Chilean water regulation and sustainability of the common-pool resource : proposals for institutional change

Abstract

Water has been historically a central object of conflict, due to its nature as a common good and its status as a scarce resource indispensable for life. Conventional economic theory teaches that the pooling of finite resources by heterogeneous actors with selfish interests leads to the possible exhaustion of these resources, leading to the classic “tragedy of the commons”, where the only solution to this situation is to privatize the resource, or leave it in hands of state regulation. However, Elinor Ostrom - first woman to receive a Nobel Prize in economics - shows a much wider field of action, moving away from this dichotomy that provides inefficient solutions. Through Ostrom’s contributions, an analysis is made of Chilean water regulations, where it is concluded that it is not a sustainable model over time. Based on this result and Ostrom’s findings, recommendations are given on how institutional change in the area of common-pool resources should be addressed.