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Open AccessFeature PaperArticle

Measuring the Transaction Costs of Historical Shifts to Informal Drought Management Institutions in Italy

1
Centre for Global Food and Resources, University of Adelaide, Adelaide, South Australia 5005, Australia
2
Centro Euro-Mediterraneo sui Cambiamenti Climatici, 30175 Venezia Marghera, Italy
3
Università Ca’ Foscari Venezia, 30123 Venezia, Italy
4
Departamento de Economía e Historia Económica, Universidad de Salamanca, 37007 Salamanca, Spain
*
Author to whom correspondence should be addressed.
Water 2020, 12(7), 1866; https://doi.org/10.3390/w12071866
Received: 6 May 2020 / Revised: 25 June 2020 / Accepted: 26 June 2020 / Published: 29 June 2020
(This article belongs to the Special Issue Institutions and Economics of Water Scarcity and Droughts)
Coase shows how costly resources are (re)allocated via costly institutions, and that transaction costs must therefore be positive. However, Coase did not elaborate on transitions between institutions which incur positive transaction costs that are characterized by numerous institutional complementarities; that is, feedback loops that inform the need for, and pathways toward, institutional change. Economic investigations of complementary modes of (re)allocation are rarely undertaken, let alone studies of transitions between modes. However, modes of (re)allocation that achieve similar results at less cost are generally viewed as having production-raising value. This paper measures the costs of transitioning drought management institutions in Italy toward informal, participatory, and consensus-based approaches during several recent drought events. The chosen model is Drought Steering Committees, which offer a substitute for current formal (less flexible) planning approaches, and where lower transaction costs that are associated with the transition are inferred. Our results highlight the relevance of empirical assessments of ‘costly’ transitions based on a historical study of transaction costs, as well as supporting previous works that highlight the value of contextual analysis in economic studies, in order to identify the benefits of institutional investment. View Full-Text
Keywords: Po River Basin; institutional economics; climate change adaptation; cost of adaptation Po River Basin; institutional economics; climate change adaptation; cost of adaptation
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MDPI and ACS Style

Loch, A.; Santato, S.; Pérez-Blanco, C.D.; Mysiak, J. Measuring the Transaction Costs of Historical Shifts to Informal Drought Management Institutions in Italy. Water 2020, 12, 1866.

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