The Institutional Economics of Granting a River Legal Standing

Abstract

The governance of water is of increasing concern to policy analysts. Several property rights systems, which allow for ownership of water by the individual, community, or state have been advocated, but no approach has been uniformly successful in resolving water quality or scarcity issues. In some cases, identifying alternative property rights arrangements for governing water systems could be useful. This research examines how a river system can be granted legal standing and the institutional economic effects of doing so. It is the first academic treatment of this subject. Focusing on the case of the Whanganui River, New Zealand, a careful critique of the new property rights arrangement - termed resource self-determination - is given. Using Ostrom’s Institutional Analysis and Development (IAD) framework, game theory, and economic experiments, the economic and socio-ecological outcomes observed under state ownership are compared with the outcomes expected under resource self-determination. To understand how and why the new property rights approach was identified for the Whanganui River, a critical analysis of the institutional variables central to the identification of resource self-determination is also undertaken using a new dynamic version of the IAD framework developed as part of this research. The results of the study suggest that the implementation of resource self-determination is likely to result in an increase in transaction costs and a redistribution of water within the system, but that the new framework could successfully deliver on the objectives of the new legislation. For policy makers interested in replicating the approach for other river systems, words of caution, as well as recommendations, are offered. Show more