INTRODUCTION

Climate change is not only one of the great challenges of this century for governments and individuals; it is also a major issue for the millions of micro-, small- and medium-sized businesses (SMEs) that exist across Southeast Asia.

The current level of knowledge about the impact of climate change on this sector is low. There are a number of important questions for which more evidence is needed: Do small business operators think climate change is an important issue? How are SMEs in the region attempting to reduce their emissions, if at all? What do they intend to do in future to deal with a warming climate? What obstacles do they face? And what effective assistance and advice are needed for them to deal with the issue?

This paper summarizes the results of a large-scale, multi-country quantitative assessment of these issues, focusing on SMEs in the five largest economies in ASEAN. The results are illuminating, and provide some guidelines for policymakers, governments, industry associations and climate change advocates as they grapple with the complex issue of helping SMEs work towards a low-emissions future economy.

CLIMATE CHANGE

As Table 1 indicates, every nation in ASEAN already contributes to some extent to the continuing global output of GHG-inducing emissions, such as CO2. Whilst some member states (such as Brunei and Cambodia) produce very low levels, others such as Indonesia are already amongst the biggest generators of emissions globally.

Climate change is already having a tangible impact on the region, according to the Intergovernmental Panel on Climate Change (IPCC). A number of physical changes are already occurring in the climate and weather patterns of Southeast Asia. These include alterations to monsoon patterns; more heatwaves, cyclonic activity and droughts; rising sea levels; and more precipitation and flooding. The IPCC predicts that as temperatures continue to rise, these problems will be exacerbated, noting that “every additional 0.5°C of global warming causes clearly discernible increases in the intensity and frequency of hot extremes, including heatwaves, and heavy precipitation … There will be an increasing occurrence of some extreme events unprecedented in the observational record with additional global warming…” (IPCC 2021, p. SPM-19). Finally, sea level rises are also “virtually certain” and will threaten major metropolitan regions such as those in Manila, Bangkok and Jakarta (ASEAN 2021).

This chapter examines when goods become owned. It starts with the traditional Demsetz model and then considers cases of nonlinear transaction costs.

When many individuals combine their inputs in production, common property problems arise. Often the use of low incentive wage contracts are necessary to mitigate overuse. However, such contracts mean that workers need direction from others. This is the seed of an organization. The central person in an organization must be able to bare the risks of their decisions, and so the owner of the organization is often the holder of the equity capital, which is used to convince others that they will not bear negative residuals.

Transaction costs are the costs of strengthening a given distribution of economic property rights. When these costs are positive, economic property rights are never perfect and the Coase Theorem does not hold. Furthermore, different distributions of these property rights lead to different levels of joint wealth.

Institutions are the system of legal rules and social norms that enhance individual economic property rights. Individuals take them as exogenous, but they are endogenous to the entire system. Institutions are complicated distributions of economic property rights and are therefore the result of attempts to maximize wealth net of the transaction costs involved. This chapter defines institutions, relates them to property rights, reviews the literature, and provides numerous examples of institutions and their evolution.

Throughout history, individual laborers have often not had freedoms of movement, effort, or work choice. Workers have worked under master/servant relations, indentured servitude, and even slavery. Within marriage, the doctrine of coverture made wives assume the legal identity of their husband. Such restrictions on individual freedoms affect the choices these indivduals make, and lead to various transaction costs. These costs help explain the organization and institutions surrounding nonfree labor.

Output is higher when individuals cooperate and combine their inputs in some type of production. This exposes the attributes of their inputs to other people. Since contracts and agreements cannot prevent overuse of someone elses attributes, transaction costs arise in every form of human production interaction. Specific contracts are designed to mitigate this problem.

One of the greatest placements of wealth into the public domain was the US federal governments decision to issue large land grants to railroads and many small land grants to homesteaders in the nineteenth century. These lands were enormous in size, and putting them in the public domain induced a massive rush to get them. This chapter argues that the government wanted the lands to be taken and occupied, and that this was the benefit of placing them in the public domain, even though the racing was costly and they could have sold the lands.

The traditional economic model implies that ownership is irrelevant for resource allocation. This result is known as the Coase Theorem. The Coase Theorem is just an idea, not a reality. Its importance comes from understanding its logic. It relies on the assumption of zero transaction costs. When this assumption is violated, then the way ownership is organized matters. Hence, a theory of ownership, or a theory of the allocation of property rights, must be based on models of positive transaction costs.