Tragedy Of The Commons

Question 1

Tragedy of the Commons

Answer 1

Private ownership promotes non-selfish use of property

Public Ownership/Commonization of property promotes selfish use of commons and can/will lead to exhaustion of the commons

– an unmanaged commons in a world of limited material wealth and unlimited desires inevitably leads to ruin

Question 2

The Spoilage Process

Answer 2

Individuals pursue their own interests at the expense of others; others realize they are losing out and may begin to act selfishly (trying to get their share of the commons)

Question 3

Limited Access

Answer 3

limits access to and use of some resource to members of a relatively small group; group has the right to exclude others from access

Question 4

Open Access

Answer 4

no single individual and no group has the right to exclude anyone; land is open for anyone to use [burden on everyone, benefit is individual)

• • thought to create tragedy of the commons
• each user benefits directly from his use and suffers delayed costs from the deterioration of overuse (Solution: coercive intervention to regulate use or privatize the land)

Question 5

Externalities

Answer 5

cost/harm imposed on a neighbor but not the user of the property

Harms = inefficient use of resources/inefficient market

• negative harms = overusing
• positive harms = underusing

** EFFICIENT FREE MARKETS HAVE NO EXTERNALITIES

Question 6

Economic Theory of Property

Answer 6

The purpose of property rights is to enhance social welfare by maximizing the value of scarce resources

• this is done by internalizing externalities (making the user bear the costs of resource use) giving the user greater incentives to use the resources more efficiently

Question 7

Freeriders

Answer 7

getting the advantages but not bearing the cost

Question 8

Holdouts

Answer 8

Let everyone else bear the cost and holdout

Question 9

Goals of the commons

Answer 9

Technical efficiency - max. output, rules which produce the most product sustainably

Subjective fairness/justice - who get’s what benefits? how do we allocate the benefits?

Question 10

Alienability

Answer 10

Ability to transfer interest in land
– ensure private property gives best outcome by providing the ability to sell the land so that it can be used more efficiently

Question 11

Mutual agreement of allocation/ voluntary binding agreement

Answer 11

One solution for allocating commons

• Rules are decided by the group
  *You give up something in the short term but benefit in the long term
  *Fair BUT
  – transaction costs
  – free riders/holdouts
  – running with the land
  –enforcement of the contact
  (are their sanctions for violations? will people just violate and pay damages b/c its cheaper?(hand rule))

Question 12

Running with the land

Answer 12

when property is transferred, does the mutual agreement transfer to the buyer? how does that affect others?

Question 13

Gov’t Coercion/Law of Regulation

Answer 13

Gov’t sets the rules to allocate the resources

adv. - no transaction costs (other than paying taxes to fund the govt)
Disadv. - is gov’t decision fair and efficient?

(i.e. Zoning)

Question 14

Private Property

Answer 14

Break the land into sections and give each portion to an owner
– each owner has exclusive rights to the property

– personal decisions don’t affect others, costs and benefits are localized to your own property