Market Failure and Tragedy of the Commons Flashcards
What is a public good?
A good that is both non-rivalrous and non-excludable
What is meant by a public good (explained)?
Non-excludable - no one can be excluded from consuming it
Non-rivalrous - one person’s consumption does not diminish the quality or quantity of another’s consumption
What is meant by non-rejectability?
The collective supply of a public good for all means that it cannot be rejected by people
What is a common resource?
A resource that no individual or organisation can lay claim to
What is the ‘Tragedy of the Commons’?
The idea that individuals acting in their own best interest will overuse a common resource, leading to the depletion or degradation of this resource
Why does the tragedy of the commons occur?
As the common resource is non-excludable but it is rivalrous
What are three possible solutions to the tragedy of the commons?
Rules and regulations
Cultural norms
Creating property rights
Give an example of a rule or regulation that would offer a solution to the tragedy of the commons
Limiting the number of days that people can fish for
What is a problem with using rules and regulations as a solution to the tragedy of the commons?
Often inefficient and ineffective
Limits the tragedy but rarely prevents it
Give an example of how cultural norms could be a solution to the tragedy of the commons
(example)
- Overfishing results in cultural disapproval
- One who honours the norms is respected
- Can be effective in relatively small, self-governing communities
What is a problem with using cultural norms as a solution to the tragedy of the commons?
Take a long time for cultural norms to develop
Explain how the process of creating property rights offers a solution to the tragedy of the commons
It makes the common resource excludable - therefore it makes the common resource behave like a private good
e.g. tradable fishing allowances
e.g. tradable fishing allowances
What is a problem with using property rights as a solution to the tragedy of the commons?
The common resource may not stay in one place (e.g. fish)
would need a multi-country system to be truly effective
