Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
169
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Property Rights, Entrepreneurship and Public
Policy: A Review from Classical Liberalism
Derechos de Propiedad, Empresarialidad y Políticas
Públicas: Una revisión desde el Liberalismo Clásico
Edwin Iván Zarco Nieva
Independent legal researcher
City:
Lima
Country:
Peru
Mary Liz Zarco Nieva
Independent legal researcher
City:
Lima
Country:
Peru
Original Article (Miscellaneous)
RFJ, No. 13, 2023, pp. 169 - 203, ISSN 2588-0837
ABSTRACT:
This research describes how Market Ecology
constitutes the basis for understanding and implementing
efficient and innovative actions for the Conservation of Natural
Resources. Basically, through this article, it will be understood
that the ideas of freedom, the market, and a public policy
that promotes the entrepreneurial function, are the basis for
protecting, managing, and caring for those beautiful spaces, full
of life and nature, that we appreciate so much.
KEYWORDS:
market ecology, property rights, entrepreneurship,
public policies.
RESUMEN:
Este artículo describe cómo la Ecología de Mercado
constituye la base para entender e implementar acciones
eficientes e innovadoras de Conservación de los Recursos
DOI 10.26807/rfj.vi.458
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
170
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Naturales. Básicamente mediante el presente trabajo se
entenderá que las ideas de la libertad, el mercado y una política
pública que fomente la función empresarial, constituyen la base
para proteger, gestionar y cuidar esos espacios hermosos, llenos
de vida y naturaleza, que tanto apreciamos.
PALABRAS CLAVE:
ecología de mercado, derechos de
propiedad, empresarialidad, políticas públicas.
JEL CODE:
G18, H82.
INTRODUCTION
Market Ecology is a theoretical approach that began to
be conceived in the 1980s by a group of young economists (Terry
Anderson, John Baden, P.J. Hill, and Richard Stroup) around the
Property and Environment Research Center (PERC)
in Bozeman,
Montana, an institution founded by these professionals to
investigate how markets can improve environmental quality.
According to Anderson (1993):
At its core, Market Ecology is based on a system of well-
defined property rights over natural resources. If these
rights are in the hands of individuals, corporations,
non-profit environmental groups, or communal groups,
a discipline is imposed on resource users, because the
wealth of the owners of the property rights are at risk
if wrong decisions are made. Of course, the further a
decision is removed from this discipline - as is the case
when there is political control - the less likely it is that
resources will be properly managed. Moreover, when
well-defined property rights are transferable, owners
must consider not only their value but also what others
are willing to pay for them. (p. 32)
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
171
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Market Ecology is fundamentally based on an adequate
definition of property rights as the basis for guaranteeing
property owners the incentives to develop initiatives to protect
natural resources. Well-defined and transferable property
rights generate positive incentives for people to act in an
environmentally friendly manner. In this sense, this article
addresses the implications of peaceful interaction between
property rights, entrepreneurship, and public policies to
achieve sustainable preservation of the environment.
1. PROPERTY RIGHTS AND PRODUCTIVE
ENTREPRENEURSHIP
In addition, an adequate definition of property rights
motivates owners to develop their Business Function, i.e., to
carry out the necessary actions to enhance the value of a given
area with valuable natural resources. In the case of natural
resource conservation, having properly defined property rights
encourages the owners of these areas to promote business
initiatives such as ecotourism, biodiversity research, or other
options that generate economic benefits for them.
Property rights form the basis of the theoretical
approach to Market Ecology, as indicated by Anderson (1993):
The approach to property rights over natural resources
admits that such rights imply a dependence on the
benefits and costs derived from their definition and
application. This calculation depends in turn on variables
such as the expected value of the resource in question,
the technology of measurement and control of property
rights, and the moral and legal usages that condition the
behavior of the acting parties. At a given point in time,
property rights will reflect the perceived benefits and
the costs of definition and enforcement. (p. 56)
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
172
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
In this conceptual framework, we can find several
elements that distinguish property rights. First, we see that
property rights generate information on the benefits and
costs to be considered by individuals, entrepreneurs, and
communities wishing to protect the natural resources of their
respective territories.
In simple terms, environmental entrepreneurs will
feel more confident in promoting ecotourism, research, or
recreation project within their respective properties if they have
information on the benefits they will achieve through certain
costs. Likewise, they will be able to evaluate the generation of
partnerships with other actors that complement the business
initiative they wish to undertake. For example, a community
that has information on the benefits and costs involved in
protecting a given resource will evaluate the convenience of
partnering with a tourism entrepreneur to preserve an area
with beautiful natural scenery. In conclusion, a definition of
property rights allows owners to have “Information”.
Without defined property rights, environmental
entrepreneurs will never have the necessary “information”
to make decisions or undertake a business initiative that
protects natural resources. But the issue of property rights
in the environmental field is not only about the production
of information on benefits and costs, but a clear definition of
property rights in addition to the generation of “Information”
also allows for cooperation between individuals. In other words,
defined property rights prevent the emergence of conflicts
between two individuals who wish to use the same natural
resource for different purposes.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
173
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
As Cordato (2004) points out:
Irresolvable inefficiencies, i.e., inefficiencies that
cannot find a solution in the business operation of
the market process, arise due to institutional defects
associated with a lack of clearly defined or well-
enforced property rights. In a situation where rights
are clearly defined and strictly enforced, plans may
conflict, but the resolution of that conflict is implicit in
the exchange process. In other words, the conflict may
appear in the planning stages, but it is resolved before
the actors proceed to implement those plans. (p. 8)
As we can see, an adequate definition of property
rights resolves conflicts that may arise between two actors.
For example, if a community has an area with flora and fauna
resources but does not have clearly defined property rights over
the area in question, another invader or extractor of natural
resources will enter and deforest the forests in that territory
without caring about the damage caused to the community,
creating a conflict scenario that will pit the community against
the illegal logger who wishes to deforest the forest.
However, if in the above case there were a clear definition
of property rights backed by an institutional level, the conflict
would not arise. On the contrary, new forms of cooperation
would develop between the community and the illegal logger
since it is very likely that an exchange or cooperation could
emerge between both actors through some business alternative.
In the end, the illegal logger could become a timber buyer and
the community would undertake the cultivation of timber trees
for commercial purposes. But alternatives such as these will
only emerge if there are clear institutional rules that guarantee
defined property rights.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
174
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
In this sense, a clear definition of property rights
that generates conditions to protect and efficiently manage
natural resources implies the development of clear Institutions
or institutional rules. In other words, as Anderson (2014)
indicates:
By Institutions, we mean the rules that govern the
way people interact with each other. More specifically,
property rights are those that determine who should
use resources (including natural resources, capital, and
labor), how other resources could be used, and whether
these could be exchanged. (n. p.)
These institutional rules must have two fundamental
characteristics. First, they must be accepted by the stakeholders
who wish to conserve natural resources and, second, they must
be supported by legislation or public policy. Otherwise, if the
public policy goes against the institutional rules that emerged
from the free agreement of the stakeholders interested in
conserving natural resources, the environmental undertaking
to conserve these resources will not be fulfilled and cooperation
will be replaced by conflict and the destruction of biodiversity-
rich territories.
As Anderson (2014) points out:
When property rights are dictated by central
authorities with a minor stake in the outcome, time
and effort are usually wasted in the process of creating
property rights, so productive investment suffers. Just
as technological change is generally incremental rather
than discontinuous, effective institutional change
evolves slowly, taking into account specific conditions
of time and place. (n. p.)
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
175
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
As we can see, property rights have an evolutionary
nature, especially regarding the conservation of natural
resources. Since property rights are institutional rules governing
the exchange between two actors, the emergence of property
rights will depend on the work of institutional entrepreneurs to
create new ways of establishing clearly defined property rights.
The solutions proposed and implemented by these entrepreneurs
will be based on information about time and place.
In this sense, the evolving nature of property rights
develops according to the new challenges that institutional
entrepreneurs must face to guarantee the use of a given natural
resource. These entrepreneurs promote new institutional rules
that make it possible to use and enhance the value of a given
territory rich in biodiversity.
In this context, the work of institutional entrepreneurs
is fundamental, since they, in an environment of freedom and
cooperation, create rules to be able to exchange, trade, and
protect certain natural resources. For example, if a farming
community wishes to establish agreements with environmental
entrepreneurs, it will need to establish clear rules of exchange
based on clearly defined property rights, such as contracts,
delimitation of areas, traditional systems of area protection,
technology to establish property boundaries, among other
innovative initiatives that will only come from the actors
directly involved.
As Anderson (2014) points out:
It is easier to understand the importance of institutional
entrepreneurs in a context that tests their ability to
prevent the
tragedy of the commons
. The tragedy of the
commons occurs when there are no limits to accessing a
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
176
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
resource, resulting in overexploitation of the resource.
The most typical example is the overgrazing of village
commons. If customs and traditions do not limit access
to pastures, individuals will exploit them irremediably,
and the entire pasture will be devoured by livestock.
The entrepreneur who can develop rules to restrict
grazing will gain part of the increased value of the
pasture. Thus, their value will not dissipate, something
that does happen through the tragedy of the commons.
(n. p.)
As we can see, the work of institutional entrepreneurs
is fundamental to addressing the tragedy of the commons, as
institutional entrepreneurs can develop innovative initiatives to
create institutional rules to define property rights to conserve
natural resources. The work of the owners of biodiversity-
rich areas, be they individuals, NGOs, entrepreneurs, or
communities, in defining property rights is fundamental to
undertaking innovative initiatives to conserve nature.
However, the success of institutional entrepreneurs will
depend on public policies not affecting the free development of
their initiatives. That is, given that public policies are generated
by officials who do not have information on time and place, the
application of these policies may generate a risk that blocks the
initiatives of these environmental entrepreneurs. As Anderson
(2014) points out:
Although formal property rights, norms, and laws may
be important in determining economic prosperity, their
effectiveness in promoting harmony depends largely
on how formal rules interact with informal institutions.
Custom and traditions can be decisive factors in the
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
177
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
process of growth. (n. p.)
For these reasons, the Market Ecology approach
highlights the importance of the work of institutional
entrepreneurs and the application of their knowledge (customs
and traditions) when defining property rights and the danger of
a public policy that goes against the free development of these
private initiatives that seek to conserve natural resources.
In this regard, it is key that public policies only focus
on guaranteeing property rights or developing institutional
rules that allow landowners to undertake natural resource
conservation initiatives. As Cordato (2004) mentions “if legal
institutions, instead of making it more expensive to establish
private property rights, stimulate them, markets can develop
recreational spaces and pleasant environments in the same way
that they provide traditional products” (p. 235).
Likewise, Larraín (1995) indicates that an:
In-depth examination of the solution to environmental
problems leads us to suggest that the adequate response
is not indiscriminate regulation, which is usually
advocated. On the contrary, a more efficient solution,
in terms of resource allocation and even environmental
objectives, can be achieved through the definition of
property rights where they do not exist. These, together
with a competitive market, allow for greater care of the
environment in a process of economic growth. (p. 17)
In this sense, a definition of property rights allows
owners of biodiversity-rich land to obtain economic benefits
from initiatives that conserve nature. This means that an
adequate definition of property rights reduces the transaction
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
178
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
costs involved in protecting a natural resource, as Anderson
(2014) points out:
Institutions that elucidate existing property rights, or
create them when needed, also reduce transaction costs
through the oversight and protection they provide. For
example, rules for branding cattle with iron caused
their market to be more efficient, and land inspections
and records made property transfers cost less. (n. p.)
Property rights provide landowners with tangible
benefits expressed in lower transaction costs and income
generation. These benefits become the incentive for
landowners, whether they are individuals, communities, NGOs,
or entrepreneurs, to undertake conservation initiatives such
as ecotourism, recreation, and nature research, among others.
However, this incentive or stimulus will be blocked when
public policies that go against the property rights of these
actors are implemented. In this situation, the owners will not
feel confident about obtaining benefits and therefore economic
progress will dissipate.
On this point, Anderson (2014) tells us that “rules that
restrict exchange discourage profitable business and encourage
conflict. And laws that prevent private property can cause rents
to disappear, as happens with overgrazing, uncontrolled fishing,
or overexploitation of resources. All these types of rules create
artificial transaction costs” (n. p.). For that reason, public
policies should only focus on guaranteeing the exchange and
ownership of natural resources held by owners of biodiversity-
rich land. Only in this way will transaction costs decrease, and
benefits increase.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
179
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Anderson (2014) summarizes this point with the
following sentence:
By focusing on transaction costs and how they relate
to different institutions, we can better understand the
origin of cooperation and prosperity. When property
rights are well defined and adequately protected,
markets promote gains from trade and encourage more
efficient use of resources. However, when property
rights are not well specified not protected, valuable
resources vanish, as people will then compete to obtain
the rents from unique resources. (p. 542)
On the definition of the Entrepreneurial Function,
Professor Huerta de Soto (2015) tells us the following:
In a general or broad sense, the entrepreneurial
function coincides with
human action
itself. Moreover,
it could be stated that the entrepreneurial function is
exercised by any person who
acts
to modify the present
and achieve its objectives in the future. Although at first
sight, this definition may seem too broad and not in line
with current linguistic usage, it must be borne in mind
that it responds to a conception of entrepreneurship
that is increasingly elaborated and studied by the
economic sciences and that, in addition, it is fully in
line with the original etymological meaning of the term
company. Both the Spanish expression “empresa” and
the French and English expressions
entrepreneur come
etymologically from the Latin verb
in prehendo-endi-
ensum
, which means to discover, to see, to perceive, to
realize, to catch, and the Latin expression
in prehensa
carries the idea of action, it means to take, to grasp, to
do. In short, the enterprise is synonymous with action.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
180
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Now, the meaning of enterprise as action is necessarily
and inexorably linked to an entrepreneurial attitude,
which consists of continually trying to seek, discover,
create, or realize new ends and means. (p. 41)
Therefore, adequate development of the entrepreneurial
function depends to a great extent on an adequate definition of
property rights, i.e., if the rights over territory or area cannot
be definable, defensible, and transferable, its owner will not
have the motivation to invest money, time and work that will
allow him to achieve a personal purpose or benefit. In this
respect, the entrepreneurial attitude will only awaken when
the individual has the security that the resources he invests
will be protected by a contract, document, or legislation. In
simple terms, this condition means having property rights.
For this reason, the conservation of natural resources,
or specifically the conservation of an area that has valuable
flora and fauna resources, will depend on well-defined property
rights over this area, and this implies that the owner, be it an
individual, businessman, NGO, or community, has the security
to choose what actions to take over the natural resources under
his ownership. For example, renting, selling, or transferring
this property to another interested actor. If these conditions
exist, the owner will be motivated to undertake or create
business initiatives to obtain economic benefits in line with the
conservation of natural resources.
In this respect, Professor Huerta de Soto (1994)
indicates that:
What is important is to put into operation the
entrepreneurial processes aimed at solving the
problems. This means that concrete and specific
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
181
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
technical recipes cannot be given, since they will have
to be discovered, considering the circumstances of
time and place of each environmental problem by the
force of the entrepreneurial function, in a context of
free enterprise and correct definition and defense of
property rights. (p. 225)
As Professor Huerta de Soto (1994) points out, the
development of the entrepreneurial function allows the use
of time and place information, that is, information that is only
available to individuals who are in the area, either because they
live in the area or because they have direct contact with the
area. For example, if a community owns an area rich in natural
resources and there is also a group of professionals in the area
who wish to join the community to conserve those natural
resources, then both actors have the knowledge to undertake
more creative and efficient actions on how to conserve those
natural resources (ecotourism, research, or recreation).
This knowledge of time and place cannot be replaced by the
knowledge of some state authority or technician who is not
in the place and even less so who does not have the property
rights to the area in question.
2. FREE-MARKET ENVIRONMENTALISM IS BASED
ON PRODUCTIVE ENTREPRENEURSHIP AND
ENTREPRENEURSHIP
As Anderson (2015) points out:
Free-market environmentalism relies on
entrepreneurship as a driving force that is to reduce the
costs of defining, enforcing and negotiating property
rights so that resources can be used more efficiently.
This way of thinking follows the work of Nobel Laureate
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
182
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Friedrich Hayek whose ideas are compared to those
of Charles Darwin. Hayek saw markets as processes
in which demanders and suppliers continuously
responded to changing price signals in the same way
that Darwin saw species taking advantage of empty
niches. Thus, both markets and ecosystems are bottom-
up systems that cannot be managed from the top down.
Matt Ridley captured the similarities between Hayek
and Darwin, saying that both markets and nature
are spontaneously self-ordering through the actions
of individuals, rather than ordered by a monarch or
parliament. (p. 13)
For these reasons, Market Ecology is not only based on
an adequate definition of property rights and the development
of the entrepreneurial function, but also on the influence that
public policy can have on both points. For example, if the public
policy does not guarantee landowners their property rights
and instead violates them, these landowners will not be able
to develop their entrepreneurial function or undertake creative
initiatives to conserve natural resources. Infringement of
property rights by the State means that the State is promoting
policies that do not allow owners, be they individuals,
entrepreneurs, NGOs, or communities, to define, defend or
transfer their property.
This negative influence of the State is reflected in
concrete actions such as the political distribution of property
rights, i.e., when the State grants rights to various agents over
the same territory, regardless of whether these rights conflict.
For example, in the Peruvian Amazon, the State has granted
property rights over the same territory to communities, mining
concessions, settlers, and forestry concessions, among others,
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
183
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
causing what is called “overlapping property rights”.
In places where this overlapping of property rights
is evident, the incentives for landowners to develop nature
conservation initiatives are lower, and this is evident because
property rights in these areas are not adequately defined,
creating a situation of conflict, and blocking the development
of the landowners’ entrepreneurial function.
Another action by the State that blocks the development
of the business function is expressed in the public ownership
of territories rich in biodiversity. In this regard, it should be
noted that in many parts of the world, areas characterized by
particularly valuable flora and fauna resources are protected
by the State under the model of national parks or simply as
public property. In the case of the Peruvian Amazon, more
than 60% of this territory is owned by the State, a situation that
has not allowed the development of private initiatives in this
territory, except for a few experiences such as the Conservation
Concessions and Ecotourism Concessions that we will explain
below.
It is evident that one of the obstacles to achieving an
adequate allocation of property rights has been the State itself,
which, in its eagerness to protect natural resources through
the formula of public goods, has given rise to two visible
consequences: a) the monopolization of land and b) the origin
of negative externalities due to the excessive eagerness to
create protected natural areas that in the end it cannot control
and monitor.
The influence of the State in the definition of property
rights plays an important role in the development of private
initiatives for the conservation of natural resources. For
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
184
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
example, if a landowner does not have legal security from the
State that provides guarantees to protect his property rights,
he will never consider the conservation of natural resources
as an end, since he will not have the necessary incentives to
devise or undertake market solutions for the conservation of
biodiversity.
Likewise, if the State monopolizes lands of great value
in flora and fauna (Amazon) under the modality of public
property, businessmen, NGOs, communities, or other actors
will not be able to enter these areas to create efficient nature
conservation proposals, since they will not have recognized
property rights.
For this reason, the Market Ecology approach seeks to
study the relationship between property rights, entrepreneurial
function, and public policy influence. The entrepreneurial
function is another component of Market Ecology, and its
development depends closely on a clear definition of property
rights. In other words, if property rights are clearly defined,
environmental entrepreneurs will have the incentives to
promote initiatives that conserve natural resources.
As we indicated in the previous point, a clear
definition of property rights provides landowners with the
security to establish medium and long-term plans that seek to
conserve natural resources. This security allows landowners
to find strategic partners such as entrepreneurs or institutions
interested in ecotourism, conservation, and biodiversity
research.
But the key point that motivates landowners to
implement their business function is the “information”
produced by the defined property rights and this “Information”
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
185
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
is expressed in the
costs and benefits
that the landowner comes
to know to be able to define his plans, actions, and decisions in
the face of future risks involved in undertaking a biodiversity
conservation initiative.
In this regard, Huggins (2013) indicates that:
Property rights provide the basis for a market
economy. Without private property rights there would
be no exchange, without exchange there would be no
prices, and without prices, there are no clear signals to
transmit information to consumers and producers. The
three
Ps
of
Property, Prices, and Profit
/losses, provide
the three I’s of a dynamic economy of
Incentives,
Information, and Innovation
. (p. 9)
In a broader context these elements: ownership,
pricing, profit/loss, incentives, information, and innovation
relate to three basic aspects that characterize the individual or
environmental entrepreneur. These three aspects are
Human
Nature, Knowledge, and Processes and Solutions.
Regarding
Human Nature
, which is the first aspect that
characterizes the environmental entrepreneur who exercises
the entrepreneurial function, Anderson (1993) indicates
that “free market ecology considers that man is interested in
himself”, in that sense, “the good management of resources
depends on how social institutions manage to set in motion
their interests through individual initiatives” (p. 33). This
means that to foster the development of the entrepreneurial
function it is important to understand that individuals respond
to their ends and seek the means to achieve those ends,
in that sense, if the rules or institutions foster a context for
landowners rich in biodiversity to achieve their ends, they will
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
186
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
seek the most creative and innovative means to achieve their
end or personal interest.
On this point, we must consider that, in the field of
natural resource conservation, there are owners (individuals,
entrepreneurs, or communities) who are interested in
conservation. There are also investors, researchers, scientists,
and international organizations that are also interested in
achieving this objective. Consequently, all these actors have
a common goal, which is to “protect natural resources”.
Now, if government institutions and regulations foster the
conditions for these actors to achieve this goal, cooperation
will immediately develop, and each of these actors, either
individually or in association, will seek the most creative and
innovative alternatives to achieve this goal.
These creative and innovative ways will depend
exclusively on the information of time and place available
to each of these actors, therefore, only they will be able to
undertake innovative initiatives to conserve natural resources.
These environmental actors or entrepreneurs will be able to
fulfill their interests by generating new forms of conservation
of natural resources. This new knowledge will serve as an
example or inspiration for new entrepreneurs who will
improve the processes towards better management of nature.
In this sense,
Knowledge becomes the seco
nd aspect that
characterizes the environmental entrepreneur, in this respect,
Anderson (1993) tells us the following:
The free-market ecology considers that the gap
between the knowledge of an expert and the average
individual is much smaller. From this point of view,
individual private owners are in a better position and
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
187
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
have greater incentives to obtain time- and place-
specific information about their resources and to
manage them than centralized bureaucracies. (p. 34)
This means that the
information or knowledge
that the
owners of biodiversity-rich territories have is more useful than
the information available to a public official who wishes to
promote an environmental policy. This is because landowners
are much closer (in time and place) to the natural resources. In
this regard, Huerta de Soto (2015) tells us that this information
and knowledge that forms the basis of the business function is
characterized by six key aspects:
Subjective knowledge of a practical, non-scientific type:
“
It is all that which cannot be represented, in a formal way,
but which the subject acquires or learns through practice, that
is, through human action itself in its corresponding contexts”
(n. p.). In the case of natural resource conservation, the
landowners have local knowledge about the traditional use of
natural resources, for example, many of the landowners know
very well the traditional use of plants, places for bird watching,
trails to walk through the area, and other local knowledge
about the natural resources found in their territories.
Privative and dispersed knowledge:
“Each man who acts
and exercises the entrepreneurial function, does it in a strictly
personal and unrepeatable way since he starts from reaching
certain ends or objectives according to a vision and knowledge
of the world that only he possesses in all its richness and variety
of nuances, and that is unrepeatable in an identical way in any
other human being” (n. p.). In the case of nature conservation,
each of the owners, whether they are individuals, community
members, or entrepreneurs, has a unique knowledge of their
goals and the means to achieve these goals. For example, if the
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
188
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
landowners’ goal is to conserve the natural resources of their
land, they will implement the most creative and innovative
means to achieve these goals (ecotourism projects, research,
and other innovative initiatives).
Tacit and inarticulable knowledge:
“The actor knows
how to do or perform certain actions but does not know what
the elements or parts of what he is doing are, or whether they
are true or false. For example, the set of habits, traditions,
institutions, and norms that constitute a law, which the
individual obeys without theorizing on their content” (n. p.). In
the case of nature conservation, communities have institutions,
traditions, and norms that form the basis of their organization
and become the strength when managing a natural resource
conservation initiative.
The knowledge that is created ex nihilo, out of nothing,
through the exercise of the entrepreneurial function:
“The creative
character of the entrepreneurial function is embodied in the
fact that it gives rise to entrepreneurial profits, which, in a
certain sense, arise out of nothing. It is enough for individuals
to become aware of misalignments or miscoordinations among
other individuals and immediately find the opportunity to
obtain an entrepreneurial profit” (n. p.). In the case of natural
resource conservation, the owners of land rich in biodiversity
identify the conservation option as an alternative to obtain
economic income, for this reason, they seek alternatives to
obtain these benefits by promoting business projects such as
ecotourism or biodiversity research.
Transmissible knowledge:
“The creation of information
simultaneously implies its transmission in the market. To
transmit something to someone is to make that someone
generate or create in his mind part of the information that
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
189
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
we created or discovered previously. Prices are a powerful
means of transmitting information and respond to a subjective
valuation set by the actors” (n. p.). In the case of natural
resource conservation, the defined property rights of land
rich in biodiversity generate incentives for landowners to
coordinate with other professionals or investors interested in
nature conservation. This coordination takes place through the
prices assigned by the landowners to the services that their
area can offer, such as lodging, viewpoints, lodges, landscapes,
and biodiversity, among other services.
The knowledge that generates learning and coordination:
“
The actors that communicated through the entrepreneurial
function learn to act in a coordinated way, that is, in the
function of the other human being. Consequently, without
the exercise of the entrepreneurial function, the economic
calculation that is based on the information that is necessary
for each actor to adequately calculate or estimate the value of
each alternative course of action is not generated” (n. p.). In
the case of private conservation areas, coordination among the
stakeholders involved, whether they are owners, investors, or
users, is one of the strengths of undertaking a natural resource
conservation initiative. For example, the joint work between a
community and a tourism entrepreneur has made it possible
to combine traditional knowledge with professionals and thus
develop sustainable initiatives on private natural resource
management.
As we can see, “knowledge” is one of the key elements
of the entrepreneurial function, especially the knowledge of
the owners or stakeholders directly involved with biodiversity-
rich areas. Although the knowledge of
time and place
that these
actors have is the basis for undertaking innovative initiatives
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
190
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
on natural resource management, this condition alone does
not guarantee the development of successful environmental
ventures.
In addition to “knowledge”, it is necessary to develop
a third element that sustains the entrepreneurial function, this
third element is constituted by
the Processes and Solutions
that
institutional entrepreneurs put into practice when creating
rules, norms, and contracts that allow defining property rights
over biodiversity-rich territories.
The planning of new institutional solutions constitutes
the most tangible expression of the processes developed by
entrepreneurs to establish rules that allow defining property
rights. In the development of these processes, the innovative
solutions they plan to address the tragedy of the commons
and promote productivity. In this context, institutional
entrepreneurs reorganize existing property rights or define
new rights needed to obtain benefits from the conservation of
natural resources.
However, if institutional entrepreneurs, instead
of reorganizing or defining property rights, opt for the
option of redistributing property rights, productivity will be
reduced, and conflict will arise. For example, in the Peruvian
Amazon, the State has redistributed property rights under a
political criterion. This situation has caused an overlapping of
property rights and a continuous conflict, since on the same
territory there are several types of properties such as mining
concessions, protected natural areas, forest concessions, and
communal lands, among others. In such a context, it is normal
that conflicts to arise and innovative solutions to conserve
natural resources are blocked.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
191
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
For this reason, the work of institutional entrepreneurs
in defining rules and contracts that reorganize and define
property rights is key to the emergence of the entrepreneurial
function. As Anderson (2014) indicates:
Institutional entrepreneurs are motivated by
achieving high returns. Such perceptions require the
entrepreneur to establish control over productive
resources: labor, capital, and land. The entrepreneur
is first and foremost a
contractual innovator
who must
find ways to capture the value generated through the
creation and reorganization of property rights. (n. p.)
The task of institutional entrepreneurs is to find a
balance between increasing business benefits and the costs of
defining and monitoring property rights to biodiversity-rich
areas. Consequently, when entrepreneurial action finds the
most innovative ways to establish property rights, it results in
increased rents and decreased costs associated with monitoring
conservation areas.
In most cases of private conservation of natural
resources, the solutions to the problems of defining property
rights were initiated by the private sector and not by the
state sector. For example, in the Peruvian case, legislation on
private conservation arose after the initiatives of institutional
entrepreneurs, which shows that the knowledge of the owners
(individuals, communities, entrepreneurs, NGOs) of lands with
valuable natural resources, are the ones who can undertake
the most innovative solutions to manage and conserve these
territories.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
192
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
In this regard, Anderson (1993) tells us that:
Entrepreneurial imagination is of fundamental
importance to Free Market Ecology because it is in
areas where property rights are evolving that resource
allocation problems arise. When entrepreneurs
working with ecological resources can discover ways
to market these values, market incentives can have
dramatic results. It is important to recognize that any
instance of external benefits or costs is fertile ground
for an owner capable of defining and enforcing
property rights. (p. 56)
In summary, the entrepreneurial function in the field
of natural resource conservation allows for the discovery of
options to enhance the value of the flora and fauna resources
of a given area. This achieved by the development of the
entrepreneurial function is based on the work of institutional
entrepreneurs to establish creative ways to define property
rights over these resources. Establishing these property rights
implies the development of private and state actions.
Private actions are those undertaken by landowners,
entrepreneurs, NGOs, and communities to establish rules or
implement technology to guarantee property rights over their
areas or territories. On the other hand, public actions are
policies or legislation issued by public officials.
Unfortunately, if public actions do not promote
entrepreneurship and the entrepreneurial function that are
private actions, the development of innovative initiatives for
the conservation of biodiversity-rich areas will fail, since public
policies will block the emergence of the incentives or benefits
that entrepreneurs need to know to feel motivated to establish
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
193
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
actions or take risks to define property rights, invest financial
resources and undertake entrepreneurial actions to enhance
the value of the natural resources of their territories.
For this reason, public policy should allow institutional
entrepreneurs to implement innovative initiatives for the
management and conservation of natural resources, since only
in this way will it be possible to develop the entrepreneurial
function that will provide innovative solutions to the
conservation and management of biodiversity-rich territories.
For example, solutions could include business initiatives such
as ecotourism, research, and recreation, among others.
In this regard, Huggins (2013) tells us:
Entrepreneurs are addressing environmental challenges
by learning to reap benefits from what would otherwise
have been a “tragedy of the commons,” a term coined
by Garret Hardin (1968) in Science to describe a
common cow pasture that is ruined by too many people
overgrazing their cattle. His fable is a useful illustration
of a genuine public policy problem: how to manage a
resource that belongs to no one? Some solutions:
One
,
close the commons and turn the environment into a
private asset. This requires the entrepreneur to create
or define property rights, which he will do when the
benefits of having a well-defined system outweigh the
costs of creating the system (Boettke and Coyne 2003).
Two
, given rigorous institutional arrangements, the
commons can remain open, but must be commonly
managed (Ostrom 1990). (n. p.)
Solution
One
implies that the benefits outweigh the
costs that the environmental entrepreneur will assume to secure
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
194
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
the property rights to his land, i.e., profit is the main driver for
a landowner (individual, entrepreneur, NGO, or community)
to implement natural resource conservation solutions or
alternatives. As Anderson (1993) points out:
If the connection between private interests and good
resource management breaks down because the good
steward cannot reap the benefits, or cannot bear the
cost of his decisions, or receives distorted information
because of political interventions, the effectiveness
of free market ecology will be damaged, just as
centralized planning would damage the efficiency of
an ecosystem. (p. 36)
In the case of solution
two,
for territories belonging to
communities, it is not only important to obtain benefits, but
also to develop rigorous institutional agreements that allow
community members to guarantee adequate management
of natural resources for common use. In this context, it is
important to highlight the seven principles that characterize
sound common pool resource institutions as outlined by
economist Elinor Ostrom. According to Ostrom (2000), the
design principles characteristic of long-lasting Common Use
Resource institutions is the following:
a)
Clearly defined boundaries: “The individuals or
families with rights to extract resource units from the
RUC must be clearly defined, as must the boundaries
of the resource” (n. p.). This principle is a clear
indication that communities also need institutions to
guarantee the property rights of their territories. These
institutions will determine what actions community
members should take to protect the boundaries of their
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
195
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
territories and efficiently manage natural resources.
For example, in the private conservation experiences
that have been developed in Peru, the peasant or
indigenous communities that have been most successful
in managing a private conservation area have been
those that have very clear institutional guidelines to
guarantee their property rights.
b)
Coherence between the rules of appropriation
and provision with local conditions: “The rules of
appropriation that restrict time, place, technology and
the resource units are related to local conditions and
to the rules of provision that require labor, material,
and money or both” (n. p.), Each experience of natural
resource management is different and characterized
by its peculiarities, for that reason, it is not possible
to apply centralized management plans or from the
government. To work with communities, it is important
to consider local conditions and the rules of natural
resource appropriation that develop in the area.
c)
Collective choice arrangements: “The majority of
individuals affected by the operational rules can
participate in their modification” (n. p.), communities
that have institutionalized coordination spaces where
their members can discuss decisions or agreements
involving the private management of natural resources
in their territories, have greater strength to manage
biodiversity conservation initiatives. This strength is not
only evident within the communities, but also when the
community coordinates with a company or other actor
interested in partnering with it to undertake a business
project on the private management of natural resources.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
196
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
d)
Oversight: “Overseers who actively monitor the
conditions of the RUC and the behavior of appropriators
are either accountable to them or are appropriators”
(n. p.). Oversight of property rights, as well as
compliance with rules or agreements, is the basis of the
communities that have the greatest strength to manage
a conservation area. When managing a Common Use
Resource, it is not enough to have coordination spaces,
but also clear rules for supervision of property rights
and the obligations of each member of the community.
e)
Graduated sanctions: “Appropriators who violate
operating rules receive graduated sanctions (depending
on the severity and context of the infraction) from other
appropriators, appropriate officials, or both” (n. p.).
Establishing graduated sanctions for those community
members who have not complied with their obligations
or established agreements constitutes a key piece that
reinforces oversight actions. In the case of natural
resource conservation and management, graduated
sanctions constitute an institutional rule to prevent
actions that go against biodiversity conservation,
such as illegal logging, deforestation for agricultural
activities, or hunting of wild animals.
f)
Mechanisms for conflict resolution: “Appropriators and
their authorities have quick access to local instances to
resolve conflicts between appropriators, or between
appropriators and officials at low cost” (n. p.). During
the fulfillment of the commitments established by the
community to manage a biodiversity conservation
area, disagreements or conflicts may arise that alter the
efficiency of the area’s management. For this reason,
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
197
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
the community must have spaces or mechanisms
for conflict resolution. Communities that have these
mechanisms in place have been better able to resolve
disputes that have arisen during the management of a
private conservation area.
g)
Minimum recognition of organizational rights: The
rights of the appropriators to build their institutions are
not questioned by external governmental authorities.
Communities usually maintain institutional rules
that have prevailed from generation to generation,
since they have been the main strength of their
organization and decision-making. Most of these rules
have prevailed over time because of the community’s
work, but also because of minimal recognition
by government authorities. In the case of private
conservation and management of natural resources, it
is key to respect and rescue those institutional rules
of the community that can provide efficiency in the
management of a private conservation area. In some
cases, the decisions made by the communities on
natural resource management are likely more efficient
than a businessman or nature-loving professional. For
this reason, the State, when applying its public policies,
must be very careful not to override these local
institutions, which are undoubtedly the basis for the
entrepreneurial function of communities interested in
biodiversity conservation.
Communities that put these seven principles into
practice have proven to have greater strengths in managing
a natural resource conservation area and in dealing with the
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
198
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
uncertainties involved in undertaking a business project in the
field of biodiversity conservation.
3. THE ROLE OF PUBLIC POLICIES
In this context, the role of public policies should be
limited only to establishing legal certainty that guarantees
individuals, communities, or other actors property rights over
the territories they own. As Anderson (2015) points out:
Undoubtedly, governments play a critical role in clearly
specifying and recording property claims, establishing
rules of accountability, and adjudicating disputed
property rights. That said, well-defined and enforced
property rights impose discipline on resource owners,
holding them accountable for the harm they do to
others and rewarding them for improving resource
use. Property rights incentivize owners to protect the
value of their environmental assets. (p. 4)
Undoubtedly, the role of the State should be limited
only to the generation of legal guarantees that allow owners
to have clearly defined property rights. In the case of natural
resource conservation, this would imply that the property of
individuals, NGOs, entrepreneurs, and communities interested
in conserving the flora and fauna resources of their territories
be protected by the State through an official registry of their
land ownership and the issuance of clearly defined property
titles. As Coase (2009) points out:
If I am correct that trying to get the government to
undertake new activities will only make it perform worse
than before in the activities it is already responsible for,
the continued expansion of government responsibility
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
199
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
will lead to the situation where most of its activities
end up doing more harm than good. I guess that we
have already reached that point. (p. 77)
As Anderson (1993) points out:
The free-market ecology emphasizes the importance
of the role of government in enforcing property rights.
With clearly specified titles - obtained through a land
registration system, with strict accountability rules, and
with allocations through court judgments of disputed
property rights - the market process can stimulate better
resource management. If property rights are unclear or
poorly enforced, over-farming occurs. (p. 32)
For these reasons, the State should only focus on
guaranteeing property rights and not waste efforts formulating
public policies that violate property rights and block the
development of entrepreneurial initiatives. In other words, the
State should avoid the political management of natural resources
or the development of proposals that involve centralist or state
management of conservation areas or nature protection areas,
since this entity does not know of time and place that the actors
involved with natural resources (communities, landowners,
businessmen, and researchers) have.
Market Ecology recognizes that politicians and their
experts do not have all the information necessary to make the
right decisions to protect the environment, and for this reason,
it considers that the only actors that can propose solutions
to environmental problems are those directly involved in the
problem. In this regard, Anderson (1993) states the following:
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
200
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Market ecology recognizes that information about the
environment is so diffuse that a small group of experts
cannot manage the planet as if it were a single ecosystem.
Specific people must be counted on to process time-
and place-specific information and to discover niches,
just as other species do in their ecosystems. (p. 261)
Market Ecology offers an approach to environmental
problems that is compatible with the principles of Ecology This
means that there is a closer relationship between economics
and ecology than we think, in this regard, Professor Walter
Block (1989) tells us the following:
It is not that there is a simple analogy between the
market and ecosystems, but that the laws of evolution
and interaction in both processes are very similar, so it
could be said that ecology is but a part of the economic
sciences, or if you prefer, that the economy itself would
be a discipline encompassed in a broader one: ecology,
hence the term “Market Ecology”. (n. p.)
For this reason, Market Ecology considers that
environmental policies or regulations should be carefully
analyzed and evaluated to identify whether, instead of providing
a benefit to the conservation of natural resources, they block
the development of business initiatives or environmental
enterprises that can provide market solutions to the issue of
nature conservation.
CONCLUSIONS
Finally, we must not lose sight of the fact that although
environmental policies may have the purpose of benefiting
society and protecting the environment, there will always be
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
201
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
a risk that these actions may lead to bureaucratic inefficiency,
over-regulation, and excessive public spending, which will
directly affect owners and investors who wish to invest or
undertake projects that seek to manage natural resources to
conserve them and obtain financial benefits.
Nor should we forget that part of the nature of the State
is its tendency to grow without control, for this reason, we must
always be alerted to ensure that this natural growth of the State
does not invade spaces that could very well be managed by the
private sector. Currently, the State already has responsibilities
in the areas of security, health, and education, among others,
and to add to these issues the protection and management of
natural resources are put at risk an area that could very well be
managed by private actors such as communities, landowners,
NGOs, or companies.
REFERENCES
Anderson, T. and Hill, P. (2014).
The Not So Wild West, Property
Rights on the Frontier
.
INNISFREE Edition.
Anderson, T. and Leal, D. (1993).
Ecología de Mercado
. Madrid:
Unión Editorial.
Anderson, T. and Leal, D. (2015).
Free Market Environmentalism
for the Next Generation
, 1st ed. United States: Palgrave
Macmillan.
Anderson, T. and Libecap, G. (2014).
Environmental Markets.
A Property Rights Approach.
Cambridge Studies in
Economics, Choice, and Society.
Benegas, L. (2015). Freedom is reciprocal respect.
Ecology
Debate
, pp. 105 - 108.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
202
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Block, W. (1989),
Economics and environment: A Reconciliation
.
Vancouver: The Fraser Institute.
Coase, R. (2009).
Essays on economics and economists
.
Madrid:
Marcial Pons.
Cordato, R. (2004).
Toward an Austrian Theory of
Environmental Economics.
The Quarterly Journal of
Austrian Economics
, (1), pp. 3-16.
Huerta de Soto, J. (1994). Estudios de Economía Política.
Chapter XXI Property Rights and Private Management
of Nature’s Resources,
2nd ed.,
(pp. 229 - 249).
Madrid:
Unión Editorial.
Huerta de Soto, J. (2015).
Socialismo, Cálculo Económico y
Función Empresarial
, 5th ed.
Madrid: Unión Editorial.
Huggins, L. (2013).
Environmental Entrepreneurship, Markets
Meet the Environment in Unexpected Places
.
Massachusetts, USA: Edward Elgar Publishing Limited
Inc.
Larraín, L., Hurtado, J. and Ramírez, P. (1995).
Ecología de
Mercado
. Fundación Libertad y Desarrollo de Chile.
Ostrom, E. (2000).
El Gobierno de los Bienes Comunes, la
evolución de las instituciones de acción colectiva
. México:
Universidad Nacional Autónoma de México, Centro
Regional de Investigaciones Multidisciplinarias.
Fondo de Cultura Económica.
Smith, F. (1996).
Introduction to Market Ecology
.
Market Ecology
Institute - FAES.
Zarco E.; Zarco, M.
Property Rights, Entrepreneurship and Public Policy
203
Revista Facultad de Jurisprudencia RFJ No.13 Junio 2023
Received:
14/08/2020
Approved:
07/12/2022
Edwin Iván Zarco Nieva:
Looking Institute Director and Head
of Research
City:
Lima
Country:
Peru
Email:
edwinzarconieva@yahoo.es
ORCID:
https://orcid.org/0000-0002-1382-5023
Mary Liz Zarco Nieva:
Looking Institute Researcher
City:
Lima
Country:
Peru
Email:
mzarco@eslibertad.org
ORCID:
https://orcid.org/0000-0002-0903-8094