1.

Define common-pool natural resources relative to both private goods and pure public

goods. Provide an example. In detail, discuss what sort of rules might prevent the commons

(common pool resources) from being overused.

A common resource pool can be thought of as the flow of resource units or benefits that are

generated by these systems. The stock, also known as the facility, is the component of the system

that generates an ongoing flow of resource units or benefits, and it is referred to in a variety of

different ways depending on the context. The aforementioned lakes, rivers, groundwater basins,

forested areas, fishing stocks, and grazing areas are all examples of resources that are managed

as part of a common-pool resource system. One example of this would be the resources available

for fishing. Internet and mainframe computers are two examples of facilities that are examples of

common-pool resource systems, which are shared resources. This category of facilities is also

known as shared resources. Water, timber, medicinal plants, fish, fodder, central processing

units, and connection time are just some of the resource units or benefits that can be derived from

a common pool resource. Other examples include medicinal plants, fish, fodder, and medicinal

plants (Understanding Water Markets: Public vs. Private Goods, 2015). There are also plants

used for medical purposes that can be considered resources. In order to ensure the long-term

viability of the utilisation of a shared resource, it is necessary to have certain rules that restrict

access, as well as other rules that restrict the amount of time and technology that can be used to

remove various resource units from the system that houses the common pool of resources. Both

kinds of rules are necessary in order to manage a resource and the flow of that resource in a

sustainable manner.

The "tragedy of the commons" is a central tenet of economic theory. It raises the issue of the

exploitation of natural resources or resources without clearly defined property rights. It usually
occurs when excluding potential users from common property resources becomes difficult,

costly, and time-consuming. The conditions are ideal for a typical property dispute, to put it

simply. "The tragedy of the commons" was first coined by Garrett Hardin in 1968, when he

published an article in the journal Science discussing it. Using a publicly accessible pasture,

Hardin tried to demonstrate his theory in the article he co-wrote, which was published alongside

it. Selling the animals of each herder brought in a significant profit in this situation. Because

overgrazing was so cheap for them, they did it.

As a result of the pastured's profitability, an increasing number of herders moved their flocks

there. Even when the number of animals on the pasture exceeded its capacity to regenerate, both

current and potential herders were highly motivated to add more animals because there were no

property rights defined and, as a result, there was no private cost(Understanding Water Markets:

Public vs. Private Goods, 2015). However, they imposed a significant external cost when they

reduced the amount of grass that was available for others. The imposition of a toll tax on

motorists travelling over heavily travelled bridges is one strategy for addressing the externality

issue that is caused by such bridges. Economists from all over the world have proposed the

implementation of a general solution that involves a higher toll tax rate during peak hours and a

lower rate during nonpeak hours. Congestion and wait times in traffic are thereby decreased. In

the case of fisheries on private property, the licence fees will have no influence on the amount of

time spent fishing, whereas the tax will always have that effect. In fisheries with unrestricted

access, on the other hand, both tools will have the same effect of cutting down on fishing effort.

This is due to the fact that the point where the total cost line and the total benefit line meet is

where the equilibrium occurs. As a result of the fact that the licence fee and the tax both bring in

the same amount of revenue, they both contribute the same amount to the overall cost.
Example:

A common-pool resource like a stock of fish is the most recognisable example of its kind (CPR).

Rightly, fisheries economics literature focuses on issues arising from a rule of capture and each

individual's incentive to compete for the unowned resource. The fact that all members have

access to the stock of fish, which is a key factor in production, has received far less attention than

it should have. When we take a closer look at the second issue, we can see how coordination can

bring to light policies that are frequently overlooked in academic literature.

Recent advances in fisheries management have relied heavily on granting fishery users special

access privileges. To date, the economics literature has focused on two rights-based management

(RBM) strategies: individual transferable quotas (ITQ) that allocate quantifiable harvest rights to

individuals, and territorial use protections fisheries (TURFs) that do so on a spatial basis. It has

attracted scant attention, despite having forebears in forms of ordinarily marine tenure that have

been used by many island cultures for hundreds of years.

3 Explain the concept of an externality and show how externalities lead to market failure

and inefficient allocation of resources.

It is possible to define an externality as the uncompensated impact that the activities (production

or consumption) of one person has on the health and happiness of a third party. It's possible for

there to be both positive and negative externalities. Extra costs or benefits that are generated by a

producer, but which are not transferred to or incurred by that producer, are referred to as

externalities. To boil it down, externalities are effects that are felt by third parties in markets

where production and consumption do not directly involve those third parties (Market Failures,

Public Goods, and Externalities - Econlib, 2012). The majority of the time, these externalities
refer to aspects of the environment, such as public health as well as the consumption and

distribution of natural resources. A significant number of the technical externalities are

frequently categorised as market deficiencies, and lobbyists urge governments to act on them by

passing the relevant legislation. Externalities have the potential to bring about market failure if

they are not addressed. It is not always the case that the price equilibrium of products that exhibit

externalities accurately reflects the true benefits or costs to society. Individuals may make

decisions that have further negative effects on all of the parties involved when the equilibrium

does not represent an optimal level of production. This is what happens when there is a problem

with the market.

A market failure can be indicated by too much production, and unrepresentative price, and

uncontrolled pollution in what is essentially caused by a negative externality. On the other hand,

positive externalities are often omitted when consumers try to account for benefits due, which

can lead to market failure.

The second effect of externalities is the misallocation of resources. There is an excess production

of products that have negative externalities, and the cost of collecting the negative externality is

not reflected in the private cost of the product. Therefore, resources from somewhere else are

redirected to fix these negative externalities in order to avoid disrupting production or shifting

the responsibility to the producers themselves (Market Failures, Public Goods, and Externalities

- Econlib, 2012). In addition, customers and positive externalities frequently result in low

investment because there is a low return on investment (ROI). This indicates that initiatives or

businesses that bring more positive social externalities are more prevalent than those that bring

about undesirable social outcomes. A negative externality is one in which the behavior of one

person has an effect that is detrimental to another (for example, smoking), while a positive
externality is one in which the behavior of one person has an effect that is advantageous to

another (example-education). In light of the current state of the aluminum industry, it is

important to note that the factories not only pollute the surrounding air but also the river. When

aluminum is produced, a certain amount of smoke is released into the atmosphere. This amount

is proportional to the amount of aluminum produced. A negative externality exists here due to

the fact that those who breathe in this smoke are put in danger of developing health problems. As

a result of the externality, the cost of producing aluminum to society is significantly higher than

the cost to the producers of aluminum themselves (Market Failures, Public Goods, and

Externalities - Econlib, 2012). The private costs incurred by aluminum producers are factored

into the overall social cost, which also accounts for the costs incurred by bystanders who are

adversely affected by the pollution caused by aluminum production. Due to the fact that it takes

into account the external costs that are imposed on society by the production of aluminum, the

social cost curve will be located above the supply curve.

The quantity of aluminum that has reached equilibrium, denoted by the symbol Qm, is greater

than the quantity that would be considered socially optimal. This inefficiency arises due to the

fact that the market equilibrium only reflects the costs of production incurred by private parties.

Aluminum has a value that is determined by the market that is lower than the social cost of

producing it when the market is in equilibrium. The demand curve is located below the social

cost curve when QM is taken into account. Because of this, the private cost curve shifts to the

left as the social cost curve does, and as a result, we have a lower socially optimum equilibrium

quantity for aluminum, which demonstrates that the market is failing.

5. Discuss in detail key policies promoting sustainable production and consumption.

Utilizing the natural environment and its resources in a manner that continues to have negative

effects on the planet is the foundation upon which the production and consumption that take

place on a global scale are based. This gives the global economy its driving force.

The environmental degradation that has been observed in the course of economic and social

development over the course of the past century is putting at risk the very systems that will

determine the course of future progress and whether or not humanity will survive.

The goal of sustainable consumption and production, also known as SCP, is to produce more

with fewer resources(OECD, 2008). It is also about uncoupling economic growth from the

degradation of the environment, increasing the efficiency of using resources, and promoting

sustainable lifestyles.

The elimination of poverty and the transition toward low-carbon and environmentally friendly

economies can both significantly benefit from sustainable consumption and production practices.

The SCP is an integrative approach that focuses on systemic transformation. It is built

around three primary goals, which are as follows:

 Differentiating between the effects of economic expansion and the degradation of the

environment. Reducing pollution and depletion of natural resources throughout the life

cycle is a great way to increase the net welfare benefits of economic activity while also

improving human well-being (Boulanger, 2010). The net welfare benefits will rise as a

result of these actions. In terms of goods and services, it is possible to provide "more"

while using less resources, degrading the environment, generating less waste, and

polluting the environment.

  Application of life cycle thinking: Improved sustainable resource management and a

more efficient use of resources is the goal of this effort. Extraction of raw materials,

manufacturing of intermediate products for input producing, distribution, advertising,

use, disposal, and recycle waste are all included in this category. Distribution, marketing,

and use of waste, as well as disposal and reuse of waste, are also included.

 Developing countries can choose between "leaps" and "options" for determining

dimensions. As part of the United Nations Millennium Development Goals, the

Sustainable Community Program contributes to the overall goal of eliminating poverty

and achieving the Millennium Development Goals (Boulanger, 2010). It is possible that

the SCP will bring new markets and jobs, as well as better and more efficient use of

natural resources to developing countries. An opportunity to "leap" toward innovations

that are more resource-efficient, greener, and more competitive while avoiding the

inefficient, polluting, and finally expensive stages of the project followed by the vast bulk

of developed countries exists.

Obstacles to environmentally responsible consumption and production

Despite the fact that one billion people are malnourished and another one billion go to bed

hungry every night, 1.3 billion tonnes of food are lost or wasted every year. This is despite the

fact that one billion people are undernourished. Households are responsible for 21 percent of the

world's total CO2 emissions and consume more than one-third of the energy that is produced

globally (29 percent). Rivers and lakes around the world are becoming polluted at a rate that is

significantly faster than nature can recycle and purify the water.

Options for more environmentally responsible consumption and production

It is imperative that food waste be reduced by all parties involved, including food manufacturers,

food retailers, and individual consumers. To save 120 billion dollars annually and prevent 16

billion tonnes of carbon emissions over the next 25 years, make the switch to lighting that is

more energy efficient. It is imperative that a reduction be made in the quantity of waste and

chemicals that are permitted to be discharged into the atmosphere, water, and soil.

Performance standards and labels that are required by the government are among the obligatory

measures that have been taken by the government in order to encourage environmentally

responsible consumption. These standards and labels are designed to limit the amount of product

damage that occurs as a result of consumption or use. These instruments are the most direct

policy instruments that can be used to take unsustainable products off the market, which is an

important aspect of changing consumption patterns(OECD, 2008). It is strongly recommended

that governments regulate more products in order to protect the environment and advance the

general welfare. The majority of OECD nations have adopted energy efficiency standards for a

wide range of home appliances, the most common of which are refrigerators, air conditioners,

washers and dryers, heating, ovens, and lighting.

Taxes and fees have the potential to effectively influence consumer behavior with regard to

sustainability if they are used to raise the price of products that are less sustainable. Internalizing

negative externalities is made easier with the assistance of these tools, which also give the

market the ability to assume a more active role in the process of altering consumers' shopping

habits(OECD, 2008). When compared to regulations, which frequently call for significant efforts

to be put into their enforcement and monitoring, taxes and fees may prove to be more profitable.

From an economic point of view, taxes are more effective than regulations, and they give

households and businesses more leeway to adapt to changing circumstances.

When applied to individuals and their homes, taxes and other types of charges have the potential

to reduce emissions from automobiles (e.g., fuel taxes, registration or purchase taxes, and

congestion charges) (Boulanger, 2010). Consumption of household energy (such as taxes on

carbon dioxide or electricity), consumption of household water, and consumption of household

waste (e.g. taxes on disposal). In the field of public health, taxes are most frequently used to

discourage the consumption of alcoholic beverages and tobacco products.

References
Boulanger, P.-M. (2010). Three strategies for sustainable consumption. S.A.P.I.EN.S. Surveys

and Perspectives Integrating Environment and Society, 3.2.

https://journals.openedition.org/sapiens/1022

Market Failures, Public Goods, and Externalities - Econlib. (2012). Econlib.

https://www.econlib.org/library/Topics/College/marketfailures.html

Microeconomics The Efficiency of Private Exchange. (n.d.).

https://www.csun.edu/sites/default/files/micro9.pdf

OECD. (2008). Promoting Sustainable Consumption GOOD PRACTICES IN OECD

COUNTRIES. https://www.oecd.org/greengrowth/40317373.pdf

Public and Private Goods / The Tragedy of the Commons | GEOG/EME 432: Energy Policy.

(n.d.). Www.e-Education.psu.edu. https://www.e-education.psu.edu/geog432/node/277

Understanding water markets: Public vs. private goods. (2015, April 27). Global Water Forum.

https://globalwaterforum.org/2015/04/27/understanding-water-markets-public-vs-

private-goods/