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Governing the Commons notes Chapter 1-3Governing the Commons notes Chapter 1-3.doc

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Chapter 1 1, Issue: How best to limit the use of natural resources so as to ensure their long-term economic viability. Three advocates to solve the problem of common-pool resource: ? Central regulation ? Privatization ? Regulation by those involved 2, Three influential models: A, The tragedy of the commons: used to symbolize the degradation of the environment to be expected whenever many individuals use a scare resource in common. (Garrett Hardin) Example: Rational herder. Each herder receives a direct benefit from his own animals and suffers delayed costs from the deterioration of the commons when his and others’ cattle overgraze. Each herder is motivated to add more and more animals because he receives the direct benefit of his own animals and bears only a share of the costs resulting from overgrazing. By Gordon: everybody’s property is nobody’s property. The fish in the sea are valueless to the fisherman, because there is no assurance that they will be there for him tomorrow if they are left behind today. By Clark: Where a number of users have access to common-pool resource, the total of resource units withdrawn from the resource will be greater than the optimal economic level of withdrawal. B, The prisoner’s dilemma game: a non-cooperative game in which all players possess complete information. In prisoner dilemma, each player has a dominant strategy in the sense that the player is always better off choosing this strategy, no matter what the other player chooses. When both players choose their dominant strategy, given these assumptions, they produce an equilibrium that is the third best result for both. Neither has an incentive to change that is independent of the strategy choice of the other. The equilibrium resulting from each player selecting his or her “best” individual strategy is, however, not a Pareto-optimal outcome. Paradox that individually rational strategies lead to collectively irrational outcomes seems to challenge a fundamental faith that ra