Designing institutions that coordinate expectations of different classes of rural producers in a manner in which income disparities are reduced; common property is better managed and in fact rejuvenated (if possible); and redundancy for coping with uncertain contingencies are continually created; is indeed a tremendous challenge. Three major issues are discussed here. The concept of scarcity and its consequent effects in different classes are presented to answer the question: Who should bear what part of the loss for how long when supply of a basic resource is reduced. The unfortunate aspect of institutional innovations triggered by market forces is that they pass on the greatest part of burden on those who have least capacity of shoulder. Second issue of redundancy in rule making is presented to highlight the need for building capacity in institution to deal with unanticipated range of contingencies. The traditional moral values, it is argued serve as redundant means of guidance in various social actions, including resource management. Finally, the role of state in providing assurance to different classes of resource users is discussed to question the merit of policy of privatization supported by the aid agencies and host countries. It is hoped that paper provides framework for designing institutions that can deal with the complexity of resources use under degraded environments.