Common Pool Resources and Microcredit: Cooperation and Reciprocity to Achieve Social Justice and Loc

Abstract

Sustainable development will not succeed until economic activity takes into consideration its impact on human well-being and happiness, and on the environment of our planet. Indeed, resource sustainability has become a key issue of a growing concern in relation to capitalism and the global market economy, especially regarding the climate change trends and the depletion of the world’s forest (Timilsina, Kotani and Kamijo, 2017). The sustainability of natural resources is claimed to be endangered worldwide, as many countries are now moving toward more competitive environments. As socio-ecological environments are established to affect human nature, it is necessary to analyse how the ongoing modernization of competitive environments affects natural resource use. For this reason, in the first part of the paper I analysed Elinor Ostrom’s theory that explains how individuals – who are known to face a coordination problem of social dilemmas and a sustainability problem of depletion – are able to self-govern CPRs thanks to interpersonal communications and monitoring. This points to the importance of identifying dynamic socio-ecological factors to enhance self-organization through analysing collective human behaviours rather than imposing top-down rules. Focusing the empirical evidences of the irrigation communities of Huertas in Valencia, analysed by Ostrom, we have demonstrated the importance of a polycentric approach and how local societal network and reciprocity influence cooperation among individuals, ensuring sustainable management of CPRs. Regarding the need of the traditional economy to consider social justice outcomes, the second chapter of the paper describes modern microcredit as an innovative strategy of the past decades - born from the inspiration of the Nobel Prize Yunus taken from Rawls’ “Theory of Justice” - to combine economic efficiency with distributive justice through credit emission in order to promote microenterprise activity. What has been rarely studied is the impact of microcredit mechanisms on communities’ relationship with the local ecosystems. Microcredit acts in fact on marginalized groups of the society, as women, who often have a direct relationship with the natural resources. Besides, it may change the demand of these resources and advance the technology to use them. Describing the situation of deforestation in Vietnam, we can see that microcredit may have a positive impact on CPRs only when it produces social capital. In the last part of the paper, underlining the need for a propensity to cooperate, the concept of Corporate Social Responsibility (CSR) in relations to microcredit, in order to make enterprises obliged to act within certain standards for the environment and the social well-being.

Managing common pool resources (CPRs) under the principle of reciprocity In his classic definitional essay, Paul Samuelson divided goods into two types: Pure private goods and pure public goods (1954, as cited in Ostrom, 2009). The basic division was consistent with the dichotomy of the institutional world into private property exchanges in a market setting and government – owned property organized by a public hierarchy. The people of the world were viewed primarily as consumers or voters.

Buchanan added a third type of good, which he called “club good” (1965, as cited in Ostrom, 2009). Groups of individuals create private associations to provide themselves nonrival but small-scale goods and services that they could enjoy while excluding non-members from participation and consumption of benefits. The last type of good is the common, or using Elinor Ostrom’s words, common pool resources (CPRs).

The basic definition of CPRs widely accepted by the majority of the economists includes the following characteristics:

1. CPRs are rival: a unit used by one user is not available to others;

2. Non-excludability of possible users of the resource;

In order to do understand better common-pool resources we might also bear in mind the difference among the resource system and the flow of resource units produced by the system. Resource systems include fishing grounds, groundwater basins, grazing areas, irrigation canals or bridges; instead resource units are what individuals (herders, fishers, ect...) appropriate or use from resource systems such as the quantity of biological waste absorbed per year by a stream or other waterway. Contrarily to the resource systems, resource units are not subject of joint use or appropriation (Ostrom, 1990). Hence, distinguishing between resource units and resource systems might help to overcome the frequent confusion about the relationship of CPRs to public or collective goods. If appropriation of resource units is more closely related to the theory of private goods, the process of designing, implementing and enforcing a set of rules to coordinate provision activities is equivalent to the provision of local collective good. Reassuming, CPRs appropriators who manage a CPR face some problems that are similar to those of appropriating private goods and other problems that are similar to those of providing public goods.

These goods are gaining nowadays more and more attention for its relationship with environmental degradation, with the emergence of poverty – as many CPRs represent the basic needs for the majority of poor populations in the World – and eventually, as an evidence of the failure of the traditional economic doctrine.

Furthermore, atmospheric GHG sinks, and more in general climate change, are having a tragic effect on common-pool resources. Each natural or man-made resource such as forests, fisheries, water and land play a pivotal role in local livelihood, especially for the poor who rely primarily on common-pool resources. Nowadays, two are the major risks that the CPRs are facing: their depletion – undermining the survival of populations that benefit from the direct management of them – and the inequal distribution between individuals – in other words, the problem of social injustice (Zamagni, 2015, as cited in Sacconi and Ottone). Both the CPRs management and the social justice promotion require absence of free rider behavior in favor of greater cooperation and reciprocity.

Starting from the characteristics of CPRs, as Elinor Ostrom affirms, the benefit that the individual gains from the common usage materializes together with the benefits of the other individuals, instead of against them – as in the case of private goods – or regardless of them – as in the case of a public good. Obviously, the cooperation in the CPRs management needs to be sustained by a strong institutional set up in order to function successfully. Before analyzing Elinor’s Ostrom successful institutions capable to self-govern CPRs, Hardin’s “The Tragedy of Commons” and their possible solutions elaborated from the traditional economy need to be introduced.

Hardin’s “The Tragedy of Commons”

In 1968 Garrett Hardin in an article in Science used for the first time the expression of "the tragedy of commons". In Hardin's point of view the tragedy occurs in a common-pool resource when individuals act rationally in pursuing their own well-being and consequently, the sustainability of the resource is threatened. Since then this expression has symbolized the degradation of the environment to be expected whenever many individuals use a scarce resource in common; much of the world is dependent on resources that are subject to the possibility of tragedy of the commons.

In his own words, studying the situation from a prospective of a rational herder, Hardin suggests that "Each man is locked into a system that compels him to increase his herd without limit in a world that is limited. Ruin is the destination towards all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons".

However, Hardin was not the first to notice the situation of the tragedy of commons, which has a deep heritage of debates. Long time before Hardin, Aristotle observed that "what is common to the greatest number has at the least care bestowed upon him. Everyone thinks chiefly of his own, hardly at all of the common interest" (Ostrom, 1990). Even in Hobbes' thought men seek their own good and end up fighting up one another.

Hardin's model has often been formalized as a prisoner's dilemma game (Dawers, 1973, as cited in Ostrom, 1990), where the players of the game represents herder’s using a common grazing meadow. The prisoner's dilemma game is conceptualized as a non-cooperative game in which all players possess complete information. In non-cooperative games, communication between the players is forbidden or impossible or simply irrelevant as long as it is not explicitly modeled as a part of the game. "Complete information" implies that all players know the full structure of the game tree and the payoffs attached to outcomes.

Source: re-elaboration from “Governing the Commons” (1990).

When both players choose their dominant strategy, they produce an equilibrium that is the third-best result for both. The equilibrium resulting from each player selecting his or her best individual strategy is however, not Pareto-optimal outcome. The paradox that individually rational strategies lead to collectively irrational outcomes seems to challenge a fundamental faith that rational human beings can achieve rational results. Prisoner's Dilemma may suggest that it is impossible for rationale creatures to cooperate (Campbell, 1985, as cited in Ostrom, 1990).

A closely related view of the difficulty of getting individuals to pursue their joint welfare, as contrasted to individual welfare, was developed by Mancur Olson in the book: "The logic of Collective Action: Public Goods and the Theory of Groups". Here he set out the challenge the accepted view that individuals with common interests would voluntarily act so as to try to further those interests. Hence, Olson challenged the presumption that the possibility of a benefit for a group would be sufficient to generate collective action to achieve that benefit. In his point of view individuals might act in their common interest just in case the number of individuals is quite small or there is a form of coercion: otherwise, rational, self-interest individuals will not act to achieve their common or group interests.

To find a solution for the "tragedy of commons" situation, many scholars have advocated the State or market's action. Nevertheless, Elinor Ostrom illustrated alternatives solutions that go beyond states and markets and using an institutional mode of analysis, explained how communities of individuals fashion different ways of governing the commons.

The Leviathan Model

The most common approach to CPRs governance is direct centralization whereby the state is responsible for their management.

"Because of the tragedy of commons, environmental problems cannot be solved through cooperation... and the rationale for government with major coercive powers is overwhelming" (Ophulus, 1973, as cited in Ostrom, 1990). The presumption that an external Leviathan is necessary to avoid tragedies of the commons leads to recommendations that central governments control most natural resource system. Carruthers and Stoner (1981) analyzed problems involved in water resource management in developing countries and came to the conclusion that without public control, "overgrazing and soil erosion of communal pastures, or less fish at high average cost" would result. Indeed, in the last century a lot of emphasis has been put on the role of public control on common property resources in order to obtain economic efficiency. In particular, centralizing the control and regulation of natural resources such as grazing lands, forests and fisheries has been one of the most used policy in developing countries. Modifying the Hardin's herder game with the imposition of the central authority, the solution we find now is the (cooperate; cooperate).

Source: re-elaboration from “Governing the Commons” (1990).

However, the optimal equilibrium achieved by following the advice to centralize control, is based on the assumptions that we are in a situation with perfect information, with zero costs of administration and with the capacity to monitor capabilities and to sanction reliability. If the central agency does not have valid and reliable information, it would make several errors, such as sanctioning herder’s who cooperate or not sanctioning defectors. Hence, if we assume that the central agency has a perfect information about the carrying capacity of the meadow but incomplete information about the particular actions of the herder’s, it might make errors in imposing right punishments.

x= probability of central agency to punish cooperative actions

1-x= probability of central agency to not punish cooperative actions

y= probability of central agency to punish defections

1-y= probability of central agency to not punish defections

Source: re-elaboration from “Governing the Commons” (1990).

Knowing that central agency imposes both types of sanctions correctly with a probability of 0.7 (y=0.7; x-0.3) we obtain:

Source: re-elaboration from “Governing the Commons” (1990).

In this case, the herder face once again the prisoner's dilemma: they will defect rather than cooperate. Moreover, the equilibrium of the regulated game has a lower value than that the unregulated one.

Considering the case of “global commons” – High seas, Atmosphere, Antarctica and Outer Space – the Leviathan Model is way less concrete from its application (Buck, 1998).

The Privatization Model

Another group of policy analysts have seen in privatization, rather than the common property, the only way to the right government of CPRs. Using Smith's words: "by treating a resource as a common property that we become locked in its inexorable destruction". Imposing private properties in the game already illustrated before would mean dividing the meadow in half and assigning one half of the meadow to one herder and the other half to the other herder. Now, each herder would play a game against nature in a small terrain rather than playing a game against the other herder in a larger terrain. Nevertheless, the privatization of the meadow, also of many other CPRs, has at least two different limits: first of all, it works until the meadow is perfectly homogeneous over time in its distribution of available fodder; this is not always possible because of the uncertainty of the environment, which is becoming more and more frequent with climate change's effects. Secondly, in regard to non-stationary resources, such as water and fisheries, it is unclear what the establishment of private rights would mean. Even if a diversity of rights might be established giving individuals’ rights to use particular types of equipment or to use the resource system at a particular time or place, the rescue system is likely to be owned in common rather than be owned individually (Binger and Hoffman, 1989, as cited in Ostrom, 1990). Another problem of transforming an environmental resource in a private good, is the possibility to encounter market failures – monopoly, underestimated negative externalities and informative asymmetries used as a source of profit from the supply side (Musu, as cited in Sacconi and Ottone, 2015).

Furthermore, the market does not satisfy needs, but only solvent preferences (Zamagni, as cited in Sacconi and Ottone, 2015). Hence, not only the privatization model fails to govern these kinds of heterogeneous resources, but also the market is an institution incapable to distinguish between basic needs and superficial desires and, the following asymmetry between the basic need’s supply and demand create a significant reduction of the capabilities – using Amartya Sen’s vocabulary – of the subject economically marginalized. Transforming the commons in commodities, would not resolve the problem, as the tragedy of the Commons, more than a problem of property, is a problem of control. The privatization mechanism would undermine the two fundamental requisites of the commons: equal and free access and absence of discrimination based on the identity or purchase power of the possible appropriator (Sacconi, as cited in Sacconi and Ottone, 2015).

The solution advocated by Elinor Ostrom The assumption that all individuals are fully rational is generally accepted in mainstream economics and game theory. Fully rational individuals – commonly known as homo oeconomicus – are presumed to know all possible strategies available in a particular situation, which outcomes are linked to each strategy given the likely behavior of others in a situation and a rank order for each of these outcomes in terms of the individual’s own preferences as measured by utility (Ostrom, 2009). The rational strategy for such an individual in every situation is to maximize expected utility.

For this reason, both privatization and leviathan model are claimed as the tow possible solutions. They both advocates that institutional change must come from the outside and must be imposed on the individuals affected. Accordingly, external coercion is a frequently cited theoretical solution to the problem of commitment (Shelling, 1984, as cited in Ostrom, 1990).

What Ostrom proposes is to overhaul the idea that there is a single solution for a single problem, in favor of the existence of many solutions that cope with many different problems. Paraphrasing Ostrom, rather than presuming that optimal institutional solutions can be designed easily and imposed at low cost by external authorities, the process should be much more deepened throughout a reliable information about time and place variables and a wide repertoire of culturally acceptable rules. Thus, sharing commons is not always a trap for individuals, but their capacity to extricate themselves from various types of dilemma situations varies from situation to situation. Moreover, institutions are rarely either private or public and many successful CPRs institutions - institutions that enable individuals to achieve productive outcomes and adopt cooperative strategies in situations with free-ride temptations are present- are a wide mixture of both "private-like" and "public-like" institutions.

Game in which herders commit themselves through a binding contract a cooperative strategy within a noncooperative framework:

Source: Re-elaboration of “Governing the commons” (1990);

This game shows various attempts of negotiations in which the only feasible agreement and so the equilibrium, is for both herders to share equally sustainable yield levels of the meadow and the costs of enforcing their agreement.

Anyway, this self-financed contract-enforcement game is not presented as the only solution possible, but as a start point that generates as rich set of alternative applications.

It also raises many different questions, such as establishing if it might be possible for herders to hire a private agent to take on the role of enforcer. Indeed, if parties use a private arbitrator, they do not let the arbitrator impose an agreement on them. The arbitrator simply helps the parties to find methods to resolve disputes that arise within the set of working rules to which the parties themselves have agreed. That mechanism makes it possible for individuals to initiate a long-term arrangement that they could not otherwise undertake. Unlikely the case of the State's intervention, in this case participants design their own contracts in light of the information they have in hand. Moreover, the self-interest of those who negotiated the contract will lead them to monitor each other and to report observed infractions. Therefore, the contract will be enforced, and arbitrators may not need to hide monitors to observe the activities of the parties. On the contrary, a regulatory agency always needs the presence of monitors and by ensuring the monitors to do their own job it might faces the principal-agent problem.

However, the self-financed contract-enforcement institution have many weaknesses too: for instance, each party can overestimate or underestimate the carrying capacity of the CPR and they own monitoring system may break down.

In this case, the self-organized participants rather than solving the commitment problem with an external enforcer, motivate themselves to monitor activities and be willing to impose sanctions to keep conformance high. They indeed create institutions, committed themselves to follow rules and monitor their own conformance to their agreements, as well their conformance to the rules in CPRs situations.

In Ostrom's point of view institutions can be identified as the sets of working rules that are used to determine who is eligible to make decisions in some arena, what actions are allowed or constrained, what aggregation rules will be used, what procedures must be followed, what information must or must not be provided, and what payoffs will be assigned to individuals dependent on their actions. In other words, working rules are common knowledge which has been monitored and enforced. Common knowledge also implies that every participant knows the rules, and know that others know the rules, and know that they also know that the participant knows the rules. Working rules may or may not closely resemble the formal laws that are expressed in legislation, administrative regulations, and court decisions. Indeed, the difference between working rules and formal laws may involve no more than filling in the lacunae left in a general system of law.

Changing institutions and monitoring are indeed fundamental actions for appropriators of CPRs, which presumably face a variety of problems that need to be solved. These problems can be divided into two broad problems: appropriation problems and provision problems (Gardner, 1990, as cited in Ostrom, 1990). Appropriations problems. Appropriations are concerned with the effects that various methods of allocating fixed, or time-independent, quantity of resource units will have on the net return obtained by the appropriators.

Hence, the key problem is how to allocate a fixed, time - independent quantity of resource units in order to reduce uncertainty and conflict over the assignment of rights and to avoid rent dissipation. Rent dissipation can occur whenever many individuals are allowed to appropriate from the resource or to withdraw more than economically optimal quantity of resource units.

A second type of appropriation problem relates to assignment of spatial or temporal access to resource units, which are because of climate change more and more frequently heterogeneous and uncertain. Then, the risks associated with geographic and temporal uncertainty can be very high. Well-enforced rules to allocate time or location of use or the quantity of resource units to specific users can reduce risks still further if the rules are well drafted to fit the physical attributes of the resource system.

Provision problems. Appropriations are concerned about the effects of the various ways of assigning responsibility of building, restoring, or maintaining the resource system over time, as well as the well-being of the appropriators. Provision problems are time-dependent, and they focus on the productive nature of investment in the resource itself. Provision problems may occur on the supply-side, on the demand-side, or on both sides.

The supply-side problems faced in a CPR environment are related to the construction of the resource itself and its maintenance. If construction problems are like any long-term investment in capital infrastructure, maintenance problems involve determining the type and level of regular maintenance that will sustain the resource system over time. In other words, supply-side problems’ provision is similar to the supply-side problems in providing a continuing public good. However, the main difference is that if in a public good situation, appropriation problems do not exist, in a CPR situation, unless appropriation problems are resolved, the provision problem may prove intractable.

Instead, demand-side supply includes regulating withdrawal rates so that they do not adversely affect the resource itself.

Many factors might affect the strategic structure of an appropriation or a provision problem such as the physical structure of a particular CPR, the technology available to the appropriators, the economic environment and the set of rules that affect the incentives that appropriators face.

For this reason, as Oliver suggests (1980), we might conclude that "there is not a right way to model collective action: different model imply different assumptions about the situation and lead to substantively different conclusions". Indeed, multiple levels of analysis are requested, and consequently it is useful distinguishing three levels of rules that cumulatively affect the actions taken and outcomes obtained in using CPRs.

1. Operational rules affect the day-to-day decisions made by appropriators concerning where, when, and how to withdraw resource units or who should monitor the actions of others. At this level of analysis, the processes of appropriation, provision, monitoring, and enforcement has occurred.

2. Collective choice rules directly affect operational choices as they are used by appropriators, their officials, or external authorities in making policies about how a CPR should be managed. At the collective choice level, it is where processes of policy - making, management, and adjudication of policy decisions take place.

3. Constitutional choice rules affect indirectly operational activities and results through their effects in determining who is eligible and determining the specific rules to be used in crafting the set of collective-choice rules that in turn affect the set of the operational rules. At the constitutional level of analysis, we find formulation, governance, adjudication, and modification of constitutional decisions.

In general, institutional-choice rules, which include both constitutional-choice and collective choice situations, affect the rules used in the operational situations. From now on, rather than examining constitutional-choice and collective choice processes separately, we might refer, as Ostrom suggests, to both using the term institutional-choice situation.

However, rules are changed less frequently than are the strategies that individuals adopt within the rules. In fact, as rules provide stability of expectations, changing the rules at any level of analysis will increase the uncertainty that individual will face. Furthermore, we might easily understand that changing operational rules is easier changing institutional rules.

The importance of self-organizing and self-governing individuals trying to cope in field setting is that they might be able to not be stuck in a single-tier world and that the structure of their problems is not given to them.

In order to solve appropriation and organizations problems, individuals must learn about the structure of the physical system on which they jointly rely, about the norms of behavior that are followed in a community, about the incentives they will encourage or discourage as they change rules, and about how all these factors will contribute to affect their net benefits and costs over time.

However, we cannot find the best way for the governance of the commons without considering the historic, anthropologic and cultural conditions (Musu, as cited in Sacconi and Ottone, 2015). For, this reason, Ostrom shows several local empirical evidences, demonstrating that instead of a package of rules, successful institutions are characterized by some regularities that may vary with their local peculiarities.

Ostrom has designed eight key principles through which evaluating the institutional performance of each case, identified by the Institutional Analysis and Development (IAD) framework:

i. Clear boundaries and memberships for the appropriators and the resource domain;

ii. Congruency of operational rules: That means that appropriation rules must be congruent with local conditions and with provision rules, which regulate user inputs for resource maintenance. When the rules related to the distribution of benefits are made consistent with the distribution of costs – resulting in a fair and just system - participants are more willing to pitch in to keep a resource well maintain and sustainable;

iii. Collective-choice arena. It means that individuals affected by a resource regime must be authorised to participate in making and modifying their rules. As environment change over time, being able to craft local rules is particularly important as officials located far away do not know of the change;

iv. Monitoring by the appropriators or by their agents;

v. Graduated sanctions are applied to appropriators who violate operational rules;

vi. Conflict-resolution mechanisms need to be readily available, low cost, and legitimate;

vii. Recognised rights to organize means a minimal recognition by external authorities;

viii. of governance activities organised in multiple layers of nested enterprises, which aggregate institutions within local, regional, and national jurisdictions.

One example of successful institution that demonstrates to have all the seventh characteristics showed above, is the Huerta irrigation institutions situated in Spain – specifically in Valencia, Alicante, Murcia and Orihuela.

‘Huerta’ irrigation institutions in Valencia, Alicante and Murcia and Orihuela

Huertas are well-demarked irrigation areas surrounding or near towns of Valencia, Murcia, Orihuela, and Alicante. They consist mostly of small farmers cultivating up to 1 hectare of land or less. Water supply is scarce, irregular, and sufficient only for about a quarter of land. The huerta has been in use for hundreds of years and receives water from a reservoir, two inter-basin canals, and a local groundwater source (Chakravorty, as cited in Lutz, 1998). The water users association, which runs the irrigation system, owns only part of the water and buys the rest on a regular basis. It allocates water by holding auctions every week in which tickets to a certain amount and duration of water flow are traded. This system allows for scarce water in the huerta to be allocated in its most valued use.

On May 29, 1 435, about years before the residents of Torbel signed their formal articles of association, 84 irrigators served by the Benacher and Faitanar canals in Valencia gathered at the monastery of St. Francis to draw up and approve formal regulations. Those regulations specified who had rights to water from these canals, how the water would be shared in good years as well as bad, how responsibilities for maintenance would be shared, what officials they would elect and how, and what fines would be levied against anyone who broke one of their rules. Thus, for at least 550 years, and probably for close to 1 ,000 years, farmers have continued to meet with others sharing the same canals for the purpose of specifying and revising the rules that they use, selecting officials, and determining fines and assessments. Given the limited quantity of rain fall throughout this semiarid region and the extreme variation in rainfall from year to year, its highly developed agriculture would not have been possible without irrigation works bringing water to the farmers' fields. Water was never abundant in this region, not even after major canals were constructed. Given the high stakes, conflict over water has always been just beneath the surface of everyday life, erupting from time to time in fights between the irrigators themselves, between irrigators and their own officials, and between groups of irrigators living in the lower reaches of the water systems and their upstream neighbours (Ostrom, 1990). Despite this high potential for conflict - and its actual realization from time to time - the institutions devised many centuries ago for governing the use of water from these rivers have proved adequate for resolving conflicts , allocating water predictably, and ensuring stability in a region not normally associated 'with high levels of stability.

The right to water in the Valencia irrigation systems

Near the city of Valencia, the waters of the Turia River arc divided into eight major canals serving the 16.000-hectare huerta. The farms in Valencia have always been small, but they have become extremely fragmented during the past century. Over 80% of the farms are less than 1 hectare, and few exceed 5 hectares (Maass and Anderson 1986, p.11, as cited in Ostrom, 1990). Most winters arc frost-free, and the summers are hot and sunny. Farmers are able to harvest two or three crops each year and concentrate largely on potatoes, onions, and a wide diversity of vegetable crops. Each farmer is free to select the cropping patterns he prefers. Given the low rainfall in Valencia itself, the extensive agriculture of this region would not have been possible without effective use of the Turia River. Some groundwater has been developed in the region to supplement the river's supply, but this has never been a major factor in the supply of irrigation water. In effect, as Elinor Ostrom affirms in “Governing the Commons”:

“In Valencia, the right to water inheres in the land itself. Land that was watered before the time of the reconquest is specified as irrigated land – regadiu -, and the remaining lands in these huertas are dry lands – or seca. Some land is entitled to water only in times of abundance (extremales). The basic allocation principle in Valencia is that each pice of regadiu land is entitled to a quantity of canal water proportionate to its size” (1990, p. 71).

In Valencia, the irrigators from seven of the major canals are organized into autonomous irrigation communities whose syndic, or chief executive, participates in two weekly tribunals. The ‘Tribunal de las Aguas’ is a water court that has for centuries met on Thursday mornings outside the Apostles' Door of the Cathedral of Valencia. A presiding officer ql1estions those who are involved in a dispute and others who may be able to provide additional information, and the members of the COU", excluding the syndic whose canal is involved, make an immediate decision regarding the facts of the case in light of the specific rules of the particular canal. Fines and damages are assessed consistent with the rules of the particular canal. The final decisions of the court are recorded, hut not the proceedings. After the court session, the syndics may also convene a second tribunal, which serves as a coordinating committee encompassing all seven of the canals to determine when to institute operating procedures related to seasonal low waters or to discuss other intercanal problems. Besides his role in the two tribunals, the syndic is the executive officer of the individual irrigation unit. His responsibilities include the basic enforcement of the regulations of his own unit. He has the power to make authoritative physical allocations of water when disputes arise in the day-to-day administration of the waterworks, to levy fines, and to determine the order and timing of water deliveries during times of severe shortages. The farmers (hereters) who own lands eligible to receive water from each of these seven canals meet every second or third year to elect the syndic and several other officials for their canal. The hereters elect an executive committee (junta de gobierno) to consult with the syndic until the next biannual meeting. The executive committee is composed of delegates from all of the canals’ major service areas. Decisions about when to shut down the canals for annual maintenance and how the maintenance work will be organized are made by the members of this committee of irrigators. The basic rules for allocating water are dependent on the decisions made by the officials of the irrigation community concerning three environmental conditions:

• Abundance. In years of declared abundance - a relatively infrequent event - farmers are allowed to take as such water as they need whenever water is present in the canal serving their land.

• Seasonal low water. This represent the most common condition and water is distributed to specific farmers through a complex, rule-driven hydraulic system. Each distributory canal is positioned in a rotation scheme in relation to the other distributory canals. Each farm on a distributory canal receives water in a set rotation order, starting from the head of the canal and culminating in the tail end of the canal. Consequendy, no irrigator can tell exactly when his turn will come, because that depends on the volume of water in the canal and the quantity needed by those ahead of him. On the other hand, each irrigator knows that he can take as much water as he needs when his turn eventually comes.

• And extraordinary drought. During these periods, these procedures arc modified so that farms whose crops arc in the most need of water arc given priority over farms whose crops require less water. At the beginning of a drought period, the farmers themselves are expected to apply water only to those crops in most need to shorten their turns in order to allow other farmers in need to obtain the scarce water. As a drought period continues, the syndic and his representatives take more and more responsibility for determining how long each farmer may have water, in light of the condition of the farmer's crops and the needs of others. These switching regime when environmental conditions change.

The level of monitoring that is used in the huertas is very high. In this environment of water scarcity and risk, many temptations occur to take water out of run, or in some way obtain illegal water. Challenges to the actions of a syndic, a ditch-rider, or another irrigator can be aired weekly before the Tribunal de las Aguas. Given that everyone is watching everyone else, there is considerable potential for violence among irrigators and between irrigators and their agents, but the actual violence never approached the potential.

The sanctioning mechanisms were described in The books of fines, which also reveal that even though the syndic received two-thirds of the fine (the other third going to the accuser) and the authorized levels for fines were set high, the actual fines assessed "were very low (a few pennies at the most) and also variable, depending on the gravity of the offense, on general economic conditions, and probably on the individual's ability to pay” (Glick, 1970, p. 56, as cited in Ostrom, 1990, p. 75). This introduced some flexibility into the relatively rigid rotation systems.

Eventually, properly functioning irrigation systems had allocated scarce supplies to their most valued use and ensured a fair and just water redistribution. Besides, they also improved the efficiency of water in the agricultural sector (Chakravorty, as cited in Lutz, 1998).

Today, traditional Mediterranean Huertas are experiencing a decline of production activities combined with a crisis of small-scale farming. The increase of abandoned land and new land uses, including leisure, gardening and self-production, are replacing what once was cultivated land. Farming activities have to compete with urbanization so their future is very uncertain. The degree of environmental degradation is considerable and the types of contamination are countless. Uncontrolled urban and industrial waste dumping sites abound both in the Huertas of Valencia and Murcia. The salinization of farmland, the decrease of water quality and the pollution of underground waters have been recurrent for several decades. Changes in land use and structure of settlements have triggered the lack of protection of agriculture and water heritage (Romero and Melo, 2015).

The necessity to changing institutions and introduction to polycentrism

Analyzing an alternative solution for the CPRs governance, does not mean that the Leviathan and the privatization models are wrong. Instead of being wrong, these are special models that utilize extreme assumptions rather than general theories. These models can successfully predict strategies and outcomes in fixed situations approximating the initial conditions of the models, but they cannot predict outcomes outside the range. They are useful for predicting behavior in large-scale CPRs in which no one communicates, everyone acts independently, no attention is paid to the effects of one's actions, and the costs of trying to change the structure of the situation are high; they are far less useful for characterizing the behavior of appropriators in the smaller-scale CPRs that are been discussed in this inquiry. It is important to underline that the models of the firm and the state explain what individual will do when they are in a situation that they cannot change; but they are not able to explain what individuals will do when they have autonomy to craft their own institutions and can affect each other's norm and perceived benefits (Ostrom, 1990).

In many circumstances however, it is impossible to exclude both the public and the private sector from their intervention on local realities. Perhaps, it is possible to take inspiration from the behavioral mechanisms based on cooperation and reciprocity described by Ostrom to foresee a diverse role interpreted by the two sectors.

For this regard, the concept of polycentrism may be introduced. The concept of polycentrism as a system of governance was elaborated for the first time by Vincent and Elinor Ostrom and it assumes the existence of different decision-making centres which are formally independent of each other.

Vincent Ostrom defined polycentric order as a "one where many elements are capable of making mutual adjustments for ordering their relationships with one another within a general system of rules where each element acts with independence of other elements" (1999, as cited in Ostrom, 2009).

A polycentric system consists of different players, both public and private, state and non-state, acting on different levels and scales (Ostrom, 2005). It is a decentralized and bottom-up approach, in which interaction between the players can often ensure successful cooperation and alleviate the problem of free-riding (Nowak, 2017).

Vincent Ostrom, Charles Tiebot, and Robert Warren wrote in an article in 1961 entitled "the Organisation of Government in Metropolitan Areas: A Theoretical Inquiry" in which the authors wanted to make scholars aware that a simple dichotomy between the market and the government was not a good scientific approach to the study of public economies. On one hand the authors urged readers to think of the public sector as a polycentric system rather than a monocentric hierarchy; On the other hand, they underlined that the expected efficiency of a market disappears if it is consolidated into a monopoly. The market has to be composed of many different types of firms: Not only of medium and large scale, but even small-scale firms are necessary for the promotion and maintenance of the local environment. As the polycentric development, together with the ‘sustainable and balanced development’ and the ‘social and economic cohesion’, is surely within the solidaristic economic model – which is opposed to the Neoliberal economic model. The latter is a monocentric model, against the nature and the most vulnerable people in the society, which responds to the needs of the strongest enterprises. The other model privileges actions that are horizontal and bottom-up, involving more actors and paying particular attention not only to the economic but also to the social, cultural and political consequences (Gallina and Villadsen, as cited in Villadsen, 2007).

One strategy that has become popular in the past decades as a form of solidaristic economy is the microcredit scheme for poor people

Introducing Microcredit: Cooperation and reciprocity in the private sector

Coase’s Theorem: Efficiency and Fairness in the market

Neo classical economics takes the institutional context as given and irrelevant, starting from the assumption that the market’s functioning is perfect. However, we have just seen how the empirical evidences showed by Ostrom, self-governance of CPRs is possible as a consequence of well-functioning institutions that – even though informal – reduce significantly transaction costs and information asymmetries. For scholars as Coase, the market and the firm are institutions and as such are the focus of the analysis since their functioning induce transaction costs for economic agents. Coase’s thesis was not to deny that economic policy could impose duties to emend market failures, but he suggests of analysing all transaction costs associated to any institutional arrangement, and hence both the costs associated to intervention and inaction of government; finally to find out the less costly way for internalizing externalities.

If transactions costs are non-existent - concerning the exchange of goods and property rights - then the market reaches the efficient final allocation of goods. Hence efficiency problems and fairness problems can be separated: the initial allocation may be unfair but nevertheless an efficient Pareto Optimal allocation can be obtained, while unfairness remains unredeemed. In fact, social efficiency does not require as a condition perfect competition, but simply the absence of transaction costs of the market and the possibility of contracting without bargaining costs. The theorem calls our attention to the importance of institutional design in order to obtain at the same time fairness and efficiency – and thus the possibility of a mutual improvement over the starting point established by rights. Nonetheless, if it were the efficient mechanism, we would not need these institutions. Collective choice model - before the market - of constitutional type is needed. Furthermore, the indifference regarding the fairness of the economics functioning expressed by this Theorem, might arise several critics. For instance, the economist Richard Thaler highlights the importance of behavioural economics in explaining the inability to effectively use the Coase Theorem in practice. Because of the endowment effect, the initial allocation of property rights will determine the final allocation of resources even if there are no transaction costs and the valuations are too small for income effects to matter. People were more likely to be concerned with ensuring fairness in negotiations when negotiating over their own tangible property rather than in an abstract sense. This suggests that in practice, people would not be willing to accept the efficient outcomes prescribed by the Coasean bargaining if they deem them to be unfair. While our decisions are often guided by self-interest, we also care about fairness and equity (The Royal Swedish Academy of Sciences, 2017).

As a matter of fact, microcredit schemes have been having a lot of success worldwide because of their capacity to reach distributive justice without ignoring economic growth.

The origin and inspiration from Rawls’ Theory of Justice and the basic functioning of Microcredit

Microcredit has as a primary purpose the social inclusion of poor people, sacrificing its own profits but not excluding the economic sustainability. Hence, it promotes the access to the credit by all the individuals without any collateral – which is not normally considered sustainable and efficient by the traditional financial system (Becchetti, 2008). Microcredit is an example of a successful institution capable of:

• Mobilise directly the resources of small savers, who are more willing to accept a reduction of private returns in exchange of the satisfaction of financing projects with high social value;

• Demonstrate that it is possible to promote social justice beyond the traditional philanthropic initiatives based on the provision of grants; Besides, contrarily of philanthropic initiatives, it may ensure the reintegration into the society of its clients and help them breaking out of the cycle of poverty though micro-credit loans (Noruwa, 2014).

Microcredit in just one of the mechanisms that functions inside the wider concept of Microfinance, in which is included other services as liquidity, collections and payments management or the use of credit cards. Microfinance Institutions (MFIs) seeks to facilitate better living for its staff and clients while making good returns for its shareholders. This is commonly referred to as the “Double Bottom-Line” approach to microfinance (Noruwa, 2014).

During the half of the 70s, Muhammad Yunus, a young economy professor, after concluding his studies in USA, came back to teach at the University of Chittagong, in his country of origin, Bangladesh. He studied the opposite poles of the economic thinking: Bentham’s utilitarianism – that sees the wealth of the society as a sum od individuals’ “happiness” - and Rawls’ theory of justice – which on the contrary the wealth of the society coincide with the state of the individual less happy – thus, usually with less financial capacity. Rawls proposed the ‘sense of justice’ as a solution for the stability problem of a well-ordered society, which is chosen by the individuals under a ‘veil of ignorance’ (Sacconi, as cited in Sacconi and Degli Antoni, 2011). Justice understood as fairness would provide a great stability of just institutions. Obviously, reciprocity represents the key for the development of this sense of justice within societies. Using Rawls’ words “the sense of justice arises from the manifest intention of other persons to act for our good” (Rawls, as cited in Sacconi and Degli Antoni, 2011). Yunus was inspired widely by Rawls’ theory, as it was more focused on the inequalities in the society (Becchetti, 2008). Besides, he started to realise that the trickle down mechanism believed by the majority of the economists, was not always functioning properly. Not always the economic growth would promote indirectly the wealth of the poorer. Sometimes, some special institutions need to work with this aim. Following Rawls’ Theory of Justice doctrine, he believed that social justice – a moral sentiment based on the attitude of reciprocity between the parties of a society - should have included not only the achievement of civil and political liberties, but also the promotion of fundamental institutions aimed at guaranteeing equal opportunities, independent from any social conditioning, and the acceptance of social and economic inequalities only insofar as they are in the best advantage of the mostly disadvantaged parties.

Yunus started the project giving his money as a guarantor of the sum lent. The first project was initiated in the small village of Yobra in the period 1976-79 and showed successful results. Part of the success was related to the fact that the clients always giving back the money for a matter of honour. Especially women, showed highest return rates. The project started to spread in the region, and in 1983 it became an independent Bank. After 2013, the Bank became under control of the Central Bank.

Today there are five different forms of Microcredit:

1. Traditional informal microcredit. This type of microcredit existed long before the example of the Grameen Bank and it included the existence of local moneylenders, pawnshop, friends and family loans and consumer loans in the informal market. In the case of mechanism, there is a substantial reduction of the informative gap between the moneylender and the client. Being the local moneylender is not the only economic relationship that he has with its clients, and as a result, he can decide to give loans to the client even in case the latter does not have any asset guarantee. However, the local moneylender can detain a position of monopoly, raising his bergaining power. Besides, the mechanism has two further limits: it does not promote the social emancipation of the clients, as they may occur in cases of slavery in case of failure of recover loans; Then, it usually lend money for consumers, not for microenterprises that may emancipate the local client and increase the local development.

2. Group loans in the credit informal market. This mechanism has a deep tradition in the Global South. An example is the Tontine mechanism, which are funds created voluntarily by a group. Once a member of the group die, his resources increase the return of the members.

3. Loans of small dimension provided by traditional Banks – usually specialised in specific sector of investments as in agriculture.

4. Credit institutions – as Credit Unions or savings Banks. These institutions are committed also at financing small/medium enterprises. However, in order to access to the loans, clients have to prove their asset guarantees.

In these two last cases 3) and 4), the equilibrium situation between costs and revenues is the following;

P*X*(1+r) + (1-P)*G = C + X

Revenues Costs

X = amount of capital requested by the client for the investment of a risky project;

P = probability of success of the project;

1-P = probability of non-success of the project;

C = costs internal to the Bank;

1+r = interests accrued;

G = capital guarantees of the debtor;

Considering the amount of the guarantees equal to the lending money plus the interests, the Bank does not incur in any risk and the equilibrium condition would result: X*r = C.

Modern Microcredit. It can be defined:

“Small loans, finalised especially for in the investments, rather than for the consumer credits, to individuals or to microenterprises, usually without any capital guarantees; Microcredit uses alternative forms of guarantees”. (Becchetti, 2008).

In this case, the situation of equilibrium would be:

P*Xp*(1+r) = C+Xp

Differences; in case of failure of the project, the Bank does not obtain anything; The loans are usually small; And the lowest interest rate, in the case of 1.000 loan, 80% of the project success and 200 euro the costs of the bank, would be of 50%. In case of group loans with joint liability would reduce to 25%. Nonetheless, the latter lack of efficiency in cases where an event can cause damages to all the projects of the group’s debtors, as in cases of meteorological shocks.

The successful strategy adopted by microcredit is the so-called ‘Ikea Model’. Ikea, giving part of the costs of the service to the clients – who has to assemble the furniture, increase aggregate demand; The model, based on the psychology of their clients, understands that for the consumers become a pleasure rather than a sacrifice to assemble their own furniture. In the same way, the strategies used by the microfinance institutions, try to include their own clients in the management of the projects and in the monitoring operations. As a consequence, the ‘asymmetric information’ is reduced without asking capital guarantees.

In the credit market, the potential debtor usually detains a major informational advantage. The Bank has in fact to deal with the adverse selection before the loan concession; the moral hazard when the loan is given; the strategic failure adopted by the client after the investment project is ended in order to not give back the dept. In order to overcome these limits, microfinance institutions have been adopting several different strategies as making the debtor also the depositor or/and the shareholder of the Bank. The integration of the two dimensions have been guaranteeing the reduction of individualistic behaviours. Microcredit was able to consider other variables – in addition to capital and labour - that help to the success of a productive activity: values, relations and symbolic processes. In particular, it has been giving attention to dimensions as trust, proximity to the local reality, dignity and interpersonal and professional relationships.

Even though the microcredit mechanism results in weak capital efficiency, it has important role in the social inclusion and realisation of pair opportunity and social justice. Furthermore, if efficient in the long run and widespread, the phenomenon can also take towards the economic development of the country – as in the Grameen Bank case, that has contributed to the increase of the GDP of more than 1% in Bangladesh.

Some of the potential explanations that have been proposed to account for the high rate of repayment experienced by many MFIs. The first important mechanism that may affect borrowers’ behaviour is group lending and joint liability. In fact, it produces self-selection of trustworthy members and administrative and transaction costs are reduced. Secondly, reputation within members of a community plays an important role as well. If a good reputation is a prerequisite for re-financing, a borrower will be willing to forgo short-run profits in order to obtain higher profits in the long run (Pelligra, as cited in Sacconi and Degli Antoni, 2011).

Eventually, as an economic institution ‘inside the system’, it needs to take into consideration the non-economic consequences of the economic choices. The majority of the economists still give great part of the attention to the materialistic consequences – both economic development and/or inequalities and poverty. Very less importance is given to the public happiness and to the environmental sustainability.

Social Justice, Microcredit and common pool resources (CPRs)

Despite the significant interest and financial support microcredit has received, and loan recipients who make at least part of their living by exploiting their local CPRs, very little has been written exploring microcredit’s effects on these resources (Anderson, Locker and Nugent, 2000). This effect is particular important, as it underline the interconnection between the microcredit’s primary goal – social justice and emancipation – and environmental protection – especially regarding the management of local CPRs.

In a paper of 2000, it has been highlighted how microcredit programs may affect the sustainable use of CPRs, by creating physical, human and social capital. First, microcredit programs often focus on women, who are the primary users of CPRs in many developing countries. Second, microcredit extends credit to the very poor to promote microenterprise activity, which may increase production and consumption activities and in turn may change the demand for CPRs and the technology for their use. At the same time, microcredit can positively affect the management of these resources. In fact, microcredit often employs group meetings and group lending techniques, enabling the capacity to communicate and to develop trust, and thus building human capital and strengthening the social capital of the community. This social capital can lower the costs of collective action in managing local CPRs, helping to solve the complexity of the commons.

Microcredit techniques: Strengthening CPRs management or weakening environmental sustainability?

There are few examples of financial Microfinance organizations (MFOs) that explicitly tie environmental management of lending, through environmental practices often appear in the members’ conditions of lending. In large part this may due to the precedent set by the Grameen bank in their 16 conditions that borrowers are encouraged to adopt.

“… we will keep our children and the environment clean, we will build and use pit-latrines, during the plantation seasons, we will plant as many seedlings as possible” (Khandker, Khalily and Khan, 1995).

Besides, microcredit and environment are often coupled within conservation NGOs or development NGOs with a conservation agenda. For example, Thailand’s Population and development International (PDI), is trying to discourage deforestation in the Western Forest Complex along the Myanmar border using microcredit to promote alternative, resource sustainable, livelihoods, such as more soil friendly and organic crops, harvesting non-timber forest products, and aquaculture. In Bangladesh, the research organization UBINIG is helping farmers in the Tangail district reduce their dependence on pesticides, begin composting for fertilizer, and practice mixed cropping aided by seed banks. There is also a small, but growing group of MFOs and microenterprises concerned with producing ‘green’ products and technologies. For instance, Grameen Shakti is dedicated to providing renewable energy sources, such as solar photovoltaics (PV), biogas, and wind turbines to villages in Bangladesh that are without electricity. Likewise, the Solar Based Rural Electrification Concept (SO-BASEC) in the Dominican Republic and Honduras uses microcredit to promote solar-based renewable energy.

Implications of increased levels of physical capital on the environment

However, Green MFOs appear to be a minority. At the same time, microcredit activities change behaviors that have implications on their sustainable use of CPRs. It affects environmental and CPRs thought financial, human and social capital changes in the levels, diversity, or regularity of borrowers’ income and increase levels of physical capital. Credit allows microenterprises to invest in small-scale capital such as sewing machines, loom, bicycles, livestock, tools and other supplies. These investments allow the borrower to produce goods and services otherwise not possible. Changes in their discount rate between present and future consumption, afforded by increased income have both negative and positive effects: On one hand it may generate more toxic waste (Dasgupta and Maler, 1994, as cited in Anderson, Locker and Nugent, 2000); On the other hand, rising incomes tend to be correlated with improved household infrastructure including sanitation and cooking facilities, access to safe drinking water. The resource use in production tends to change as well. Especially for rural, biomass-based subsistence economies, growth involves either intensification of agriculture, extensification of agriculture, or new rural non-farm activity including resource extraction. Some of these activities change environmental resource use directly, others in terms of property rights and ownership, and others in the use of labor, capital or technology that complement or substitute for natural resource inputs. There will be an increased willingness to use organic fertilizers and pesticides and techniques such as integrated pest management that can reduce both the demand on common pool water resources and the toxins reducing the quality of these resources.

Women’s empowerment and their intimate relationship with local ecosystems

Microcredit plays also an important role in human capital creation, with a focus on women. Women are reputed to be better credit risks with higher payback rates, easier to discipline, more inclined to use income they control for improving children’s nutrition and education, and they possess more unrealized entrepreneurial capacity. Nonetheless, increases in income and property rights for women attributable to microcredit will have environmental consequences too. Women often gain knowledge and sophisticated appreciation of local ecosystems through their daily work. This is the key to understand the intimate relationship between the local ecosystems and environmental resources. They suffer the most, therefore, from deforestation and desertification, and have a particular incentive to maintain or improve their local environment and CPRs. This incentive has translated into some of the most creative conservation initiatives worldwide and MFOs can facilitate and strengthen these initiatives. But the women’s empowerment frequently leads to a more reduced fertility, whose implications remain unambiguous. If fewer children mean less resource consumption and less waste, per capita consumption usually tend to arise. Hence, the net effect also depends on how activities’ composition changes, not simply the level.

Microcredit’s positive implications of social capital in the collective action

Another outcome of microcredit is the production of social capital and reduction in the cost of collective action – thanks to lower information and transaction costs - for managing other environmental resources. Microcredit creates in fact social capital through its group lending techniques and through meeting and other services that allow to invest in education and training members of the community can acquire skills that would allow them to locally design, develop and manage community projects (Schrieder, 1999, as cited in Anderson, 2000). As Ostrom and others have noted, it takes effort and energy to create social capital and microfinance mechanisms can lower the costs of monitoring and enforcing existing rules and norms, and also the costs of crafting new rules, investing in social capital and adding further incentives for cooperation. Microfinance meetings would per se help to determine collective choice rules, as much as they would be used to monitor and amend the day-today operational rules governing CPR use (1994, as cited in Anderson, 2000).

The empirical evidence in Vietnam as a positive example of microcredit’s impact in CPRs

In Vietnam, over one third of the total population depends upon the forests for survival. In the past decades, deforestation has been causing many ecological damages. However, it has made strides in reversing rapid forest loss through afforestation and regeneration efforts in recent years. Over the last two decades, the Government of Vietnam, through a policy of Forest Land Allocation (FLA) and Forest Allocation (FA), has transferred forest management to households and local communities in order to improve sustainable forest management and alleviate poverty (EU REDD Facility and CERDA, 2016). Making productive use of forest will motivate them to use and manage the land more carefully and sustainably. Unfortunately, the implementation of FLA/FA has been less successful than anticipated in the remote uplands of Vietnam, which are the most forested regions. The Centre of Research and Development in Upland Areas (CERDA) and the EU REDD Facility conducted a pilot intervention to demonstrate how a collective action approach to forest protection could overcome challenges associated with Forest Land Allocation (FLA) and Forest Allocation (FA) in upland regions in Vietnam. Incentives have been created for communities to engage in forest protection efforts including a revolving fund for microcredit tied to performance and creating greater social capital through the cooperative governance structures.

In Vietnam, the use of microcredit did not really become popularized until the institutionalization of Doi Moi, a shift from a state planned economy to market liberalization instituted by the Vietnamese government at the end of the 1980s. In this scenario, the demand for credit rose sharply as individual farmers found themselves in need of money for inputs previously supplied by the collective. This tendency has been existent in many other countries in the world that have been opening to neo-liberalism since the 1980s. Like other countries, Vietnam represents an example of the struggle to balance economic liberalization and privatization, a growing population with food, fuel and also social needs with the need to protect its biodiversity and environment.

In order to meet this demand for rural credit, the Bank of Agriculture (VBA) was established, and in 1995, the Bank of the Poor (VBP) was created as a non-profit branch of the VBA to set up to target poorer clients (Anderson, 2000). For the latter, no collateral is needed and loans average US$96. While it is too early to offer evaluations of MFOs in Vietnam who consciously draw upon and expand their community’s social capital to promote sustainable use of CPRs, it is possible to provide only an example of a MFO which was unsuccessful in its reforestation project: The 1990 ‘Mangrove Planting Project’ piloted by the Save the Children Foundation. Families in the program received an area of land to plant and maintain and funds for these functions for a period of six years. Although in the mandate a need for a participatory approach was included, clients felt excluded from the decision-making process, women were marginalised, and people felt disassociated with the environmental projects of which they were supposed to act as stewards. The projects failed as the appropriators of the CPRs were not authorised to design the project and graduated punishments to transgressors were not provided. Summarizing, the project was not able to contribute to the formation of the social and human capital of the village.

Corporate social responsibility: The new approach of microcredit to minimise the environmental cost

In recent years, increasing attention has been paid to trust, trustworthiness and social norms of reciprocity and cooperation as key factors in socio-economic development. Both the concept of social capital and corporate social responsibility (CSR) refer to these elements (Degli Antoni and Sacconi, 2011).

Bourdieu defines social capital as “the aggregate of the actual or potential resources which ate linked to possession of a durable network of more or less institutionalised relationships of mutual acquaintance and recognition which provides each of its members with the backing of the collectivity-owned capital, a credential which entitles them to credit” (1986, as cited in Sacconi and Degli Antoni, 2011). We have already seen how social capital represents a crucial element for both a sustainable use of the commons elaborated by Ostrom and to limit the environmental consequences of the economic activity started by the microcredit mechanisms. As SC has been widely used to analyse how interpersonal relations affect economic activity by favouring the propensity to cooperate. This definition has been used to the notion of CSR. In fact, the accumulation of corporate social capital may be becoming an important asset for corporations to survive economic competition at a time of gradual transition in environmental property rights arrangements (Aoki, as cited in Sacconi and degli Antoni, 2011). In this scenario, microcredit detains all the benefits to invest in CSR programmes in terms of inequalities reduction and also financial performance (Agbeko, Blok, 2017).

As we described above, microcredit facilitates the development, growth and sustenance of micro/small enterprises whose activities directly or indirectly impact negatively on the environment. We know that specific microcredit institutions that explicitly works with a green purpose or that strengthen the human and social capital of the community, enable positive implications on the environment. However, the traditional approach of microcredit still focuses way more on social justice and economic distribution rather than on its impact on our ecosystems. Consequently, nowadays microenterprises cumulatively contribute significantly to environment pollutions and degradation.

The new role of microcredit is indeed to minimize environmental cost together with their effort to fight poverty and enhance the living standards of their target clients. The new strategy to achieve that aim is using the ‘Triple Bottom’ approach - which means making MFIs and their clients socially responsible in terms of social mission, profit motive and environmental consideration (Charan, 2011, as cited in Noruwa, 2014). From this necessity to look forward the three dimensions of sustainability, we may understand the emphasis to include the concept of CSR in MFIs. In order to analyse better the mutual relationship between microcredit and CSR, I shall provide a definition of the latter.

EU Commission defines CSR as a “concept whereby companies integrate social and environmental concerns in their business operations and their interaction with their stakeholders on a voluntary basis” (Crowther & Aras, as cited in Noruwa, 2014). In light of this definition, the initiatives which an MFI can incorporate in their programs could include the provision of health insurance loan at a very affordable process, educational products or educating clients on why and how to protect their environment like avoiding environmental pollutions, proper methods of waste disposals, etc.

In other words, enterprises that obtain credit from these institutions are obliged to consider its actions’ implications on the environment and on the social well-being.

The incentives for a new sustainable and just society are given to the private sector have been raising recently, especially since the recent new attention of the masses to the climate change issues. This new trend is changing the standard of reputation for the private entities, which usually raises proportionally with their sustainable impacts.

It has been demonstrated also with the so called ‘psychological game’ played by the firm E and its strong stakeholder S endowed with the cognitive social capital that we associate with the concept of conformist preferences (Sacconi and Degli Antoni, 2011). This game assumes that players’ payoffs are defined in terms of psychological utility functions. This model of conformist preferences is based on the idea that agents are motivated not only by material incentives, but also by the desire to conform with some ideal principle, which in the original model is a normative principle of welfare distribution, given the players’ belief in others players’ conformity. The utility function would be:

Vi = Ui (σ) + λiF [T(σ)] agent’s ideal utility and represents conformist preferences

reflecting his concern for reasons to act different from the

traditional consequentialist ones;

Material utility obtained by agent i in state σ;

T= idea principle on which agents agree in a pre-play communication stage under the ‘veil of ignorance’. It represents the agreed criterion of fair distribution among all the players, which is given by the Nash bargaining solution or social welfare function (1950). It is an endogenous variable determined by the players’ interaction;

σ = social state of affairs

λi= a component of the cognitive social capital – which the agent inherits from the social environment - defined in terms of generic disposition to conform with shared or agreed social norms. The higher the parameter is, the more the agent will be disposed to conform to with the principle T. It is a contextual variable that affects the magnitude or motivational force of conformist reasons to act as they are represented by the functional F of the principle T.

F= the effects of ideal utility of beliefs about the degree of reciprocal conformity with the ideal exhibited by the agent him/herself and other agents.

Hence, the agents will evaluate strategy combinations on terms of fairness and justice strategies of the CSR.

However, it is important to underline that S will be conformist and choose ‘fair’ if the agent predicts that also E plays ‘fair’. The latter is known as structural social capital and it describes the global linkages between the agents. The sustainability of such linkages, depends on the reciprocal beliefs that the other will cooperate, a generic disposition to cooperate, a conformist motivation contingent on agreed norms and beliefs and the existence of sanctions against agents that decide not to cooperate. In fact, behavioural economists identify the central human disposition as a tendency to reciprocate kindness with kindness and unkindness with punishment (Ben-Ner and Putterman, as cited in Sacconi and Blair, 2011).

For this reason, CSR commitment of the firm is gaining a lot of attention in terms of trustworthiness and reciprocity.

Conclusion

Since the Grameen Bank experience, microcredit has been having a lot of success among the developing countries. Besides, microcredit as a fight against poverty has been gaining a lot of attention even among the core countries. Microcredit had been sustained also by the emerging idea that individuals do not calculate their own economic activities only in terms of efficiency - as it has been described by Coase’s theory - but also in terms of fairness and Rawlsanian’s justice. As a matter of fact, it has been strengthening the idea that microcredit may be the response for all the socioeconomic problematics. However, even if it demonstrated to succeed in several occasions in terms of distributive justice and social cohesion, not enough it has been analysed regarding its non-economic outcomes in the society. What I analysed in the paper is the difficult relationship between the emission of credit without collateral towards small enterprises and the consequential behaviour changes in the management of CPRs. Even if many similarities characterise both microcredit mechanisms and CPRs collective management described by Ostrom – including reciprocity and cooperation, well-known local conditions, low number of local resources’ users who are active in the decision-making processes – not always these two realities cooperate. In this paper I theorised that a successful collaboration of the two can succeed in cases of where the microcredit is able to strengthen the human and the social capital of the local community in which is operating, as in the cases in Vietnam. Eventually, I introduced the concept of CSR in relation with the operations of MFIs and demonstrated the importance of reputation and reciprocity through the explanation of the “psychological game”. MFIs, including CSR as their collateral to emit credit to small/medium enterprises, may demonstrate how the characteristics of cooperation and reciprocity are essential if private entities want to achieve sustainability. Things get even more complicated regarding CPRs as water or forests, which can be hardly be the object of market transactions (Bartolini and Bonatti, as cited in Sacconi and Degli Antoni, 2011). In this scenario, bottom-up approaches of governance will be the key to ensure a more sustainable private sector. As a matter of fact, polycentrism and local communities bound by cooperative norms – that may be strengthen by microcredit activities - are essential for the successful government of CPRs, be more careful to justice problematics and creating a local economy strong enough to compete in the global market economy.

Eventually, a new revised Microcredit mechanims more carefull to environmental outcomes and CPR behaviours are needed to achieve social justice and fair CPRs management through elements of reciprocity and cooperation.

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