Property rights and tenure issues are important to assure success in efforts to combine appropriate management of natural resources with productivity increases in developing-country agriculture. Failure to understand existing and alternative property-rights arrangements and how they work may result in inappropriate action by governments and nongovernmental organizations. Research to enhance such understanding is of critical importance and occupies high priority within the current five-year plan of IFPRI. While much attention is paid to the negative effects of free access to natural resources and the potential benefits from privatization of natural resource ownership, this lecture describes common-property institutions and illustrates how they may be superior to both free access and private ownership to achieve appropriate natural resource management and sustainability in agricultural production. Professor Ostrom demonstrates how well-meaning government action aimed at environmental protection may destroy existing community-level arrangements to the detriment of both natural resources and the people living in the community. Action by governments and nongovernmental organizations should enhance rather than replace social capital, which has been built up at the community level over generations. Professor Ostrom argues convincingly that local common-property institutions are effective if not essential components of successful future management of natural resources. While some things are best done by governments or the market, others are more appropriately done by community-level institutions, that is, 'neither market nor state.