Water markets and freshwater ecosystem services: Policy reform and implementation in the Columbia and Murray-Darling Basins

Water markets have featured prominently in the reallocation of water rights to restore freshwater ecosystem health. Incentive-based water rights acquisition and transactions have emerged as a market-oriented policy approach to reallocate water resources from existing uses to enhance the provision, regulation, and sustainability of freshwater ecosystem services. This paper develops a conceptual framework to examine factors enabling and constraining successful policy reform and implementation in market-based environmental water allocation. This analysis distills and extends the findings and lessons of a September 2007 workshop in Brisbane, Australia on environmental water transactions. Two case studies were selected in water stressed basins - the Columbia (U.S.A) and Murray-Darling (Australia) Basins - where transactional approaches to environmental water allocation first emerged. The case studies draw upon practitioner perspectives and previous policy and economic analysis in two regions where shared political economic and physical conditions lend a strong analytical basis for comparison. A common set of policy and regulatory reforms has occurred in both cases - albeit in different forms and via distinct paths - to develop three enabling conditions: (1) establishment of rights to and limits on freshwater extraction and alteration; (2) recognition of the environment as a legitimate water use; and (3) authority to transfer existing water rights to an environmental purpose. However, these elements of policy reform are necessary but not sufficient for effective implementation; a second set of driving forces, barriers, and adaptations explains the ability to achieve larger scale ecological outcomes. These conditions include the physical, social and economic factors driving demand for environmental water allocation; administrative procedures, organizational development and institutional capacity to effect transfers; and adaptive mechanisms to overcome legal, cultural, economic, and environmental barriers. The case study analysis suggests that environmental water transactions can play an important role in establishing environmental water allocations, although water markets require ongoing institutional capacity and adaptive governance. The conceptual framework and empirical lessons generated through this cross-case comparison provide the basis for an expanded research agenda to evaluate the design and performance of market-oriented reforms as implementation experience accrues and new programs emerge in diverse ecological and political economic settings.     

The Economic Efficiency of Policy Reform and Partial Market Liberalization under Transaction Costs

The article presents an integrated analysis of the effects of domestic and trade policy reform on resource allocation and welfare under transaction costs. It develops a general multiagent, multicommodity model, where transaction costs are the costs of resources used in the exchange process. The influence of domestic and trade policy (including both price and quantity instruments) on distorted market equilibrium is analysed. Alternative concepts of distorted equilibrium are presented and investigated. They provide a basis for evaluating the effects of multilateral partial market liberalization on resource allocation and welfare under transaction costs. New conditions are derived under which multilateral policy reforms generate Pareto improvements.     

Factors that influence transaction costs in development offsets: Who bears what and why?

Environmental policy instruments generate transaction costs to public and private parties. There is a growing literature reporting on the size of transaction costs produced by environmental policy instruments. This paper extends that literature through an analysis of the factors that influence transaction costs in environmental policy and how this influence occurs. The theory based factors that influence transaction costs are categorised as: 1) transaction characteristics; 2) transactor characteristics; 3) nature of the institutional environment; and 4) nature of the institutional arrangements. We examined how these factors influenced transaction costs through the analysis of two Australian-based development offset schemes with different policy designs. We found evidence of all four theory-based categories of influence in the policy case studies. The degree of influence and how each factor influenced transaction costs varies across the two policies and between parties. Policy design as a component of the institutional environment had a particularly large bearing on transaction costs of offset buyers and the policy administrator. An important contribution to transaction cost theory assumes the institutional environment as given.     

评估地方政府层面的制度改革:一个有待研究的领域

在地方政府层面,对制度改革政策的评估是目前政策评估领域中很少涉及的内容。文章将相关的方法运用到制度改革政策的评估中,从而对该领域的研究做出一些探索。文章将制度方面的政策(如地域性和功能性改革)概括为一类特殊的公共政策,并从概念上和方法上将其与普通的实体政策相比较。文章探讨了评估过程中存在的诸多问题,包括交易成本的确定和找寻制度改革的度量指标等。文章最后提出了关于功能性和地域性改革评估的分析框架,以便区别制度评估和绩效评估。此外,该框架还可以应用于比较性的评估研究中。     

Talk is cheap,or is it? The cost of consulting about uncertain reallocation of water in the Murray–Darling Basin,Australia

In this paper we reflect on the challenge of reallocating water resources from agricultural interests to environmental uses. The area of interest is the Murray–Darling Basin, Australia, although the evidence presented provides salient lessons for a range of settings. We draw on the transaction cost literature where the tasks of re-designing and using institutions can help conceptualise the costs associated with policy change. A framework for improving ex ante assessment of transaction costs and its relationship to transformation or abatement costs is elaborated, especially as it relates to community consultation exercises. Against the background of the water reforms of the past three decades we conclude that policy makers and administrators could limit increases in transformation costs and contain transaction costs by giving greater attention to the form of community consultation, by taking account of the sources of uncertainty that attend policy choices and recognising the potential for consultation fatigue.     

建立水市场的成本估计框架

以往关于水资源市场交易机制的研究因为仅限于一个市场的交易成本,因此常常低估交易成本。我们认为,市场产权制度的设计与实施相关成本是交易成本中非常重要的部分。在运用交易成本对水配置机制效率的全面评价时面临一系列的测度问题,尽管有关最终交易的成本相对易于测度,但最初的信息收集、政策执行和正式市场机制的设计与运行的有关成本的测度存在困难。事实上,当一个政策实施后,再来测度交易成本要容易得多,但为了决策的需要,我们必须事前就了解相应的交易成本。     

Transaction costs and environmental policy design

This article synthesizes the growing empirical literature on transaction costs to identify pragmatic design recommendations for environmental and natural resource policies. The New Institutional Economics literature recognizes that appropriate policy choice and design will be a function of the specific characteristics of the problem. The physical and institutional determinants of both transaction costs and abatement costs should be considered in the policy design process due to potential interactions between them. Analysts also need to incorporate the extent to which the technologies, institutional environment, governance structures, or policy designs can be changed; some factors can only be adjusted to or “designed around” while others can be designed differently. This framework highlights the importance of property rights since transaction costs will be incurred to obtain or retain property rights and since the rights assignment may affect both the magnitudes and distribution of costs. Another implication is that education and extension programs or use of behavioral economics concepts to affect choices can be cost-effective in some circumstances. Policy design should take advantage of economies of scale and foster technical change. Appropriate sequencing of policy instruments may decrease transaction costs, particularly if there is potential for technical change.     

交易费用和制度变迁的分析与启示

交易费用与制度变迁都涉及到经济生活中的具体操作方面,比如资源优化配置和效率问题。中国在深化改革的过程中,不仅必须考虑到资源优化配置、改革成本和经济运行效率,而且更应以此作为检验改革成效的标尺。这些又与特定的制度安排有着内在联系,因此,只有认真研究交易费用和制度变迁的相关问题,才能保证中国改革的进一步深化。     

Permanency and Flexibility of Institutions: The Role of Decentralization in Chinese Economic Reforms

The purpose of this paper is to offer a Lachmannian analysis aimed at studying the coherence and the efficiency of reforms in China in terms of institutional change. The idea is that transition dynamics cannot be analyzed by reference to market criteria only; transition is, above all, a change in institutions. Every transition economy thus faces the problem of creating a new institutional framework which associates the co-ordination of activities by the market with the preservation of a centralized mechanism of resource allocation. We explain that, in China, this role is played by decentralization. Indeed, we demonstrate that Chinese economic reforms, of which the main institutional vector is decentralization, show the particularity of reconciling, within one single logic, the permanency of a well-established institutional order required for the co-ordination of individual plans, and the flexibility of institutions necessary for the move towards the market. We then defend the theory that both the success and the originality of Chinese economic reforms rest on their capacity to resolve the permanency-flexibility dilemma.     

企业资源配置效率差异与企业边界变动

科斯指出企业和市场是两种不同的配置资源的制度安排,企业内的组织成本和企业间的交易成本决定了企业的边界。不同的企业,其资源配置效率存在着差异,这就决定了企业边界变动的动态性与复杂性。在临界点之前,企业资源配置效率与企业边界变动之间存在着互补性;突破临界点之后,企业边界变动会降低企业资源配置效率。以企业资源配置效率差异为切入点,可以将中间性组织的形成、企业纵向一体化以及企业垂直解体等纳入到一个统一的分析框架。     

CHANGES IN WATER ALLOCATION MECHANISMS FOR CALIFORNIA AGRICULTURE

Existing institutions allocating water in California reflect prior appropriation water rights established when water was abundant. These allocation rules queue users and do not encourage water conservation. Increased water scarcity and growing valuation of water's environmental benefits are inducing a transition to water allocation mechanisms that increase water efficiency in agriculture. Transferable rights systems will lead to market-like water allocation, induce farmers to adopt water conservation technology, and may not face strong objection from senior water rights holders. One must weigh the efficiency gains associated with transition from water rights to water markets against the transaction costs associated with installing facilities that enable water exchange and trading .
Transition to water markets may preserve the agricultural sector's well-being while allowing the transfer of some water outside of agriculture—in particular, for environmental benefit. The cost of policies proposed to reduce agricultural water supply while encouraging water trading are inversely related to the extent of trading allowed. The more farmers trade water, the less costly reducing water supply is to agriculture. Policies reducing water supply to Central Valley Project contractors and allowing trading only among these contractors are much more expensive than are policies encouraging trading among all agricultural water users in California .     

Internalizing the Social Costs of a Small Number of Powerful,Overindebted Firms

Extraordinary debt-to-capital ratios (leverage) and the compression of markets to very few, large companies (concentration) are economic risk factors. They have contributed to vast social costs during the current economic crisis in the USA and in Europe. This theoretical study internalizes these social costs via two market-based policy instruments for the first time in a real-economy Dixit–Stiglitz framework: a tax on firms' debt capital use and a subsidy for market entrants. It helps understand the complex real-economic mechanisms that these policy instruments cause, it derives intuitive rules of thumb for setting the tax rate and the subsidy level so that they elevate welfare, and it suggests ways to practically implement the policies.     

投资选择的交易成本——一个从宏观调控层面的分析

本文基于现有的关于交易成本的研究通常集中在以产权为核心的交换过程 ,而对宏观调控层面可能会引起交易成本的分析没有受到应有关注的事实 ,认为新制度分析包含着政策层面上的交易成本思想 ,政府的宏观调控会导致投资选择的交易成本。文章根据投资者在投资选择过程中是否承担以及在多大程度上承担由政策引致的交易成本 ,将投资者在某时期的最终定位划分为三大集群 ,在给出相应的基本平衡式的基础上 ,运用交易成本范畴对投资者的投资选择作出了一种间接博弈的解释。本文的分析在一定程度上说明了现实投资容易偏离宏观调控的原因。     

Land Reforms in the Presence of Monitoring Costs and International Trade

This paper elucidates the implications of transaction costs in agrarian labor hiring activities in a two-sector model of international trade and identifies a link between the size distribution of land and intersectoral allocation of productive inputs. Ceteris paribus , a more unequal distribution of land increases the amount of outmigration from agriculture, a shrinkage of the production possibility set, and a decrease (increase) in the volume of trade if and only if agriculture is the exportable (importable) sector. In addition, nonintervention in factor and commodity markets is constrained optimal only when land redistribution is not a feasible policy option.     

An Endogenous Growth Model of a Financially Repressed Small Open Economy

The paper develops a monetary endogenous growth model of a financially repressed small open economy, characterized by curb markets, capital mobility, transaction costs in domestic and foreign capital markets, and a flexible exchange rate system, to analyze the impact of financial liberalization – interest rate deregulation and lower multiple reserve requirements – on growth and inflation. When the model is calibrated to match world figures, we find that interest rate deregulation enhances growth and reduces inflation in steady-state. For relatively smaller transaction costs in the curb market, the above result is, however, reversed. Under such circumstances, lowering the transaction costs in the foreign capital market tends to restore the growth-enhancing (inflation-reducing) capabilities of interest rate deregulation. Lower reserve requirements, though, always ensures lower (higher) steady-state inflation (growth).     

土地资本化与农村工业化-广东省佛山市南海经济发展调查

本文对中国西南三省的农村土地租赁市场的现状、发展以及土地租赁市场对公平和效益的影响进行了详细的分析。我们发现,土地租赁市场已经成为农户间土地转移的主要形式。无论从发生的频率上或发生转移的土地面积上看,通过土地租赁市场发生的土地转移远比通过行政性土地再调整发生的土地转移重要。虽然土地租赁市场和土地再分配都会将土地向资源禀赋较少的农户转移,但土地租赁市场更能促进生产力的提高。     

Law, trade, and development

This paper uses a Ricardian model to generate predictions about the influence of institutions on trade in differentiated (complex) and commoditized (simple) products and then uses a rich international trade data set for empirical tests. The model draws the distinction between the role of international transaction costs and domestic production costs in the trade of complex and simple products. The effects of institutions predicted by the model are identified with a three-step estimation procedure. We find that when countries have low quality institutions, institutional reform primarily influences production costs and has little influence on the volume of trade. Institutional reform, however, increases the diversity of exports in complex goods markets. Conversely, in countries with more developed institutions, institutional reform primarily influences transaction costs and is associated with gains in the volume and the diversity of complex exports.     

基于诺思制度变迁框架的中国近代企业史研究——以荣家企业制度变迁为例

从20世纪90年代起,中国经济史学研究引入了新制度经济学理论,这是传统经济史学研究方法上的突破。但这些研究大多集中于正式制度对近代企业的影响和运用交易成本或产权理论分析近代企业制度变迁。文章在诺思产权—国家—意识形态的制度变迁理论框架的基础上,以企业代替国家为制度变迁的主体,重点从意识形态视角进行研究,并通过对荣家企业的案例分析,为近代企业史研究提供了一个内在逻辑一致的理论框架。     

An assessment of market-based approaches to providing ecosystem services on agricultural lands

Market-based approaches are increasingly being advocated as tools for achieving the conservation of ecosystem services. We examine the reasons why markets so far appear to have failed to provide an efficient allocation of many ecosystem services, and identify the conditions under which markets deliver efficient resource allocation. We discuss different forms of market-based approaches to ecosystem services and identify the characteristics of services that make them better suited to one or another of these approaches. We find that lack of low-cost measurability and valuation currently precludes efficient allocation of many ecosystem services through market-based approaches. Still, some forms of market-based approaches hold promise for cost-effectively managing some ecosystem services provided by and to agricultural lands. In many cases some form of well-designed government involvement will be required to seek outcomes that protect the public interest.