Distinguish an open access resource from a commons and explain how Elinor Ostrom’s critique
of Garret Hardin pivots on this distinction. Give an example.
Talk about how introducing social behavior or how taxes can influence people to not free
ride
Hardin introduces the “tragedy of the commons” which makes the assumption that in a
market economy, individuals are only self-interested and do not care about any other interests.
Hardin introduces a thought experiment in which two shepherds share a pasture that he labels as
a common, is overly grazed as each shepherd tries to maximize their personal profits and have
their sheep be better, with no regard for the land. However, Ostrom makes a clear distinction
between a common and an open access resource, and believes that Hardin mislabeled the pasture
in his example. The pasture is instead an open access resource which is defined as an
all-inclusive resource that is not able to stop people from consuming it. Another example of an
open access resource is the ocean. A common is instead a resource that is held under the regime
of common property by a human group. Ostrom makes an important argument on this distinction
as she claims that if the pasture in Hardin’s example was truly a common, it would not be overly
exploited. She makes this case by stating that there is more than just self-interest when using
resources as there can be punishment for free-riders (those who gain all the benefits in a decision
without contributing anything of their own) or other consequences such as a damaged reputation.
She instead makes the argument that “efficient cooperation is possible and it is self-determined”
(Laurent Chapter 3 Page 33).
Contrast two normative approaches to evaluating outcomes of environmental policy (note that
the efficiency criterion from cost benefit analysis is one such normative approach, too). As an
example use a price on carbon or an example of your choice.
​“Cost-benefit analysis can be applied equally well to static problems (only one period in which
costs and benefits arise) and dynamic problems (multiple periods in which cost and/or benefits
arise).” Discuss.
There is use value, but there is also non-use value. Cost benefit analysis only looks at the
use value, which applies well to static problems as
Graphic diagram breakdown of use vs non use
Talk about discounting
Talk about Ackerman and Heizerling
Suppose David Ricardo’s corn model of growth was used to characterize the current economy
and possible obstacles to current and future growth. To the best of your abilities, try to translate
Ricardo’s categories and mechanisms into those relevant to today. Do you think the model is
useful for thinking about today’s obstacles to economic growth? Why or why not?
David Ricardo was an economist who was heavily influenced by Mathus and his model
of economic growth in relation to human population growth. However, Ricardo’s model focuses
on agricultural rent. In his corn model of growth, there are three factors that are determined
during production of corn: wages, profits, and rent. Ricardo makes many assumptions in his
model, one of which wages for workers are set at a level that is subsistence. He assumes that the
most fertile lands are first used in production, however, when demand increases past the
production capability, less fertile lands are then used. This leads to lower productivity on these
lands and his theory of “diminishing returns” as the less productive lands lead to a higher unit
cost of production and a higher selling price of the units. Thus there is a “differential rent” since
some landowners own a more productive and fertile land and can produce more from these lands.
In his model, there is a decline of output and eventually the production from the land does not
even cover the cost of the wages themselves. This is the “stationary state” where no profits are
made and there is no room for economic growth. However, even Ricardo believed that
globalization (trade with other markets) and new technologies could be solutions to the law of
diminishing returns.
I think Ricardo’s model can be applied to our world today to a certain extent. I think of
the United State’s affinity for using fossil fuels for economic growth, as it is one of the cheapest
fuel sources. However, since the United States does not have that much oil, we have turned to
“less fertile lands” (offshore drilling which isn’t actually less fertile it is just more expensive to
produce). However, since oil is not plentiful and instead is a finite resource, there is this
“diminishing return” that Ricardo points out and eventually the economy will reach a stationary
state. Even his solutions have been applied, as the United States imports much of its oil and there
has been a large push for new technologies such as renewable energy sources to replace oil
consumption. So although the application is not perfect, I think some aspects are relevant. The
most useful part of Ricardo’s model is that the most fertile lands are used first, as this can apply
to the cheapest option: the cheapest labor, the cheapest fuel source, etc. This is important when
looking at developing countries, such as India, as now with the climate crisis there is a call to not
use fossil fuels, yet this is the “best and quickest way” to develop a country— it just is not a
sustainable way. I think this way of thinking in Ricardo’s model is very important when
analyzing the modern world. However, many current economists are not pushing for
unsustainable growth. Jayant Singah, an economist and former parliament member of India, gave
a talk at UMass which discussed sustainable development for India, that strayed from Ricardo’s
model and instead thought that green technology would be even better for quick development.