This chapter pulls together content from several previous chapters to discuss arguably the most popular type of property-based policies: markets. We have already discussed markets through our examination of exchange rights in Chapter 5. There we associated exchange with reciprocity, establishing trade as a culturally ubiquitous phenomenon. As such we need to distinguish “markets”, which include informal exchange and are found everywhere but are less legible to state actors, with market-based policies, which are public policies that include the allocation of exchange rights and are our subject for this chapter. In Chapter 5 we also considered the goals of equity and efficiency that are a strong part of the dominant market discourse. Efficiency is a primary theoretical motivation for most market-based policies, and so we build further on that discussion here.

In Chapter 6, we introduced the idea of a policy panacea, which we will reflect on a fair amount in this chapter, since the market-based policies we will discuss in this chapter have often received the panacea treatment from their promoters. In Chapter 8 we introduced the idea of a hybrid property regime involving multiple types of actors, each with its own set of rights. In this chapter we unpack market policies as their own kind of hybrid property regime, commonly involving a state actor (or in some cases an NGO) with control rights and resource users with use and exchange rights.

We will explore three types of market-based environmental policies, based on O’Donnell's (2018) classification: (1) public goods markets (e.g., PES policies, conservation easements, certifications); (2) tradeable environmental allowances: shared resource markets (e.g., catch shares); and (3) tradeable environmental allowances: regulatory markets (e.g., cap-and-trade). A public goods market involves an external actor paying a local actor for the provision of a public good, based on a formalized evaluation or certification scheme. A prominent example of what O’Donnell (2018) refers to as a public goods market are payment for ecosystem services policies. In this case, money is being exchanged for environmental benefits – such as avoided deforestation – that are framed as public goods, and entitlements are granted to landowners.