Common Access Resources (Tragedy of the Commons)

• Common access resources


  Natural resources over which no private ownership has been established
• Common access resources


  • Forests providing natural resources like timber and pulp for making paper
  • Seas providing natural resources like seafood
  • Minerals
  • Air providing oxygen
• Private ownership of common access resources is often not established because it is costly and inefficient to exclude other producers from accessing these resources
• Tragedy of the Commons


  Private producers will act according to their self-interest and unsustainably keep exploiting common access resources, eventually leading to a depletion of that resource
• Two ways to look at self-interest

  • Profit motive
  • Even if individual producers stop, other producers will come in and take all the resources
• Resource depletion has a massive negative impact on future generations in terms of lost income and unavailability of goods and services made from those resources
• Resource depletion also negatively impacts current generations through decreased income and lost consumption benefits
• Overproduction and misallocation of resources from the exploitation of common access resources leads to welfare loss
• Diagram showing market for seafood

  1. Marginal private costs

  2. Marginal social costs including negative externalities

  3. Socially optimal allocation where MSC=MSB

  4. Market allocation where MPC=MPB leading to overproduction and too low prices