British Academy: The UK's National Academy for the Humanities and Social Sciences
Partha Dasgupta: 'The Economics of the Environment'
Copyright © The British Academy, 1996
Printed in Proceedings of the British Academy, Volume 90, pp. 165-221
12. Collective Agreements and the Structure of Authority
A striking difference between local and global environmental problems is this: unlike agreements on the use of, say, local commons, there is no obvious central authority that can enforce agreements among nations over the use of transnational commons. To be sure, there are international authorities that have the mandate to act as overseers. But they don't, at least in principle, possess the coercive powers that national governments ideally enjoy. This has implications on the extent to which international authorities are able to enforce agreements.
Insights into the range of options open in the international sphere can be obtained by asking a prior question: How are agreements enforced in the case of local environmental problems? Broadly speaking, there would appear to be three mechanisms by which this is achieved. (Of course, none may work in a particular context, in which case people will find themselves in a hole they can't easily get out of, and what could have been mutually beneficial agreements won't take place.)
In the first mechanism the agreement is translated into a contract, and is enforced by an established structure of power and authority. As noted in Section 6, this may be the national government, but it need not be. In rural communities, for example, the structure of power and authority are in some cases vested in tribal elders (as within nomadic tribes in sub-Saharan Africa), in others in dominant landowners (such as the zamindars of eastern India), feudal lords (as in the state of Rajasthan in India), chieftains, and priests. On occasions there are even attempts at making rural communities mini-republics. Village Panchayats in India try to assume such a form. The idea there is to elect offices, the officials being entrusted with the power to settle disputes, enforce contracts (whether explicit or only tacit), communicate with higher levels of State authority, and so forth. Wade's account (Wade, 1987) of the collective management of common-property resources in South India describes such a mechanism of enforcement in detail. [note 34 (go to Notes)]
The question why such a structure of authority as may exist is accepted by people is a higher-order one, akin to the question why people accept the authority of government. The answer is that general acceptance itself is a self-enforcing behaviour: when all others accept the structure of authority, each has an incentive to accept it. [note 35] Contrariwise, when a sufficiently large number don't accept it, individual incentives to accept it weaken, and the system unravels rapidly. General acceptance of the structure of authority is held together by its own bootstraps, so to speak.
The second mechanism consists in the development of a disposition to abide by agreements, a disposition that is formed through the process of communal living, role modelling, education, and the experiencing of rewards and punishments. This process begins at the earliest stages of our lives. We internalise social norms, such as that of paying our dues, keeping agreements, returning a favour; and higher-order norms, as for example frowning on people who break social norms (even shunning them), and so forth. By internalising such norms as keeping agreements, a person makes the springs of his actions contain the norm. The person therefore feels shame or guilt in violating a norm, and this prevents him from doing so, or, at the very least, it puts a break on his violating it unless other considerations are found by him to be overriding. In short, his upbringing ensures that he has a disposition to obey the norm. When he does violate it, neither guilt nor shame is typically absent, but the act will have been rationalised by him. A general disposition to abide by agreements, to be truthful, to trust one another, and to act with justice is an essential lubricant of societies. Communities where the disposition is pervasive save enormously on transaction costs. There lies its instrumental virtue. In the world as we know it, such a disposition is present in varying degrees. When we refrain from breaking the law, it isn't always because of a fear of being caught. On the other hand, if relative to the gravity of the misdemeanour the private benefit from malfeasance were high, some transgressions could be expected to take place. Punishment assumes its role as a deterrence because of the latter fact.
However, where people repeatedly encounter one another in similar situations, agreements could be reached and kept even if people were not trustworthy and even if a higher authority were not there to enforce the agreements. This is a third kind of mechanism.
How does it work? A simple set of contexts in which it works is where far- sighted people know both one another and the environment, where they expect to interact repeatedly under the same circumstances, and where all this is common knowledge. [note 36] For expositional purposes, it helps to simplify further and to consider circumstances where actions are observable, and where there is perfect recall on each person's part of how others have behaved in the past. [note 37] One idea is to require norms of behaviour to be supplemented by an entire sequence of meta- (i.e. higher-order) norms, all of which can be succinctly stated in the form of a basic norm, requiring each party to abide by the agreement with any other party if and only if that other party were deserving. We now assume that the social norm requires all parties to start the process of repeated interactions by co-operating. By recursion, it is then possible for any party at any date to determine who is deserving and who is not. If someone is found to be non-deserving in any period, the norm enjoins each of the other parties to impose a sanction on him for that period. (This amounts to non-cooperation with him for that period.) In long, the norm requires that sanctions be imposed upon those in violation of an agreement; upon those who fail to impose sanctions upon those in violation of the agreement; upon those who fail to impose sanctions upon those who fail to impose sanctions upon those in violation of the agreement; ... and so on, indefinitely. (This is the sequence of meta-norms mentioned earlier.) Provided agents are sufficiently far-sighted, in that they place sufficient weight to their future gains from co-operation, this basic norm, which tells each agent to cooperate with (and only with) deserving agents, can lift communities out of a number of potentially troublesome social situations, including the repeated prisoners' dilemma. The reason each party conforms to the basic norm when a sufficient number of others conform is pure and simple self-interest. If a party doesn't conform, he will suffer from sanctions for the duration of his non-conformism. It will be noticed, however, that since continual co-operation is self-enforcing, there will be no deviance along the path of co-operation, and so no sanctions will be observed. The meta-norms pertain to behaviour off the path of co-operation.
This sort of argument, which has been established in a general setting only recently (e.g. Friedman, 1971; Aumann and Shapley, 1976; Fudenberg and Maskin, 1986; and Abreu, 1988), has been put to effective use in explaining the emergence of a number of institutions which facilitated the growth of trade in medieval Europe. Greif (1993), for example, has shown how the Maghribi traders during the eleventh century in Fustat and across the Mediterranean acted as a collective to impose sanctions on agents who violated their commercial codes. Greif, Milgrom and Weingast (1994) have offered an account of the rise of merchant guilds in late medieval Europe. These guilds afforded protection to members against unjustified seizure of their property by city-states. Guilds decided if and when a trade embargo was warranted against the city. In a related work, Milgrom, North and Weingast (1990) have analysed the role of merchant courts in the Champagne fairs. These courts facilitated members in imposing sanctions on transgressors of agreements.
A somewhat reverse set of actions occurred as well in medieval Europe, where transgressions by a party were sometimes met by the rest of society imposing sanctions on the entire kinship of the party, or on the guild to which the transgressor belonged. The norm provided collectives with a natural incentive to monitor their own members' behaviour. (For a different instance of this, the context being the use of local common-property resources, see Howe, 1986.)
As matters stand, international agreements on environmental matters could be expected to be sustained by the latter two mechanisms in the list I have just discussed, not by the first. Ultimately, it is the second route that offers the strongest hopes for the emergence of collective responsibility over transnational commons. However, institutional changes are easier to bring about than changes in personal and collective attitudes; or so it would seem. Economists generally take "preferences" and "demands" as given and try to devise policies that would be expected to improve matters collectively. This is the spirit in which ecological economics has developed, and there is an enormous amount to be said for it. But in the process of following this research strategy we shouldn't play down the strictures of those social thinkers who have urged the rich to curb their material demands, to alter their preferences in such ways as to better husband the earth's limited resources. If such strictures seem quaint in today's world, it may be because we are psychologically uncomfortable with this kind of vocabulary. But that isn't an argument for not taking them seriously.
Go to Acknowledgements and Notes
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