Tragedy of the Commons

1
Tragedy of the Commons
2
Commons in Your Own Household

• What do you think would happen if everyone in
  your household went to the grocery store
  together, and pitched in equal amounts of money
  for groceries?
• Do you think that the community food would last
  longer, or shorter, than when people buy their
  own food?
• Why?

3
Environmental Economics

• Negative Externalities
• Costs NOT paid for by buyer or seller
• Costs to society NOT included in the price of the
  commodity
• Can be internalized by making buyer/seller pay
  costs

4
Freedom in a commons brings ruin to all.-G.H.

• Profit seeking individuals will overexploit open
  access resources

5
Imagine that you, as a farmer, share a lake

• Assuming that each farmer acts as independent,
  rational, free-enterprisers
• Best Outcome Only you poison the lake, and no
  one else does.
• 2nd Best Outcome No one poisons the lake.
• 3rd Best Outcome Everyone pollutes the lake.
• Worst Outcome Others poison the lake, but you
  dont.

6
Solutions to the Tragedy of the Commons?

• Privatize the commons
• Impose fines for cheating
• Have small enough communities to ensure
  compliance by close association/guilt
• Other possibilities???

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Specific Problems Common Solutions
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The Tragedy of the Commons

• GLOBAL WARMING
• The greatest environmental challenge of the 21st
  century how to tackle climate change.

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KYOTO PROTOCOL

• Industrialized, wealthy nations must reduce
  emissions of greenhouse gases economic
  sacrifices
• Developing countries need not to reduce
  emissions economic equality (?)

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KYOTO PROTOCOL

• Scientifically, will this approach work? Why or
  why not? (even if the U.S. did comply)
• Is it fair to industrialized countries?
• Will this adversely effect trade?
• The cost of reducing emissions may not be an
  externality, it most likely will be reflected in
  consumer costs.
• When will developing nations be required to
  reduce their emissions? When will they be
  considered industrialized?
• China is considered a developing nation, yet they
  are the worlds second biggest carbon dioxide
  polluter.