Set up for today’s class Hand in your paper We will play the Tragedy of the Commons You will write for 15 minutes on how your understanding of Tragedy of the Commons has improved since start of class

Economic Perspective Problem: prices are wrong; Private benefits/costs ≠ social benefits/costs Solution: get prices right / modify incentives Holds considerable sway even if you don’t agree with it Natural resources usually don’t have a price When they do, price may not reflect total value to society For example, mining rights to land do not reflect total value of land including views destroyed, etc. and same for timber harvest rights Pollution costs are not included in price of using pollutant (e.g., gasoline)

Externalities Effects of producing/consuming something that are felt by people not involved in the market transaction Transaction imposes costs on people who can’t decide not to engage in transaction Solution: “internalize” costs This causes those who ARE involved in transaction to take those social costs into account

Legal Perspective Alternative explanation of same ToC problem Problem = legal rights and obligations not distributed properly; not restraining access leads to overuse Solution = new laws and restrain use. Assumes that int’l law absent or badly formulated but good ones can be created Liability and compensation Regulation Enforcement

Tragedy of the Commons Introduction Characteristics Open access Disincentives for self-restraint Demand exceeds carrying capacity Users’ interests harmed by overuse All actors capable of engaging in use Rules don’t eliminate incentives to cheat

Simulating the Tragedy of the Commons To start the game: Management page (for Ron) Management page

Tragedy of the Commons Conclusions Greed is NOT the cause of overuse: farmers are equally greedy when using private farm or the commons Economic explanation of overuse: costs to individual of using the commons are less than benefits to individual but costs to society are greater than benefits to society Legal explanation of overuse: property rights are defined as “open access” – anyone has the right to use it with no constraints on level of use

Writing Assignment 15 minutes Briefly describe how your understanding of the Tragedy of the Commons has improved from when you handed in your paper.