for the holder to acquire the units from the asset and to utilize the units by his own choice, 3) the right of management is related to managing the asset in the form of quality and quantity, with the right-holder being responsible for maintaining things in order and up to date, 4) the right of exclusion determines the accessibility to the asset, with only the person who has an access-right being able to access the asset, 5) the right of alienation gives to the holder the right to sell or lease or both (Ostrom and Schlager 1996: 131-32). In the most general terms, property rights are described as social codes that define who has the rights to enjoy the benefits from the use of a certain asset. The “right” of someone means someone else has a duty to observe that right.
In the effective rights’ system, there is always an authority to defend one’s right in a particular outcome. If a person thinks that he has rights in such a specific situation, he can ask the authority about his claim. “The effective protection of his gain from this authority system is nothing other than a correlated duty for all others interested in his claim. A right is a triadic relationship that encompasses him, the object (the income or benefit stream) of interest, plus all others who have a duty to respect his right. Rights are not relationships between him and an object (or an income stream), but are rather relationships between him and others with respect to that object (or its associated income stream). Rights can exist only when there is a social mechanism that gives duties and binds individuals to those duties” (Bromley 1991: 94).
In the case of Pakistan, property rights are institutionalized as a part of the constitution.
According to the constitution of Pakistan, Article 23, a person can own or sell his property in any part of the country. In a further explanation of this article concerning the transfer of property act 1882, the owner can distribute his property among others or can transfer his property to someone. He is fully authorized to take a decision about his property with regard to its use. In the presence of this formal institution, the system also has some informal cultural and traditional force, which sometimes is crucial in the management of the resource.
3.2.4 Property Rights and Resource Management Regimes
Property right regimes are a human creation for managing the use of environmental resources (Bromley 1991: 21). The concept of the property regime is based on the definition of property given by Hallowell (1943) as a social relation and describes the relationship between the property holder and something of value (benefit stream) against other things (cited in Bromley 1990: 2). It is defined as the structure of rights and duties of individuals with respect to a specific resource. Property right regimes have a special quality to judge what is scarce and valuable (Bromley 1990: 2).
Institutional setups are continuously customized to modify the scope and nature of property regimes over the natural resources (Bromley 1991: 22). According to Bromley, these management regimes are of four different types: 1) non-property, 2) state property, 3) common pool property, and 4) private property regimes (ibid: 23).
In a non-property regime, no proper user of a resource is defined, and everyone can use the resource. In an "open access regime” (Bromley 1991: 30) access is free, for example, to lake fishery, pasture land, or fuel wood. In this case, the one who first controls this resource can obtain the maximum benefit. However, no one will manage the resource. Therefore, lack of management and ownership is a problem of this property regime. Hardin (1968) explains the common problem of open access in his article on the ‘tragedy of the Commons': the overutilization and exploitation of the resources without no responsibility for their care.
The term “state property regime” generally means that the state holds all rights in the resources and allots these rights to some specific authorities or citizen under certain conditions. Administrative bodies are allowed limited use, and control lies in the hand of the owner (Government) (Bromley 1991: 23). This is also known as public ownership; the value of the output is below the cost of production, and so public decision makers do not gain any benefits from their decisions and have few incentives to invest time and resources (Pejovich 1997: 61).
In common property regimes, the owners have the right to exclude people who are nonmembers and, vice versa, non-members have the liability to follow the restriction (Bromley 1991: 31). These are the rights of communities with respect to a particular locality or a group of specific ethnicity to a property. In other words, common property regimes involve a group of owners having their own common property with the right to exclude non-users from their group (Bromley 1991: 32). Members of the group have the right to decide about access and procedures of usage, but they cannot decide about the selling of these rights to others (Pejovich 1997: 64). Groups in the common property regime can change in size, nature, and structure, but they exist as units with their social norms and culture and own specific systems (Bromley 1991: 26). One group member cannot use the resource for his own interest (ibid);
hence, all the resources are under the control of the whole group or a group leader.
The term “private property regime” expresses the authority of the owner who is conferred full and unconditional control on the property (Bromley 1991: 24). The owner of private property is legally and socially able to exclude others with the ability for the best use of the property (ibid: 25). The right of choice for an asset use and its assessment together with the
transferability and constitutional guarantee is known as the ownership right (Pejovich 1997:
58-60); the owner can make changes in resources according to his wish and distribute his property to others (Eggertsson 1990: 33-7). The individual can decide on the management and investment for his property, can choose managers for his resource, and can draw up plans for future investments. This is socially useful as long as it is an inducement to industry rather than being a substitute to industry (Bromley 1991: 24).
In case of Pakistan, most land is owned by private owners, but they have rights only to a certain depth, as the land is the state's property below four feet, and in cases of any change or problem below the defined level, the landowner has to consult the land administration. In the case of deep drilling for tube wells, landowners are bound to request permission from the respective state department and have to pay some tax for the installation of this machinery on their land. However, land in general terms belongs to the landowners, and they are free to decide about any change regarding ownership or land use.
3.2.5 Transaction Costs
Property transfer rights and transaction costs: Transfer of property from one user to another one is highly dependent on government-protected property rights to stop violation or to discourage theft or other nonconsensual transfer (Mlceli and Sirmang 1995: 81). As discussed above, property rights provide a certain environment for human interaction (North 1990: 3), but for secure rights, some cost has to be paid as legal fees, registration fees, and title fees, which are known as transaction costs (ibid: 62). Williamson (1985: 1) has explained the concept as follows: “a transaction occurs when a good or service is transferred across a technologically separable interface. One stage of activity terminates and other begins.” The author has described three attributes for transactions: frequency, investment idiosyncrasy, and uncertainty. He has applied this to various types of governance structures, e.g., labor markets, regulation, family law, and capital markets (ibid 1979: 254). Transaction costs are the direct cost of inefficiencies in production (Allen 1999: 899). In this case, the transaction cost will be
the sum of the investment and any increase in costs of production (Klein and Leffler 1981:
Williamson (1979: 258) has explained the role of law to resolve issues related to family relationships. Conceding that adjudication helps in supporting out family affairs, such dealings are idiosyncratic to an unusual level, and specialized governance structure is surely the main mode of governance. With the increase of the role of law, reliability on internal structures is reduced. Therefore, unless individual rights are seriously threatened, withholding access to adjudication may be indicated and all such legal process increases the transaction costs.
Property rights have a monotonic relationship with wealth, and trade between these two explains the phenomenon of the transfer of property rights. If there is no trade, this is an indication of a lack of a factor such as property rights. If property rights are well stated, then trade is beneficial, and maximum wealth is gained; if property rights are poorly defined, then the case is reversed (Allen 1999: 898). When property rights are incomplete, people struggle to maintain their rights and the generation of more wealth, and this leads towards transaction costs (ibid).
Informal institutions and transaction costs: Williamson (2000: 598) explains informal institutions as self-created measures of society for protection against the “alien value”. The author has proposed an answer to the North (1991: 111) question “What is it about informal constraints that gives them such a pervasive influence upon the long-run character of economics?” For the answer to this question, the author has formulated a four-level framework and placed informal institutions in the first level. Williamson starts his analysis from informal institutions and ends at a market structure. With increasingly complex market and governance structure, he has emphasized transaction costs.
Social norms have a strong influence on economic activity and the functioning of economic institutions, especially altruism, which can never be ignored in theories of preferences (Koford and Miller 1994: 1). They play a vital role in the formal institutional setup, and because of a small change in them, a new environment with a new scenario is possible (ibid: 23). Habits, norms, and customs are social capital, which is not costless to produce, but this does not mean that every investment is economically efficient, although they can help in investment efficiency (ibid: 26).
These social norms, habits, and customs play a major role in markets such as daily routine business and dealing with customers, and the facilities provided by the buyer for his customers depends on these norms and habits (Koford and Miller 1994: 28). For instance, the time of arrival at institutes or offices and at which workers go for lunch together in the lunch break sets an example for new comers (ibid: 28). Williamson (1975) explains this aspect as “self seeking with guide”, which means that a person has his own interests, and he looks for them. Social capital is very important for a society, but its composition and quality do not need to be optimal and can affect the development of a country (Stiglitz 1999: 67).
Value is an important notion for the property relation, as no one wants to share property against something they do not value (Verdery 2003: 20-1). Land has strong economic and emotional values to the extent that “people’s behavior in relation to land mirrors the general state of interaction among members of society” (Sanjak 2000: 1).
Transaction costs can be considerably reduced by culture. In the presence of effective culture, communities have a strong moral binding, which can overcome many societal problems, which formal rules, by cashing high transaction costs, cannot. Thus, culture is helpful in reducing such additional costs and in enhancing the performance of the community and economy (Casson 2000:3). A strong cultural impact is prominent in the personalities and nature of the individuals of that community, e.g., if a culture is collectivistic with strong prevention orientation, individuals from this culture normally try to avoid failure. Similarly, in the case of an individualistic culture, individuals are much more focused and follow the strategies pursuing success (Lockwood 2005: 1).