The Parched Earth of Cooperation: How to Solve the Tragedy of the Commons in International Environmental Governance

This article proposes a way to strengthen international environmental agreements, such as the Paris Agreement and the Kyoto Protocol. Multilateral environmental agreements such as these are extremely fragile. At the heart of the problem is what is known as the tragedy of the commons—a unique dynamic that viciously sabotages cooperation. The cause of this tragedy is that no one can trust that other actors will conserve the common resource, which triggers a race to the bottom—a race to deplete. Global warming and our inability to halt it is perhaps the ultimate example of a tragedy of the commons on a truly massive scale. On a domestic level, the tragedy of the commons is easily solved through regulation. However, on a supranational level, where there is no overarching authority, governance mechanisms tend to collapse. The hard truth is that without robust enforcement of some kind, international cooperation is extremely difficult to maintain. This article proposes the following idea: governments joining (or already party to) an agreement, contribute an upfront deposit to an international regulatory body (the Commons Management Fund (“CMF”)) with the understanding that their contribution will be forfeited if they fail to honor their treaty commitments. The idea, while ostensibly simple, is deceptively complex. The focus is not the penalty, but rather the ability of governments to credibly signal commitment. In game theory, credible signaling can prevent a tragedy of the commons by generating confidence that everyone will stick to their commitments. The CMF is designed to exploit this effect. Now, more than ever, a solution to the tragedy of the commons on a supranational level is desperately needed—the CMF is such a solution

Investor Rationality: Evidence from UK Property Capitalization Rates

Recent analyses have suggested the irrationality of investors in Australian and U.S. office properties. More specifically, investors have failed to raise capitalization rates sufficiently at rental cyclical peaks to account for the obvious mean reversion in real rents and thus have significantly overvalued properties. In this paper we analyze the determination of UK office and retail capitalization rates and provide evidence that these rates reflect rational expectations of mean reversion in future real cash flows. Moreover, these rates are linked to capitalization rates (dividend/price ratio) and expected dividend earnings growth as expected.

Investor Rationality: An Analysis of NCREIF Commercial Property Data

The concept of a peak in value or a "100% location" is so well established in real estate that there is no reference to the term in recent real estate principles and appraisal texts. However, the land value section in appraisals of a regional shopping center did not apply the concept when adjusting comparables for location, which resulted in a substantial underestimation of site value. A regression model that included a distance variable to control for location produced a value estimate that was more than double the values in the appraisals. The empirical results illustrate that the subject site represented a distinct peak in land value as well as reemphasizing the importance of making careful location adjustments in situations where there is a distinct peak in land value.