Environmental Degradation Under East European State Socialism

The modern theory of property rights yields important and familiar implications for preservation of such environmental commons as air and water. The absence of enforceable property rights renders even land a “common” in this sense, since the benefits of actions taken or forgone in efforts to enhance the quality of the common resource are transformed into a public good, with an attendant free-rider problem. ¹ The normative theory of public finance suggests efforts to provide such public goods collectively, but that traditional theory does not examine actual public sector behavior as driven by individual incentives in political markets. ² For example, in a polity in which decisions on public spending between a pure public good and a pure private good are made with a simple majority decision rule, the majority coalition has net incentives to reduce spending on the public good and increase spending on such private goods as transfer payments to members of the majority. The static equilibrium ³ is achieved when two dollars of transfers have the same marginal value as one dollar of the public good to the members of the majority.