A Coasian perspective on informal rights assignment among waste pickers in the Philippines

Abstract

Chinese

This paper examines in light of the Coase Theorem how delineation of a degree of enforceable rights for a previously open-access dumpsite in the Philippines would affect market transactions of waste pickers. It shows that a simplistic exclusion solution was not enough to constrain rent dissipation of recyclables in the primeval land fill. Some intervention of non-government organisations backed by some initial government assistance were found helpful in reducing transaction costs to sustain operations and promote innovations and initiatives from the scavengers themselves despite obvious external economic difficulties.

Keywords

Coase Theorem dissipation of rent informal sector institutional change waste management

Introduction

How would an institutional change from an apparently open-access regime to a more formal rights-designation system affect resource reallocation, i.e. how waste pickers sustainably retrieve recyclables in a dumpsite setting? This paper demonstrates the application of the Coase Theorem¹ (Coase, 1959) in trade and innovation promotion using examples of the institutional transformation of Payatas dump site, in the Philippines.

This study, in light of the Coase Theorem (which will be discussed more in detail in the next section), demonstrates the potential of assigning a degree of exclusive rights in fostering trade and innovation. Transcending further from Hardin’s (1968) approach of property rights to constrain ‘the tragedy of the commons’, it will be shown that the approach should not be just limited to restricting access through the assignment of rights. This study examines the rational behaviour of parties assigned with rights over a previously open-access regime and shows that rights assignment with corresponding institutional changes may enhance trade despite different external difficulties.

In discussing property rights arrangement with a focus on rubbish, this study may also contribute in tackling a key difficulty in neo-institutional research on rent dissipation in land resources. Academically, the question is to find real world examples of de jure² common property rights over land other than some pirate dens, which were eventually wiped out, in the Caribbean (Lai and Ho, 2016). Umbeck’s (1977) analysis of the gold rush in the USA was really about the formation of de facto rights among squatters as gold was de jure private³ property of the US government. However, an excellent de jure common property of chattels can be found in common forms of rubbish,⁴ that is legally abandoned property by its original owners and hence those who exploit it do not violate any pre-existing private de jure rights. Growing environmental awareness and advancement in material recovery technologies have made rubbish-recyclables economically valuable and hence are tradable as commodities. However, the answer to the question of ‘who owns’ these thrown materials is often unclear. Seen from this light, recyclables can be viewed as resources susceptible to rent dissipation.

In the social arena, with better understanding of the property rights arrangement and its effect on the waste pickers, this study may also contribute to better public policies uplifting the social standing of the persons involved in this business. Although a great deal of the recycling collection is dependent on the informal sectors in developing countries – sometimes greater than the formal sector (Gunsilius et al., 2011; Downs and Medina, 2000), like waste pickers, they still remain in the lower strata of the society.

Structured in accordance with the Coasian sense of delineation of rights and transaction, the rest of the paper has two main parts. One is a brief discussion of property rights on recyclables, followed by an exposition of an actual case from Payatas.

Property rights designation in rubbish

The Coase theorems are attributed to 1991 Nobel Prize winner, Ronald H Coase. Coase himself did not personally formulate these theorems. In an interview about his ideas on economics, Coase (2012) said that he only mentioned in those papers what he thought was obvious to him. Authors such as Stigler (1966), Cheung (1990), Lai and Lorne (2015) derived these theorems from the works of Coase post facto. Coase (1988: 158) himself acknowledged the term ‘theorem’ post facto in his book, The Firm, the Market, and the Law. Among these theorems, one that is most relevant for this paper was derived by Cheung (1992) – in a paper delivered in the Nobel award symposium – based on Coase’s article entitled, ‘The Federal Communications Commission’ (1959). The 1959 article highlights Coase’s proposition that the most efficient way to allocate radio spectrum frequencies in the USA was by clearly specifying frequencies and offering them through competitive bidding. In the course of the paper, Coase mentioned ‘delimitation of rights is an essential prelude to market transaction’ (1959: 27). Cheung reiterated this in his address (1998, based on his 1990 manuscript) to the Western Economic Association as the most important contribution of Coase to economics.

In his 1959 paper, Coase observed that initial delineation of rights is crucial in order for parties (persons, firms or the like) to start bargaining with each other to rearrange or reconfigure these rights to optimise the economic value derived from them. There is no need for property rights to be very clearly defined, as in unregulated private property, but some delimitations of rights or entitlements will suffice. This Coase Theorem, which differs from the more famous ‘invariant theorem’ of Stigler (Lai, 2007), is a powerful tool for understanding the mechanism through which the economic environment works. It also implies where emphasis has to be placed to enlarge or extend any transaction. North (1995) has expanded on Coase and considered the involvement of some struggles in reallocation of property rights. Olson (1982) similarly suggested ‘Olson shocks’ as necessary to shake off vested interests before society may move more efficiently and grow better. Though these and other lines of thought have generated a vast literature, they are not the focus of this paper, which focuses on the observable effects of some micro property rights redefinition regardless of the mechanism or subjectivity of such redefinition.

With the Coase Theorem as a framework, a revision and specification of the concept of property rights for rubbish might be called for. Property rights, in contrast with material objects, are social contracts that delimit and specify relationships among people with respect to a certain resource (Alchian and Demsetz, 1973). Cheung (1974, also Alchian and Demsetz, 1973; Libecap, 1989) further specifies private property rights as the rights to use or not to use a property, to gain or not to gain economic benefits from it, and to sell or not to sell it. Libecap (1989) adds that it can be a formal arrangement or an informal one. In fact, aside from by person, property rights may also be defined along several non-personal dimensions: by location, time or product or combinations of these (Bose and Blore, 1993).

Property rights, whether de jure, de facto or both, dictate who can actually access and withdraw resources. Access, which can exist in varying degrees, is ‘the right to enter a defined physical property’ while withdrawal is ‘the right to obtain the “products” of a resource’ (Schlager and Ostrom, 1992: 250). In recycling parlance, ‘recover’ is a more common term than ‘withdrawal’ but they have the same sense with respect to obtaining the product which in our case are the recyclables. Besides these ‘operational-level’ rights, Schlager and Ostrom (1992) also stressed the importance of some ‘collective-choice’ property rights which can dictate future ‘operational’ rights arrangement. Of the three, the more relevant for this study are:

Management: ‘the right to regulate internal use patterns and transform the resource by making improvements’. And, Exclusion: ‘the right to determine who will have an access right, and how that right may be transferred’. (Schlager and Ostrom, 1992: 251)

When it comes to rubbish, the treatment becomes slightly more interesting. Intuitively, objects or materials thrown away by their original owners becomes no one’s property. However, when these objects are found to be of some value and interest, we could say that it becomes common property. Cavé (2012) proposed to see solid waste as a common pool resource in order to reconcile the apparent conceptual dichotomy of it being a public nuance to be removed and a resource to be utilised. Moreover, this is also different from communal property (Alchian and Demsetz, 1973), wherein a resource is de jure owned but many have free access to it, such as parks and roads. Another observation is that the rights arrangement changes as rubbish is transferred from one party or location to another. Ambiguity in this respect has caused problems and conflicts, sometimes even violent ones. For instance, there has occured some cases of stealing garbage or intercepting recyclables while in transit (Cavé, 2014; Samson, 2009). The pickers of La Chureca in Nicaragua, in order to stop municipal sanitary operators from intercepting the valuable recyclables before reaching the dumpsite, held a 35-day strike barring waste trucks from entering the dumpsite (Zapata and Campos, 2015). On the other hand, it was legislated in Brazil to give the recoverable waste materials of government buildings to accredited groups of waste pickers in order to generate more income for them (Dias, 2011). From these examples, we see the relevance of location and some form of legal designation for these de jure unowned chattels. Lai and Ho (2016), in dealing with military heritage, suggest a solution to this difficulty by distinguishing the two dimensions of property rights of a given resource. They attributed physical access to de facto access, distinguishing them from de jure status. This slight shift also makes it much easier to deal with the property rights for rubbish or recyclables. Table 1 is a slight adaptation of their treatment, with some examples applying it to rubbish and recyclables. Note that as rubbish is transferred from one location/party the rights arrangement is transformed. For instance, rubbish dumped on the streets and in a bin within one’s backyard have different implications.

Table 1.

A matrix of property rights and physical access to resources in rubbish.

De facto access(physical access)	De jure, legally recognised or enforceable property rights (legal/social rights)
De facto access(physical access)	Common property	Communal and private property rights (individuals/state)
Open access	Rubbish on the streets/public rubbish bin/uncontrolled open dumpsite
Partial access	Rubbish in semi-public space/semi-open dumpsite	Rubbish collected by public dump trucks/Original owner of rubbish gives to picker (but may give it to any other picker if the usual one is not around)
Closed access	Rubbish to be recovered in a landfill/well-secured private vicinity	Rubbish (recyclables) bought/recovered from a recovery facility

When the amount is small, rights arrangements for rubbish may not be a significant social issue. However, as awareness of the economic desirability of recycling and the quantity of rubbish grows, these arrangements start to matter more. Here, we are not romanticising the value of recyclables, whose price is usually less than the original value of the objects discarded. But careful and clear designation of ‘rubbish rights’ can contribute to maximising its potential, especially for the marginalised social groups involved in recovering recyclables. Moreover, even if there seems to be boundless supply of rubbish around, historically, only a finite fraction can be recycled economically or sustainably (Downs and Medina, 2000). This gives rise to some recyclables which are more marketable than others because they are technically easier to process. From this perspective, ‘good quality’ recyclable rubbish can be viewed as a limited resource. The possibility of a ‘tragedy of the commons’ (Hardin, 1968) is therefore likely. In addressing rent dissipation for common property, Hardin (1968: 1245) proposes to enclose the resources and allocate rights of access to them by different means:

We might sell them off as private property. We might keep them as public property, but allocate the right to enter them. The allocation might be on the basis of wealth, by the use of an auction system. It might be on the basis of merit, as defined by some agreed-upon standards. It might be by lottery. Or it might be on a first-come, first-served basis, administered to long queues.

Offhand, these solutions sounds very Coasian. However, in his article’s context, Hardin (1968) appears to limit himself to a simple enclosure solution to exclude or reduce competition which is quite far from what Coase had in mind in his 1959 papers. In principle, the allocation Coase refers to is not just to reduce competitors or curtail labour efforts in exploiting a resource but to create an institutional arrangement lowering transaction cost to some extent for trade and/or innovation (in a real world of positive transaction costs) to occur.

Prelude to the case study

The party in this study are usually referred to as informal waste pickers. Medina (2007) cited many philosophical and practical debates about defining the informal sector in scavenging but this is not the place to discuss them. For our purpose, we limit the informal sector to domains not employed directly by the state or municipal government to carry out recycling retrieval. The informal sector in solid waste management has been recognised in the last decade or so as assuming varied forms (cf. Budlender, 2009). With respect to wastepickers, some work alone while some work in groups by circumstance or choice (Samson, 2009). Its significance in the economic, social and environmental realm has been noted in Romania, Peru, Zambia, South Africa, Egypt, Pakistan, India, Brazil, Philippines (Budlender, 2009; Cavé, 2012, 2014; Chikarmane, 2014; Gunsilius et al., 2011; Samson, 2009). Admittedly, some informal systems of retrieval are unsightly and have room for improvement. However, informal sectors do offer a service in the extraction of recyclables.

There have been some attempts to compare and integrate the informal with the formal in some of the above countries (Bose and Blore, 1993; Samson, 2009). Different models, formats and/or legal frameworks have been applied in India, Brazil and other countries wherein the informal sector has been incorporated into the formal municipal system (Samson, 2009). The conditions vary according to the circumstances and attitudes of the parties involved, presumably ending up in an arrangement which incur the least transaction cost for all parties at that given moment.

As the period under study has understandably turbulent moments, information on those early years, even in official records, are incomplete. Nevertheless, written information about the site and the event are found in various publications. In which case, efforts to collect data from various literatures have been carried out, augmented by interviews with the waste pickers’ leaders.

The Payatas case

Payatas is a 22-ha open dump and home of squatters since the 1970s (Vincentian, 1998). It became the main disposal site of Metro Manila after Smokey Mountain closed in 1995, and was eventually transformed into a controlled dump site in 2004 (Gonzales, 2003). It is composed of two main mounds of waste located in Quezon City, Metro Manila, Philippines. Most of the garbage of the metropolis were deposited there. In 2001, only the immediate vicinity, Quezon City, was allowed to dispose rubbish there. Normally, it receives around 1200 metric tons of municipal waste per day (Bautista, 2007; Jaymalin, 2010).

In July 2000, this open dumpsite experienced a big ‘rubbish avalanche’ or ‘trash slide’, killing at least 278 people (Merry et al., 2005) and leaving several families homeless. This event caused subsequent initiatives from both the government and the non-government sector to aid the residents. In 2001, it was re-assigned to a sublocal government unit, Payatas Operations Group (POG), whose purpose included putting order into the dumpsite and eventually preparing the site for closure.

Under POG, the transformation of Payatas open dumpsite into a controlled dumpsite began in 2001 when the government contracted IPM Environmental Inc. The slopes of the mound were stabilised to an average of 23° to 25° in gradient instead of the previously dangerous 60–70° slope (Bautista, 2007). They also planted vetiver grass along the slope to stabilise it further (Montefrio et al., 2006). The area was also surrounded by a wire fence. The drainage of the rainwater leaching in and out of the mounds was also improved to lessen chances of slides due to heavy rainfall.

One of the persistent problems in the dump was the infighting among the scavengers, who then had unrestricted access to pick recyclable waste on the site. Violence caused by competition among the group of pickers was rampant. The site was open even to very young scavengers as seen in many of the proliferating pictures of Payatas. In order to resolve the problems of violence and inefficiency, some rules have been devised:

The Payatas Operation Group, who works under the Office of the City Mayor, organized the 2,000 waste pickers into 13 associations to better manage them. These associations are not employees of the City and do not receive any wages. They work independently from each other but are required to follow the rules set by the POG. (Jaymalin, 2010: 16 of SWAPP proceedings)

The majority of the associations work during the day time while the rest work at night (Jaymalin, 2010). These associations were not employed but were recognised as legitimate by the city government. Membership was mostly from the pre-existing informal groups already present before the slide (Arilas et al., 2015, personal communication). The new system included the use of IDs which the pickers had to always wear in the picking area. Deadly weapons were also banned from the site. The area was secured by personnel, around half of whom were veteran soldiers. These policing measures are obviously not costless but they further specify the rights (Demsetz, 1964) of the authorised scavengers.

The recovery process is as follows (Jaymalin, 2010): When a loaded garbage truck arrives, it tips the waste into the designated area within the site. The accredited association of waste pickers have 20–30 minutes to sort through the heap to retrieve materials. After that, the waste is bulldozed and compacted into the mound. With this system, children under 14 years are not allowed to pick waste. Parents are highly discouraged from bringing their children to the site.

In 2008, the associations were consolidated into the Payatas Alliance Recycling Exchange Multipurpose Cooperative (PARE-MC) who run the material recovery facility, as the place where they pick out recyclables is called. Aside from the one-time membership fee of Php200.00 or USD5.00, they now also have an option to invest into a capital fund of PhP 2000.00 or USD45.00. Currently, they have 1500 non-regular members (membership fee only) and around 236 regular members who invested in the cooperative (Arilas et al., 2015, personal communication).

Institutional changes

For our purpose, we will compare three periods in the transformation of Payatas in the last two decades. One is the pre-trash slide (pre-POG) period; followed by the initial POG period, and then the establishment of the cooperative. Although the latter two periods are very much related, it would be useful to present them separately to show further developments. Table 2 shows a summary of this development.

Table 2.^a

Institutional changes in Payatas.

Time period	Pre-trash slide/pre-POG (pre-2000)	Start of POG to PARE cooperative (2001–2008)	PARE cooperative (2008–present)
Access regime	Open-access regimeinformal groups	Access restricted to recognised associations	Access restricted to recognised group
Number of groups	Informal groups (~9)	13 associations	One group (with many subgroups)
Number of scavengers	Unsure	~2000	~1800 (regular and non-regular)
Entrance restriction into the dump or material recovery facility	None – Might is right	Must have an ID given by POG of a recognised organisation	ID and uniform. One-time membership fee plus optional capital investment
Amount of recyclables recovered	More quantity	Less – owing to pre-segregation/recovery at source	Less – owing to pre-segregation/recovery at source
Price of recyclables	Less unit price	More than pre-trash slide	More than pre-trash slide
Innovations/undertakings by scavengers	Very little	Examples: makeshift headlights using bulb and battery, kalahig using old umbrellas	Construction of cooperative office with canteen
Violence	Fights rampant	Less	Less
Earnings	More – because more volume then	Less owing to less volume	Less owing to less volume
Other benefits from the new arrangement	N/A	Safety, livelihood training	SSS benefits, livelihood training,Cooperative benefits

Note: ^aThe information in Table 2 was also supplemented from personal communications with Ms Imelda Arilas and others, PARE-MC (2015).

As can be seen before the ‘trash slide’, Payatas was open access and its waste pickers had some form of informal rules. However, the enforcement was weak and no evidence has yet emerged to show that they had been sustainable as in other cases (e.g. prison gangs, in Skarbek, 2011). After the ‘trash slide’ happened, it evoked so much pressure on the government from within and other sectors that they had to take action, leading to the establishment of POG and, eventually, to the designation of scheduled and enforced groupings. This chain of events allowed for a lowering of transaction cost in enforcing the rules among the waste pickers. Later on, the waste pickers themselves further organised themselves into a cooperative.

This transition from the pre-slide to the post-slide period looks analogous to a shift from a partially anarchic protection market (with many ‘protectors’ who forced up the marginal costs of protection) to a more centralised, in fact, monopolised market of decreasing marginal cost of protection (Yu, 1985). The cost of protection was now shifted to the security personnel placed by POG. Whereas physical might of the informal groups in the pre-slide period were given premium, emphasis now shifted to how well-organised a group may be, given the limited amount of time they have and the risk of being evicted by the security personnel. This shows a change in the ‘rules of the game’ they play.

On 26 January 2001 around the same period of the changes in Payatas, a comprehensive environmental law, the Ecological Solid Waste Management Act of 2000, was approved. It became a gradual legal and promotional push for recycling which eventually brought down the amount of recyclable/recoverable materials entering the dump site. As mentioned above, only rubbish from one city was allowed in the dump. With the ambient environmental awareness growing, residents, firms and iterant scavengers have been recycling more outside the dump site even into the post-cooperative period. As the recyclables entering the site are themselves getting fewer and fewer, order and coordination in the waste picker’s work, coupled with ingenuity, becomes more necessary to be able to extract ‘better quality’ recyclables.

Table 3 presents a summary of the bundles of rights that have evolved in the course of the changes. From a largely access and withdrawal rights regime, they gained more enforceable rights to exclude unwanted competitors in the dumpsite and some form of taking turns was developed. Later when the cooperative was established, the scavengers themselves gained more autonomy in deciding the internal use patterns, the choice of who can pick, and to invest money into the group.

Table 3.

Bundles of rights at different stages.

	Pre-trash slide/pre-POG (pre-2000)	Start of POG to PARE cooperative (2001–2008)	PARE cooperative (2008–present)
Access and withdrawal	Violence rampant, weakly enforced informal rules	POG steps in and enforces some basic rules	Cooperative of scavengers themselves takes active role in enforcing rules
Management		Scavengers manage their respective small group with POG	Scavengers themselves (through cooperative) take greater managing role for the whole site
Exclusion		By the respective small association together with POG	By the cooperative together with POG

Source: Adapted from Schlager and Ostrom (1992).

Although the later development cannot be strictly identified as ownership (Schlager and Ostrom, 1992), note how the shift to a more secure access regime (from the upper to the lower boxes of Table 1) has at least enlarged the management and exclusion rights of the pickers themselves. This Coasian delimitation of rights endeavour presupposes that there exist more assurances that personal investments are relatively secure for the enjoyment of the investor, thus promoting market transaction. It lessens some of the uncertainties in these transactions (North, 1995). As of now, this enhancement of capacity is in the form of the cooperative. Even in its humble beginnings, the members have high hopes for their undertaking and they take it as their own (Tulali, 2014).

Post-rights creation/assignment/designation and innovation

The true spirit of the Coase Theorem is not limited to promoting market transactions in a static sense but provides the background for investments and innovations, which shift the production function upwards, granted that the best technology is not given. Yu et al. (2000) also mentioned possibility of value creation through innovation after assuming some form of ‘resource entitlements’. Lai’s (1993) study on marine fish culture shows that the conferring of license rights did not simply constrain rent dissipation but promoted innovations in culture methods and species. Therefore, it could be expected that there might be examples of similar innovations in recyclable recovery that will further enhance the welfare of the people involved.

In the case of Payatas, aside from the ID given by the POG, their respective groups also provided the waste pickers with long-sleeved coloured shirt uniforms. This simple innovation – more difficult to implement in a purely open-access situation – reduced the transaction costs of identifying and metering group outputs; exclusion⁵ and industrial accidents. Home-made tools were also developed to enhance efficiency in working (Conexor and DILG-NCR, 2007). They developed instruments such as bulb-and-battery headlights constructed from scraps and the kalahig – an L-shaped piece of metal used to pick recyclables out of the pile – made out of old umbrellas (Arilas et al., 2015, personal communication).

Furthermore, some firm-like organisation (Coase, 1937) is likely to emerge. The waste pickers consolidated their scarce resources in forms of investments, government aid and contributions to build their small infrastructures such as the cooperative office and canteen. Lately, the cooperative also started buying recyclable tin cans from its members, acting like a junkshop⁶ or consolidator, which can earn higher in the long run (cf. Sia Su, 2007, survey). Plans to expand their operations by purchasing a vehicle and other equipment are also in the pipeline (Tulali, 2014). These initiatives would not have been possible during the earlier violence regime, even if they already had informal groups.

Aside from the external factors mentioned above that have caused a decrease of recyclables entering the current landfill, there were other observable changes in economic behaviour among the waste pickers. In the last five years, POG has also recorded a decrease in recycling rate from 6% to 4%. Although it means less rubbish-recyclables were recovered and more waste is left in the dump site, it is noted that the scavengers have been picking higher-value recyclables in the past few years. Whereas before the POG system, the quantity of recyclables were larger while prices were lower, but around the time of the rights delineation system, the quantity of recyclables has gone down (Jaymalin, 2010) but the unit price for selected ones has gone up (Arilas et al., 2015, personal communication). This form of specialisation shows a lowering of transaction costs for the pickers to trade in certain high-price recyclable markets. If the government would like them to recover a greater variety of rubbish – as needed for the public good – some realignment of the rubbish market must be induced as this would decrease the transaction costs to transact in markets of other types of recyclables. This is beyond the scope of this paper.

Nevertheless, the income of the scavengers is still lower than the pre-slide days. Anecdotally, a pre-slide scavenger could earn as much as USD20 a day, but now one can only get one-third of that on the average (Arilas et al., 2015, personal communication). They augment their income by selling pigswill, used clothes recovered from the dump, umbrella parts and the like. It is fascinating that even with a lower income, the waste pickers still remain and some have even helped to spearhead a cooperative to adapt to the new situation. It is conjectured that the transaction costs to sustain such undertakings and livelihood must be lower than those of shifting to another profession or location. The parties involved must believe that violence is more costly than its benefits (North et al., 2009) and a peaceful option is more sustainable despite lesser financial rewards. That is, the monetary post-trash slide income may have been lower, but the pre-slide income less the cost of fighting, cost of life uncertainties, cost of changing jobs and other factors must still be presumably lower. Energies from different aiding sectors have also been diverted to training scavengers in their finances and other relevant basic knowledge such as health, livelihood, strategic planning (Chiu, 2010; Tulali, 2014).

External interventions/infrastructure

In the course of the analysis, it is observed that simple rights designation is not the only thing that lessens transaction cost, although it was a necessary prelude to it. Behind these innovations, there lies some basic infrastructure or interventions introduced by the state and/or non-government groups whether intentionally or not as a positive externality. The advantage of using an example, such as Payatas, from a developing country is that we know that there is huge budgetary constraint on government provision for effective waste management so that existing practices are likely minimal or even improvised. This scenario is bound to need other conditions for innovations to occur as well as likely to identify what those conditions might be.

An example of such conditions and infrastructure is the safety maintenance of the site described above. These measures may not be on a par with first-world standards but they assure a certain degree of safety for the waste pickers, which lessens enough the transaction cost of possible catastrophes. For innovations to occur, a certain peace of mind must be present.

Other infrastructural inputs involved some basic R&D and collaboration. A biogas-fuelled generator (Mitsubishi Securities, 2004) was installed on the rubbish hill, which provided free electricity for ironing clothes in the vicinity (Bautista, 2007). This centralised ironing facility lessens the expenses of the waste pickers while utilising the by-product of the dump.

Besides these, efforts have been made to collaborate with other agencies and NGOs.⁷ This informal networking with other bodies is proving to be helpful in lessening the cost of marketing their products. The cooperatives and some social entrepreneurs actually facilitate finding the right customer and help find the right price for the recyclable products. Rag2Riches, for example, has lessened the transaction cost of eliminating unfair middlemen, looking for markets, and increasing the market value of products (Tantingco, 2011).

In 2012, through the cooperative and the government social security agency, a micro-saving programme has started to provide the waste pickers some social security. Registered members are asked to drop coins into their designated ‘piggy banks’ when they enter the picking area, which should eventually add up to 312.00 Philippine pesos (around USD7) per month (SSS, 2013) – the monthly contribution required to access government social security, such as health care and a future pension. This amount deposited in their respective ‘piggy banks’ is forwarded to the social security service agency of the government.

Discussion and conclusion

Although, at first glance, the heart of the matter seems to look like a simple enclosure solution paradigm, a closer investigation shows a more Coasian twist in the story. Coase looks at this initial delimitation of rights as a starting point to ‘maximize the value of production’ (1959: 27) through rights rearrangement by consent, if it is worthwhile. Contrast this with Hardin (1968), who thinks some form of private property rights is a lesser evil to commons. But Hardin’s idea of value is not about real growth in value of these resources but by increase per capita value product with the reduction of the heads due to establishing a static exclusive rights regime, which is not the situation in the case study.

The Coase Theorem emphasises the importance of some clarity in rights designation if trade and innovation are to occur with a degree of organisation (i.e. in the presence of a visible hand). The delineation need not be always formal, legal, complete, clear or even permanent. In fact, the full spectrum of operational-level rights may not be present at a given regime, it depends on the actual need of a particular case whether or not value creation occurs (Ostrom and Hess, 2007). The example from the Philippines shows how the designation of groups and specification of picking time and location have, to an extent, helped improve the situations of around 2000 poor scavengers. The resource outcomes were: infighting reduced, effort shifted toward organised security and care for the people. With the subsequent establishment of a cooperative, a certain degree of ‘ownership’ for the activity was promoted, which in turn leads to further developments. Nevertheless, on top of these rights, some external private groups and the state have set up, directly and indirectly, some physical and social infrastructure to reduce further transaction costs to promote trade and basic welfare. It can also be seen that despite a generally lower financial income, the latter regimes must have a lower transaction cost in other aspects for it to sustain and still grow. Uplifting the welfare of the waste pickers to a level more humane and safe has greatly reduced the transaction cost.

There is still room for improvement and innovation that can boost not only the economic aspect of the system but also the personal welfare of the persons involved in this business. Policies or programmes that further link up other private undertakings and these informal sectors can also be fostered. Initiatives such as these would bring down information transaction costs of finding out who needs or collects what type of recyclables for how much. As rational individuals will generally innovate in propitious conditions, the example shows that constraining rent dissipation should not be limited to restricting access to common property.

The case of the Philippines as a developing country with rampant poverty and environmental security issues should be an excellent laboratory of institutional reforms. This paper is merely scraping the surface. Hopefully, this paper will kindle more interest in Coasian enquiry as one perspective to look at the matter of common resource management. Of great theoretical importance is the involvement of some local NGOs as visible hands. They are not part of government or business firms. They are not-for-profit organisations uncommon at a local level at the time Coase wrote his 1959 paper. They are innovative and highly sustainable because they are often bottom-up and observe the principle of subsidiarity, a concept which would surely attract greater academic attention.

Footnotes

Acknowledgements

The author would like to acknowledge Engr L Sabater of POG, Ms Imelda Arilas and associates of PARE-MC, partcipants and faculty in the 2015 Workshop on Institutional Analysis (Hong Kong), Prof. Lawrence WC Lai, Prof Stephen NG Davies, and Ms Justin Chua for their invaluable help and comments on this work. The author would also like to thank the four anonymous referees who have enriched this work with their comments and suggestions. All faults are the author’s.

Author note

This paper was based on a manuscript first presented in a Workshop on Institutional Analysis by the Ronald Coase Institute and the Ronald Coase Centre for Property Rights Research, University of Hong Kong, 10–16 May 2015 in Hong Kong.

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Notes

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