Tragedy of the commons

• What are common pool resources?

  • Common pool (access) resources are natural resources over which no private ownership has been established. They are non-excludable but rivalrous in consumption 
  • Examples of common pool resources include
  • Oceans (especially international waters)
  • Natural forests and rainforests
  • Communal grazing land
  • Water sources such as rivers
• When does the tragedy of commons occur?

  • The tragedy of the commons (as explained by Garret Hardin in 1968) occurs when common pool resources are used in production in an unsustainable way
  • Left to the free market, there is no private ownership over these resources, as it is costly and inefficient to find ways to exclude other producers 
• What does tragedy of the commons create?

  • This creates negative externalities of production and consumption 
  • There is no incentive for firms to reduce production levels as they seek to maximise profits. If an individual producer cut back production, other firms may then enter the market, causing them to lose out. Each private producer has the self-interest to keep exploiting resources
  • There is also no incentive for consumers to reduce consumption levels. If an individual consumer cuts back on consumption, other consumers will use the resource.
• What are the external costs of production and consumption?

  • The external costs of production and consumption often include pollution, environmental damage and resource depletion, which prevents future generations from benefiting in the same way. This results in partial market failure
• What is a real World Example of the Tragedy of the Commons?

  • The Darién Gap is in Panama and is located on the border with Columbia
  • This area is one of the most impregnable rainforests on the planet and is inhabited by indigenous tribes, drug traffickers, and para-military organisations