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How public resources can be abused. Created by Sal Khan.
Video transcript
Let's say that we have three small ponds. This is pond A, this is pond B and this is pond C over here. Let's say that this first pond right over here, it's a privately owned pond. It's owned by Al and this pond over here is owned by Carol. But this middle pond, pond B I guess we called it to start of with. This is common land, or I guess this is a common pond or this is open to the public. Let's say that Al and Carol, they're both fisher. I guess Carol would be a fisherwoman. They both like to fish, that's how they make their living. Al in his pond, he has fish in there and he does some fishing in his pond. But he makes sure not to overfish because he doesn't want to deplete the stock of fish he has. He fishes just enough that he can pay his bills and whatever else but not so much that it depletes the fish and essentially makes them extinct in his pond. He doesn't want to overfish, and Carol does the same thing. She's got fish in her pond and she uses them to make a living. She gets them out and sells them and eats them and whatever else but she's careful not to overfish because if you overfish then there wouldn't be fish. There wouldn't be a next generation of fish. Over here in this public pond, there are also fish. I'll draw there fish in orange. There are also fish in this public pond over here. They're smiling, maybe they won't be smiling for long. What is going to happen? Anyone can go and fish in this public pond. Al might say, and we'll just assume we'll in a world of two people. Obviously, the real world has more than two people. Al will say, "Okay. I'm going to be very careful "in my own pond. I'm going to fish just enough "that I don't deplete the fish there. "But any extra fish I need, I could go over here "to this public pond and fish all I want. "And I might be concerned about depletion "in the public pond except for the fact, "if I'm concerned about depletion, "that's still not going to help the situation "because other people might come "and still not be so concerned "and so I won't even get the benefit of the depletion "if I hold back and other people come "and deplete the pond." When you have this pond that is open to the public, all of the surrounding people whether it's Al or Carol or I guess you could have other people here, they would say, "Look. I'm going to fish here. "I'm going to get some benefit "and even if I overfish "the benefit of overfishing I'm going to get. "In the near term I'm going to get all of those fish." Then the cost of that overfishing which is in the future there won't be as many fish or no fish at all, that's going to be spread out amongst everyone else. So you have the situation where, because there's no one, I guess you could say, either owning this land or there's no one protecting this lake or however you want to describe it, there's a rational. And I want to be clear, rational does not always mean good. Rational act or it might decide to overfish. Essentially, by doing that, everyone's going to be [were] soft. They're going to destroy the productivity of this pond. They're going to destroy the productivity of the pond right over here. This idea that if there's this common land or common resource, in this case it was a pond and people can spread out the cause and they get the benefits directly. Essentially, you have a situation where that shared resource can get abused and this is called the tragedy of the commons. This is the tragedy of the commons where in the example we did here, the pond is the common space that's being abused. It's especially a tragedy and I've already hinted at this already, is that even if Al decides that, "Hey, you know what? I'm going to hold back a little bit. "I'm not going to fish so much "because I don't want to deplete it." He'll say, "But wait. If do that, "other people are going to come and deplete it "so I have no incentive to hold back." So other people are also going to have the same logic and then this thing is going to get overfished here. The classic example of tragedy of the commons where the example was first given was common grazing lands. Same exact idea. If this was private grazing land over here where I can keep my cows and my sheep and this is private grazing land over here where someone else has their cow and sheep but this over here is literally a commons where anyone can graze their cow and sheep. Then, just like the fishing, huge incentive for people to let their cow and sheep maybe overgraze the land, destroy the land, make it not sustainable but the cost of it are going to be shared by everyone else and the benefit of overgrazing, at least in the near term, you, the person who's overgrazing is going to get from it. You might even say, "I'm not even the one overgrazing it. "It's all of us collectively overgrazing." so you don't blame me. Now, what is the solution to the tragedy of the commons? How does a government or jurisdiction or a group of people avoid this type of destruction of a resource? Well, one way that you could do is you could make this somehow into a private land. So if that was owned by the government, it could sell it, auction it off to private people who could then sell access to this. Or if the government does retain control of it, it could sell permits to the land. In this situation, you could sell permits. It could figure out hey, if someone fishes responsibly in a given day, they're going to get, I don't know, $200 of value by doing this. We're going to make a permit cost, I don't know, $150 so that someone still has an incentive to do it but that will also limit the amount of fishing that can be there and we can have some conservationist that make sure that not too many permits are given for this space over here. We see that happening. If you wanted to go hunting, there are permits you need to have. If you want to go fishing in a lot of places, there are permits that you want to have. If you want to go camping in a lot of places, there are permits because you could even over-camp an area if too many people are walking there, too much trash is there. It could ruin the camp grounds. So this tragedy of the commons, the best way or the way most often seen, the best way of preventing the tragedy of the commons is through some type of a permitting process.