common pool Flashcards
(22 cards)
Common pool resources
natural resources that firms and individuals can access in society without restriction
Characteristics of common pool
Tragedy of commons
users act in their own self interest rather than preserving resources to the benefit of society and the common land
Non excludable
using this resource does not exclude anyone from using it, anyone can use it with no payement
rivalry in consumption
It is rivalrous if once the good has been consumed it cant be consumed by another person
How does common pool relate to market failure
common pool is a case of market failure as the individual benefit is significantly greater than the private cost giving consumers incentive to use more of the good and keep consuming, thus an over consumption with respect ot whats optimal to society
Externalities that arise from common pool resources
Unsustainable fishing
This arises due to the lack of ownership of common pool resources thus leading to consumers exploiting them, in this example, fish population will decrease due to mass fishing numbers around the world
Solutions to unsustainable fishing
giving out quotas ( a limit) to how much fish can be fished from the ocean
International aggreement is neccesary to control fishing
Real world example of an unsustainable fishing common pool resources
Baltic sea
A sea that is sustainable as a quota has been set for how much fish in. ayear to keep the population of fish sustainable
however an issue is that some fish are taken by birds and seals
solutions to the baltic sea issue
hunt birds and seals but there may not be many of then or a sustainable population in certain areas
reduce the amount of fish caught by professional fishers but it could lower income and make them go bankrupt
Solutions to common pool resources
Collective self governnance
those who contribute to the environmental issue being involved in all processes such as working with local communities and the government leading to the improved use of certain goods
Strenghts of collective self governance
stakeholders have expert knowledge and info of the state of the forest and ocean for example and can know when its being exploited
Works well when all stakeholders work together and communicate strongly monitoring and having enforcment
Weaknessse of collective self governance
Some stakeholders will always have more power than others, some may have a greater say depending on their occupation.
Stakeholders may have conflicting objectives
public goods
goods that are not provided by the free marjet at all but are neccessary and beneficial to society, as a result of free market not producing them there is market failure and leads to the government having to pay to make these goods
Characteristics of public goods
Non rivalrous
when one person uses it it doesnt affect the ability of another from doing so
Non excludable
once it is provided people cant be excluded from using it. eg street light road.
private good
rivalrous
the consumption of this good reduces the availability of it to others. when you buy it others cant buy the same one
excludable
it is possible to exclude from someone using the good once it has been provided because you have to pay to use the good
whats the problem with public goods in free market
free market has underproduction of publix foods because it cant make people pay for them and people prefer private goods, therefore government taxes people and provide public goods for free or very low price
whats the free rider effect
free rider problem is that with public goods its possible to recieve its benefits without ever actually paying for the tax, therefore government stops paying for them or provide less of it like the US where they hardly provide public goods to avoid the free rider problem.
what are gov interventions to respond to this problem
Direct provision
financed by tax but has opp cost
positives and negatives of direct provision
positives
eliminates free rider problem
can achieve economies of scale as the sole provider
provided for free or very cheap
negatives
has to be financed which generates an opportunity cost
crowding out
when there is too much direct provision they can push out the private sector which is bad because they are more skilled and provide better quality goods and some people actually prefer it but they cant because they arent recieving the resources to be able to fund .
how do we evaluate direct provision
is it efficent
what is the opp cost compared to the benefit
is it the right decision
what is the stakeholder impact
what is more efficent by public or private
second solution to to public goods and the problems
contracting to the private sector
positives and negatives to second solution
positive
specialized labour
more efficent
negatives
prive towards government
costly as companies will always require profit
real world example of international agreement
the paris climate agreement where they aim to reduce CO2 emissions and thus each country gets quotas on how much Co2 emissions they can release and it can be traded between them.
what are quasy public goods
non excludable
rivalrous
these are goods that posses some qualities from both public and private goods.
