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
