Question

1) What is the “tragedy of the commons”? How does it occur? What can be done to prevent the problem?

2) Explain what is meant by “free riding”. How can it lead to an under-provision of a public good?

Answer 1

ANSWER (1) The tragedy of commons is a situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users, by depleting or spoiling that resource through their collective action. The theory originated in an essay written in 1833 by the British economist William Forster Lloyd, who used a hypothetical example of the effects of unregulated grazing on common land (also known as a "common") in Great Britain and Ireland.The concept became widely known as the "tragedy of the commons" over a century later due to an article written by the American biologist and philosopher Garrett Hardin in 1968.

The tragedy of commons is a problem that ocuur when individuals exploit a shared resource to the extent that demand overwhelms supply and the resource becomes unavailable to some or all. ... Depletion of non-renewable resources is an example of the tragedy of commons in action.

Prevention of tragedy of commons :

Articulating solutions to the tragedy of the commons is one of the main problems of political philosophy. In many situations, locals implement social schemes that work well. The best governmental solution may be to do nothing. When these fail, there are many possible governmental solutions such as privatization, internalizing the externalities, and regulation.

Governmental solutions:

Governmental solutions may be necessary when the above conditions are not met (such as a community being too big or too unstable to provide a thick social network). Examples of government regulation include privatization, regulation, and internalizing the externalities.

Privatization:

One solution for some resources is to convert common good into private property, giving the new owner an incentive to enforce its sustainability. Libertarians and classical liberals cite the tragedy of the commons as an example of what happens when Lockean property rights to homestead resources are prohibited by a government. They argue that the solution to the tragedy of the commons is to allow individuals to take over the property rights of a resource, that is, to privatize it. In England, this solution was attempted in the Inclosure Acts.

Regulation:

In a typical example, governmental regulations can limit the amount of a common good that is available for use by any individual. Permit systems for extractive economic activities including mining, fishing, hunting, livestock raising and timber extraction are examples of this approach. Similarly, limits to pollution are examples of governmental intervention on behalf of the commons. This idea is used by the United Nations Moon Treaty, Outer Space Treaty and Law of the Sea Treaty as well as the UNESCO World Heritage.

Internalizing externalities:

Privatization works when the person who owns the property (or rights of access to that property) pays the full price of its exploitation. As discussed above negative externalities (negative results, such as air or water pollution, that do not proportionately affect the user of the resource) is often a feature driving the tragedy of the commons. Internalizing the externalities, in other words ensuring that the users of resource pay for all of the consequences of its use, can provide an alternate solution between privatization and regulation. One example is gasoline taxes which are intended to include both the cost of road maintenance and of air pollution. This solution can provide the flexibility of privatization while minimizing the amount of government oversight and overhead that is needed.

ANSWER (2)

• A free rider is someone who wants others to pay for a public good but plans to use the good themselves; if many people act as free riders, the public good may never be provided.

• Markets often have a difficult time producing public goods because free riders attempt to use the public good without paying for it.

The Free Rider Problem occurs when there is a good (likely to be a public good) that everyone enjoys the benefits of without having to pay for the good. The free rider problem leads to under-provision of a good or service and thus causes market failure.

The problem occurs because of the failure of individuals to reveal their real or true preferences for the public good through their contributions. For example, when a town wants to construct a vital bridge, it will ask the people of the town if they will contribute towards the construction costs. Everyone says they will, and they also know that even if they don’t contribute individually, other people will contribute enough or the local municipality will find a way to pay for the bridge. This means no one will want to contribute towards the building of a bridge because they know that even if they don’t participate in paying for the bridge, someone else will, and the bridge will get built anyway.

This situation leads to the underproduction of such goods. Since these goods are non-rival, it means that they cannot exclude other people from consuming them. For example, you cannot prevent anyone from utilizing the benefits of a street lamp, even though they haven’t paid for it.

As a result, private firms have no incentive to produce such goods since they can’t make everyone pay for them.