Common access resources- Tragedy of the Commons Flashcards
(8 cards)
What are Common Access Resources (CAR)?
Common Access Resources (CAR) are natural resources that have no private ownership. These resources are typically available for public use and include things like forests, oceans, and air, which can be exploited by anyone without restriction.
What is the Tragedy of the Commons?
The Tragedy of the Commons occurs when individuals, acting based on self-interest, overexploit a shared resource. Since there is no private ownership or control, producers maximize their own profit by extracting as much of the resource as possible, leading to the depletion or destruction of the resource.
Why does the Tragedy of the Commons happen?
The Tragedy of the Commons happens because there is no private ownership of the resource, leading to over-exploitation. Producers are incentivized to continue using the resource for short-term profit, even though this harms the resource in the long term. If one producer stops using the resource, others may still exploit it, leaving the first producer with nothing.
How do private producers behave in a Tragedy of the Commons scenario?
In a Tragedy of the Commons, private producers act out of self-interest. For example, a timber producer might continue cutting down trees, not worrying about resource depletion, because they want to maximize their profits. Even if some producers try to stop or limit their exploitation, others will continue to exploit the resource, which ultimately leads to its depletion.
What is the role of self-interest in the Tragedy of the Commons?
Self-interest drives the Tragedy of the Commons because producers aim to maximize profits without considering the long-term consequences of depleting the shared resource. Even if some producers want to conserve the resource, they know that other producers will exploit it, leading to an overall unsustainable depletion of the resource.
What are some examples of Common Access Resources (CAR)?
Examples of Common Access Resources (CAR) include:
Forests: Timber and other natural resources.
Oceans: Fish and minerals.
Air: Air pollution control (public good) and the risk of air quality degradation.
Water Resources: Rivers and lakes.
What is the cost of the Tragedy of the Commons?
The cost of the Tragedy of the Commons is the depletion of natural resources, leading to environmental damage, loss of biodiversity, and ultimately reduced availability of those resources for future use. This over-exploitation can cause severe long-term ecological and economic damage.
What happens in a market with a negative production externality?
Firms only consider private costs (MPC), not external costs.
The marginal social cost (MSC) is greater than MPC because it includes the external costs (e.g. pollution).
The market produces at Qp (private optimum) where MPB = MPC, but society prefers Qs (social optimum) where MSB = MSC.
There is overproduction and resource depletion.
Welfare loss (deadweight loss) occurs due to the misallocation of resources.
