It refers to all resource systems made available to the common public
Common pool resources refer to all resource systems made available to the common public. Examples include fisheries, forests, irrigation systems, and groundwater basins.
An essential characteristic of such resources is that they are rivalrous public goods.
They are considered a mix of public goods and private goods.
Being a public good, they are non-excludable. Therefore, the consumption of such resources cannot be restricted to a particular section of society. It may not be impossible to control consumption, but it could be costly to implement such measures.
In the case of fisheries and forests, the size of the resource makes it impossible to restrict consumption. As a result, consumers can exploit benefits from the resource without paying for it. This differentiates them from private goods.
However, unlike public goods, these resources have a finite supply. The goods are available for all but are scarce. Each additional unit of consumption reduces the total supply available.
These resources become competitive as consumers rival for their use. This makes them rivalrous or subtractable.
Such resources can be owned by the government or related bodies as public goods.
They can also be owned by communities (as a pooled resource) or private individuals (as private goods).
They are usually natural resources or a human-made system with limited quantities, considered a stock variable. Individuals or firms periodically exploit these resources for economic gains measured as flow variables.
A typical example is household use of a groundwater basin to satisfy individual needs.
No household can be excluded from consumption, and the leftover supply reduces with each use.
The tragedy of commons
Being a non-excludable rivalrous good, these resources are susceptible to overexploitation, congestion, and pollution. Such a situation leads to conflict between individual and group interests.
The tragedy of commons can be defined as a situation wherein:
- A common-pool resource is shared by a community or a group of people.
- Each consumer is free to use the resource for his economic benefit.
- However, each consumer's resource use reduces the total stock available.
- Consumers act in their self-interest and continue indiscriminately using the resource to maximize their benefit.
- Being rivalrous, consumers compete over the use of the resource. This rivalry leads to overconsumption of the resource.
- The collective behavior of all such consumers ultimately depletes the resource, and they can no longer benefit from it.
The term was first coined by the British economist William Forster Llyod in 1833.
The concept was further built upon by numerous scholars like Garret Hardin, who elaborated upon Lloyd's theory.
The example used by Lloyd described a common pastoral land in a community where herders brought their cattle to graze. Being a natural resource, it is non-excludable, giving every herder a right to use the pasture.
Since each herder acts in his self-interest, he allows his cattle to graze over more than his fair share of land. Over time, due to the actions of each herder, the land they all relied upon is left barren. This adversely affects all herders, leading to the tragedy of commons.
There are other examples where individuals act in their interest, leading to resource depletion.
The continuous overexploitation of trees for the production of consumer goods like furniture and paper has led to a significant decline in forests throughout the world.
This occurs when the resource's exploitation rate exceeds the rate at which it replenishes itself. Since planting trees and conservation methods do not provide a direct individual incentive to producers, they continue to exploit the resource.
2. Animal extinction
Instances of overfishing and overhunting are well-established examples of the tragedy of commons. Each fisher tries to maximize his profit by overfishing as he believes he is competing with other anglers for the same finite resource.
This collectively leads to a large-scale reduction in the number of fish, adversely affecting all fishermen. Similarly, overhunting endangered animals affect the economic interests of all hunters involved.
3. Depletion of water resources
When groundwater basins and irrigation systems are overexploited for personal use by households, it diminishes the water resource available.
Suppose the rate at which the resource replenishes is lower than the rate of exploitation, like in the case of extended periods of drought. In that case, unregulated consumption depletes the emergency supply for the community. This creates a tragedy of commons.
4. Climate change
Another typical example is the detrimental impact of all individual production and consumption activities like air pollution, water pollution, land degradation, etc.
Such activities harm the environment like global warming and toxic waste generation, adversely affecting us. However, individual units acting in their self-interest do not consider the social cost of their actions.
Each producer maximizes its output without considering the pollution caused. On the other hand, consumption activities like using cigarettes and air conditioners to fulfill individual needs harm the environment.
Regulating Common-Pool Resources
It is possible to avoid such tragedies and sustain a common pool resource long-term through institutional responses and proactive measures.
These institutional responses include actions taken by a regulating body.
Due to the non-excludable rivalrous nature of shared resources that make them vulnerable to the problem of the tragedy of commons, governments, and related bodies usually impose laws and sanctions.
The government may also opt for resource privatization by assignment of well-defined property rights.
When property rights are assigned to an individual or firm, the resource is no longer non-excludable. Instead, the owner charges a price for the use of the resource.
By commanding a price, the resource now acts as a private good. This cost imposed on consumers limits their usage of the resource. Consumers can no longer continue the indiscriminate use of the resource.
In the case of communal property, it may be possible for members to come together to take voluntary collective action to limit consumption and prevent resource depletion.
This is referred to as community management.
An agreement is made among all users of the resource to follow clear rules and guidelines.
A penalty system is administered for all users who violate the terms of the agreement.
A plan of action is also formulated to resolve conflicts.
Careful and periodic resource monitoring is required to ensure the effectiveness of regulatory measures.
CPRs have enormous economic value that contributes to the growth of a community. Resources like oil are used worldwide to facilitate production activities and modern equipment.
Since all can access them, many sections of society actively depend on such resources. Examples include tribal communities that rely on naturally occurring forests for their means of survival.
Moreover, natural resources like sea and groundwater facilitate primary activities like fishing and agriculture in developing and underdeveloped countries. They provide the means to sustain rural livelihood.
Public roads are congestible goods. These goods are shared and act as public goods when there is low demand. However, as their demand increase, they become rivalrous and serve as a common resource.
Roads are congestible goods since there is low to very little rivalry when their demand is low. A car driving on an empty road does not reduce the amount available for another vehicle.
However, when demand increases, like in the case of heavy traffic, individuals compete for space. This increases rivalry as one person driving on a busy road hinders the ability of others to do so.
Club goods are goods that are excludable but non-rivalrous.
Examples of such goods include online content and cable TV, as consumption is restricted through memberships, but one person's use does not diminish the amount available for others.
On the other hand, common resources are non-excludable but rivalrous.
Earth, as a resource available to humans, exhibits the characteristics of CPR. It is both non-excludable and rivalrous as the resources on the planet are limited. Individuals exploit these resources for their economic benefit.
This also implies Earth is susceptible to the problem of the tragedy of commons. Overuse and pollution of its resources adversely affect the entire population.
Global commons include everything to be shared by all the creatures on the planet. This consists of the air we breathe, the atmosphere, the seas and oceans, outer space, etc.
Local commons include smaller resources managed by local or tribal communities like forests and groundwater wells.
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