“The Problem of the Commons: Still Unsettled after 100 Years” by Robert N. Stavins
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Transcript of “The Problem of the Commons: Still Unsettled after 100 Years” by Robert N. Stavins
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“The Problem of the Commons: Still Unsettled after 100 Years” by Robert N. Stavins
From the problem of overfishing… …to climate disruption
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Background and Context
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Stavins is a recognized expert in environmental and natural resource economics
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Stavins situates his article among others seeking to explain problems associated with “the commons”
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Purpose and Method
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Stavins wants to make the case for a price on carbon in dealing with climate change
Carbon tax Cap-and-Trade
Price on carbon
EnclosureTaxes
Individual Transferable
Quotas
Market-based remedies
Renewable natural
resourcesNon-
excludability
Open Access
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Stavins has multiple objectives for this article
Descriptive
• Explain the causes, or at least conditions, facing open-access natural resources
Prescriptive
• Propose the best policy fix for the “ultimate commons problem” of climate disruption
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Main Conclusions
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Scarcity plagues renewable resources more than non-renewable ones due to property rights regime
Renewable natural resources Non-renewable natural resources
Common Property
• Excludable
Scarcity Rent
• Reflected via price signal in the market
Increasing Stocks
• Production Ee
Open Access
• Non-excludable
Scarcity Rent
• Dissipated throughout the market
Decreasing Stocks
• Production > EMSY
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Two forms of externality arise in the case of open-access natural resources
Contemporaneous Intertemporal
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Maximizing net benefits of open-access resource production means scaling back to Ee
Economic efficiency: the point where net benefits are greatest, or where the difference between Total Benefits (TB) and Total Costs (TC) is greatest.
Equimarginal rule: the efficient level of production, or resource extraction, is where Marginal Benefit (MB) equals Marginal Cost (MC); where the slopes of TB and TC are the same.
(Keohane and Olmstead 2007)
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Conventional market-based policies can diminish producers’ welfare more than if left unregulated
Enclosure and caps/limits Taxes
Tax set at level of rent (NB)
Rent transfer from private to public sector
Social Net Benefits, Producers’ welfareLimit set at
EMSY rather than at Ee
MCP, resource stock
Over-capitalization
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Individual Transferable Quotas (ITQs) compel producers toward economically-efficient outcomes, reducing open-access externalities
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Commentary & Critique
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Effective explanation in terms of resource economics, but missing the social and political
Descriptive:Explanation and choice of subjects
Prescriptive:Economic efficiency ignores distributional justice