Stephen Salant
U. of Michigan and RFF



(Tuesday, 22nd May 2012)

Title : Commons Problems and Natural Resources

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Commons problems arise whenever self-interested agents fail to take account of the combined negative spillovers their actions inflict on others. Sometimes these spillovers have only short-run consequences---as when a person enters a packed elevator disregarding everyone else's combined distress or enters a clogged expressway, disregarding the increase in everyone else's combined commute time. Sometimes these spillovers take years to manifest themselves---until the depleted fisheries, drained aquifers, changed climate, and antibiotic- resistant bacteria make their cumulative effects undeniable. This lecture reviews the theoretical literature on commons problems with an emphasis on their occurrence in the context of natural resources. It concludes with analyses of two real-world institutions to limit excessive use of the commons: (1) catch-sharing in Japanese fisheries and (2) prorationing on Texas oil fields.

Bibliographical references :

Must read reference : M. Heintzelman, S. Salant, and S. Schott (2009), “Putting Free Riding to Work: A Partnership Solution to the Common Property Problem,” Journal of Environmental Economics and Management, 57, 309-320

G. Gaudet, M. Moreaux, and S. Salant (2002),“Private Storage of Common Property,” Journal of Environmental Economics and Management, 43, 280-302

J. Cave and S. Salant (1995), “Cartel Quotas under Majority Rule,” American Economic Review, 85, 82-102

G. Libecap and S. Wiggins (1984), “Contractual Responses to the Common Pool: Prorationing of Crude Oil Production,” American Economic Review, 74, 87-98