<COMMON POOL RESOURCES>

'COMMON POOL RESOURCES (CPRs)' are... 

1) NOT OWNED BY ANYONE 

2) AVAILABLE FOR ANYONE TO USE WITHOUT PAYMENT

3) WHEN USED LEAVES LESS FOR OTHERS

• Firstly, they are RIVALROUS as WHEN IT IS USED/CONSUMED by one party it REDUCES THE AMOUNT AVAILABLE FOR OTHER parties. 

• For EXAMPLE, If we use up clean air, there is less left over for others by others; when we catch fish in the open sea, there are fewer fish left over for others to catch; if we destroy the stability of the global climate, it will not be available for use by future generations.

• Secondly, CPRs are NON-EXCLUDABLE as it is NOT POSSIBLE TO EXCLUDE ANYONE FROM USING/CONSUMING them.

• Most goods and resources CAN BE MADE EXCLUDABLE BECAUSE THEY HAVE A PRICE ATTACHED, however, CPRs have no price and hence anyone can use them without payment. 

• For EXAMPLE, we can't charge people for using up clean air or catching fish in the open sea.

• SUSTAINABILITY refers to MAINTAINING THE ABILITY OF THE ENVIRONMENT AND ECONOMY TO CONTINUE TO PRODUCE AND SATISFY FUTURE WANTS; 

• Therefore when a good is RIVALROUS and NON-EXCLUDABLE, users will overuse it and it will eventually DEPLETE and possibly DISAPPEAR completely, leaving nothing for future generations.

• In the free market system when a firm decides upon its production decisions it 'ONLY' calculates its PRIVATE COSTS OF PRODUCTION; such as wages, rent, and raw materials to establish its supply curve, which as we know helps determine the equilibrium price and quantity that it will produce.

• BUT WHAT IF THERE WAS ANOTHER COST THEY DIDN'T INCLUDE?

• Namely, the EXTERNAL COST of OVERUSE, which is the eventual LOSS of that resource on a PERMANENT BASIS.

• If this EXTERNAL COST was given a $$$ value and ADDED TO THE FIRM'S PRIVATE COSTS, then their SUPPLY CURVE WOULD SHIFT TO THE LEFT and output would fall accordingly. 

• Hence we can say that the MARKET HAS FAILED to include ALL COSTS and hence has FAILED to deliver the SOCIALLY OPTIMAL ALLOCATION OF RESOURCES.

• The most known explanation why users left alone with their CPR fail to manage it sustainably comes from Garret Hardin. In his essay “THE TRAGEDY OFTHE COMMONS” he describes a common pasture on which several shepherds keep their sheep. In order to maximize their individual benefits each shepherd decides to bring more sheep, which in the end leads to overexploitation and depletion of the pasture. The inherent dilemma is that each shepherd acts individually rational whereas the collective outcome is irrational. 

WATCH THE VIDEO BELOW AND EXPLAIN WHY THE CHICKEN FARMER IS WILLING TO MANAGE HIS PRODUCTION WHILE THE TUNA FISHERMEN ARE NOT. REFER TO THE 'TRAGEDY OF THE COMMONS' IN YOUR ANSWER.

Possible policies may include (but are not restricted to):

• Fishing quotas (including transferable quotas)

• Taxation (on various fishing related activities)

• Ending subsidies

• Education/consumer nudges

• International agreements Any other valid policy.

• 
  Minimum length of caught fish
  

• 
  Establishment of (shorter) fishing seasons / hours
  

• 
  Regulation of the size / type of trawlers used
  

• 
  Quotas (fishing)
  

• According to the tragedy of the commons, environmental destruction is purely a by-product of people’s indifference toward the environment because they are self-interested beings? 

• Are there situations when people do not display the narrow self-interested behaviour assumed by standard economic theory? 

• If so, what are the implications, and what would be the appropriate policy responses?

• These are the kinds of questions posed by Elinor Ostrom, an American political scientist who became the first woman to receive the Nobel Prize in Economics (2009) for her work on the management of common access resources. In one of her major works, Ostrom writes that her central question

• She concluded that people often behave co-operatively rather than competitively, and this has very important policy implications. Sometimes, the best method of preserving common access resources is by allowing the resource users themselves to manage them, rather than through centralised government interference.