The tragedy of the commons: property rights and markets as solutions to resource and environmental problems

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By Gary D. Libecap

Abstract

In one way or another, all environmental and natural resource problems associated with overexploitation or under provision of public goods, arise from incompletely defined and enforced property rights. As a result private decision makers do not consider or internalize social benefits and costs in their production or investment actions. The gap between private and social net returns results in externalities – harmful effects on third parties: overfishing, excessive air pollution, unwarranted extraction or diversion of ground or surface water, extreme depletion of oil and gas reservoirs. These situations are all examples of the ‘The Tragedy of the Commons’. In this paper, I consider options for mitigating the losses of open access: common or group property regimes, government tax and regulation policy, more formal private property rights. I briefly summarize the problems and advantages of each option and describe why there has been move toward rights-based instruments in recent years: ITQ (individual transferable quotas), tradable emission permits, and private water rights. Introductions to the papers in the special issue follow.

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The Australian Journal of Agricultural and Resource Economics
 Growing up in Livingston, Montana, Gary Libecap was deeply influenced by the landscape surrounding his small town. In time, his professional interests focused on topics interwoven into the fabric of western society. He explores problems based on shared resources through the framework of property rights. Libecap studies the way outside factors...
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