EconPort - Introduction

An economic good is a tangible item that can be purchased and traded within a market. Common-pool resources (CPR's, or common resources) make up a distinct class of economic goods differentiable from other more conventional economic goods. A common resource possesses two attributes which distinguish it from other economic goods: the good is subtractable, or rival, and non-exclusive, or non-excludable (Ostrom, Gardner and Walker, 1994).

Subtractability implies that one individual's use of the resource reduces the level of the resource available for other users. For example oil companies extract a natural resource that is highly subtractable. Each barrel of oil that is removed from the earth's crust reduces the amount of oil available for use by one barrel. This is a common characteristic of non-renewable natural resources.

Having a common-pool resource be non-exclusive implies that it is impossible or infeasible to exclude others from appropriating the good. For instance, many tropical fisheries are managed according to an "open-access" rule. This means that all those interested in harvesting fish within these fisheries has free access to the resource. A public good also possesses this property, but a common resource is different from a public good because it is subtractable, or rival, while a public good is non-subtractable, or non-rival.

Using the table we saw in the section on Public Goods, we classify common-pool resources as under:
[Note: For more details on each category in the table, see the section on the Classification Table.]

Excludable:
	Yes	No
Subtractable: Yes	Private Goods	Common-Pool Resources
No	Club Goods	Public Goods

Examples of Common-Pool Resources

Fisheries
Forests
Minerals (to a degree)
Irrigation districts
Groundwater basins
Clean, unpolluted air

The Tragedy of the Commons

Garrett Hardin first coined the phrase, "The tragedy of the commons" in his 1968 article, to describe how damaging the effect of free-riding is on goods which are subtractable but non-excludable. Although the paper itself focuses (very melodramatically) on the now-discredited Malthusian idea that population growth will eventually outstrip the growth of resources on one small planet, the phrase itself and the remaining examples in the paper are still illustrative.

Hardin took his use of the word "tragedy" from the philosopher Whitehead, whom he quotes: "The essence of dramatic tragedy is not unhappiness. It resides in the solemnity of the remorseless working of things." The reference is to how individuals, while maximizing their own utility, will use the commons to the maximum possible, or fail to maintain it,
thereby leading to its deterioration and eventual destruction.

The Parable of the Pasture

This is perhaps the most famous of Hardin's many examples of misuse & overuse of a common resource. Imagine a pasture near a village, where every shepherd and cattle-herder in the community takes his animals to graze. Not only will everyone want their animals to eat their fill, but if access to the pasture is free and unrestricted, they will own as large a herd as they possibly can -- restricted only by stable space available -- since that would be the most profitable.

However, if everyone in the village lets large herds of animals graze freely on the pasture, and there is no-one to look after the grass, eventually there won't be any vegetation left at all on the pasture. In a nutshell, this is the trouble with common-pool resources. How can the village solve this problem?

The "government" solution: Regulate access to the pasture, and/or raise taxes for its upkeep.
One of numerous "private-sector" solutions: auction off grazing rights to the highest bidder; split the pasture into small plots and sell them to individual shepherds, so that each one's animals can graze only on their own property, and so on.

Each possible solution has some advantages and disadvantages, and in the real world, nations and communities tend to choose -- or arrive at, by a process of trial and error -- different solutions for particular issues of the commons, depending on each case. Often the solution is a mix of private & public, or governmental. Radio, network television, and mobile-phone spectrum is auctioned to the highest bidder -- by the government. Ranchers let their animals graze only on their own property; mines and oil rigs also drill & operate on land they own, which they may or may not have pruchased through an auction. Parks and beaches, on the other hand, are normally maintained using taxes, and sometimes, in the case of national parks, restricting access by charging for tickets. (Or, in the case of beaches in the city of Los Angeles, restricting access through prohibitively expensive parking in nearby lots.)

Then there is the case of pollution control, which, until recently, was thought of as enforceable only through fines for violation of limits set by a regulatory body. However, in recent years, tradeable pollution permits have aimed at creating a market where low polluters sell their pollution rights to high polluters, effectively "privatizing" (to use the term loosely) the solution to a severe commons problem. New "smart radio" technology, currently being developed, may well eliminate the need for exclusive use of a particular band of the airwaves.

See the section on solving the problem of the commons for more details on public versus private solutions.

References

Hardin, Garrett, "The Tragedy of the Commons", Science, Vol 162, Issue 3859, 1243-1248 , 13 December 1968