In this video, we’ll consider another kind
of good – the “common pool resource”.
This type of resource can be subject to the
so-called “tragedy of the commons” – that
is, where resources are overused to the point
of depletion, leading, ultimately, to harm
for the people who use the resource.
First, let’s define a common pool resource.
Two traits are key: first, common pool resources
are rival – that is, one person’s benefit
interferes with another’s. Second, common
pool resources are nonexcludable – that
is, anyone who wants to benefit from the resource
can claim the benefit.
The name “tragedy of the commons” comes
from the medieval practice of farmers grazing
their animals on shared grassland – the
commons. However, when farmers all grazed
their animals on the commons, the grass would
all be eaten, and the commons would end up
a muddy mess that was no good for grazing.
A more modern case of a common pool resource
would be something like fish in international
waters. These fish are clearly rival – each
fish one person pulls out of the water is
not available for anyone else. They are also
nonexcludable – with no obvious authority
to limit fishing in international waters,
anyone who wishes can fish as much as they
like. The result of this is overfishing – that
is, people can only benefit from the fish
if they take them, and no one can stop them
from taking them. As a result, people take
the fish until there are none left – the
fish are depleted.
This problem of overuse or resource depletion
is the natural consequence of a good that
is both rival and nonexcludable, so what can
we do about it? There are basically four options:
collective agreements, privatization, regulation,
and “internalizing the externality”.
Some have suggested that no one really wants
the common pool resource to be depleted – so
there is an incentive for those who want to
use it to come to some sort of collective
agreement about how to ensure that the resource
isn’t depleted. Elinor Ostrom won the Nobel
Prize in Economics for her research into this
phenomenon. She found that the tragedy of
the commons is not particularly common. Often,
communities seem to be able to manage common
pool resources and avoid the tragedy of the
commons. Ostrom identified four factors that
make this ability for self-organization more
likely. First, the resource has definable
boundaries. Second, the community is dependent
on the resource – there are no easily available
substitutes, so people realize that depletion
would be a problem. Third, there is a community
– that is, a small group of people with
strong social ties. Fourth, there are well-defined
rules about how the resource can be used,
with punishments for those who deviate from
these rules. In these cases, the government
need not act at all.
A second option is to privatize the commons.
The commons, effectively, are owned by no
one. And what no one owns, no one cares for.
However, if you give ownership to someone,
then the owner has an incentive to make sure
that the resource isn’t depleted. A classic
case here involves elephants. Two African
countries – Kenya and Zimbabwe – took
different approaches to how to handle their
elephant populations. In Kenya, elephants
were treated as public property – individuals
were not allowed to own them. In Zimbabwe,
though, individuals were allowed to own elephants.
The population of elephants in Kenya fell
precipitously thanks to poaching – after
all, the government can’t watch every elephant
in the country, and, with ownership being
banned, the only way to take ownership of
the elephants valuable tusks was to hunt them
in secret. However, in Zimbabwe, the elephant
population increased during that same period.
Private ownership, effectively, turned elephants
into ranch animals – and we’re generally
not too worried about the possibility of cows
going extinct. As long as the owner of the
elephants also owns the elephants’ babies,
there’s an incentive to encourage the elephants
to breed. And, certainly, there’s an incentive
to protect your elephants from poachers.
A third option is to regulate the use of the
commons. For example, in the US, there are
generally restrictions on which fish you are
allowed to fish – both in terms of breed
and in terms of size. This is designed to
allow young fish the chance to mature to the
point where they can breed, preventing depopulation.
A final option is to “internalize the externality”.
The idea here is that part of the harm done
by using the resource is external to the person
using it – it is an “externality”. So,
people don’t think about resource depletion
when they claim common pool resources for
themselves. It’s not because people can’t
think about resource depletion – ranchers
typically don’t slaughter their entire herds
just to maximize their momentary production
– it’s that the resource depletion will
mostly affect other users of the common pool
resource. That is, the effect is external
to the decision-maker. So, one option that
the government may try is charging people
for the harm they do to the resource. By making
people pay attention to resource depletion,
people will curtail their use of the resource.
In effect, they will internalize the externality.
To sum up: the tragedy of the commons arises
when a good is rival but nonexcludable - typically
taking the form of resource depletion. However,
this tragedy can be prevented by collective
agreements, privatization, regulation, or
internalizing the externality.
