Common Property Resources Not Excludable & Rival in Consumption

The Different Kinds of Goods Types of goods Private goods Excludable & Rival in consumption Public goods Not excludable & Not rival in consumption Common resources Rival in consumption & Not excludable Natural monopoly Excludable & Not rival in consumption

Common Resources Common resources The tragedy of the commons Not excludable Rival in consumption The tragedy of the commons why are common resources used more than is desirable Social and private incentives differ Arises because of a negative externality Don’t take into account costs imposed on others when equating PMB and PMC

Common Resources The tragedy of the commons Negative externality One person uses a common resource Diminishes other people’s enjoyment of it Common resources tend to be”overused” Government - can solve the problem Regulation or taxes Reduce consumption of the common resource Turn the common resource into a private good

Common Resources Some important common resources Clean air and water Congested roads Fish, whales, and other wildlife

Tragedy of the Commons Tragedy of the commons Original example: Occurs when a rival (but non- excludable) good becomes depleted or ruined Original example: Garret Hardin, Science Magazine, 1968 Cattle grazing Commons = shared area that all cattle farmers get to use to let cattle graze Lecture notes: The commons is an area maintained by the public government. It can sustain a limited amount of cattle; it needs to sustain itself over time.