Common Resources and the Tragedy of the Commons

Overview

• Common resources: Nonexcludable but rival
• Unlike public goods, common resources get depleted as usage increases
• Example: Tuna in the ocean
  • Nonexcludable: No property rights to fish in the ocean
  • Rival: One more tuna caught is one less tuna available
• Issue: Tragedy of the Commons
  • Resource is overused and undermaintained
  • Leads to resource depletion or collapse

Examples of Tragedy of the Commons

• Tuna stock depletion (75% decrease in catch since 1960)
  • Atlantic bluefin tuna becoming endangered
• Other examples:
  • 19th-century buffalo slaughter
  • Deforestation in the Sahel
  • Hunting of elephants and rhinos
• Common feature: Lack of ownership leads to overuse

Comparison of Incentives

• Frank Perdue (Chickens)
  • Owns stock, incentive to maintain for future sales
• Tuna Fisherman
  • No ownership, no incentive to conserve
  • Conservation benefits other fishermen, not the one conserving

Potential Solutions

1. Command and Control

   • Regulations to limit use (e.g., limit boats, fishing days)
   • Often inefficient and ineffective
   • Example: Alaskan king crab season reduction
   • Fishermen adapt with better equipment, continuing overfishing

2. Cultural Norms

   • Elinor Ostrom's research: Tragedy not inevitable
   • Norms can evolve to socially disapprove overuse
   • Effective in stable, small groups
   • Difficult to establish

3. Creating Property Rights

   • Turns common resources into private goods
   • Example: New Zealand's ITQ System
     • Individual Transferable Quotas for fish
     • No restriction on boat size or equipment
     • Successful in increasing fish stock

Challenges

• Difficulties in creating property rights
  • Migratory species like southern bluefin tuna
  • Multi-country agreements hard to enforce
• Coase theorem: More parties increase transaction costs, reducing likelihood of agreements

Conclusion

• Many problems arise from lack of property rights
• Solution requires protection and implementation of property rights

• Continue learning by exploring practice questions or proceeding to the next video.