Question

What two incentives are associated with common property that can be used to explain the tragedy of the commons?

Answer 1

A common property resource are resources which are held collectively rather than individually. Now, with an increase in population all across the globe there is a new trend called restricted common property resource but generally any common property resource is unrestricted. Ground water, lakes and parks are some of the well known common property resouces. Individuals have incentives maximize their utility given these common property resources are free in nature and as well there are no restrictions unlike in private property resources which neither free nor unrestricted(Individuals pay for the damage if any).

The tragedy of commons is the problem associated with these common property resources which are used by multiple individuals rationally upon their own self interest these resources in due time will be no longer useful. As first proposed by Garret Hardin in 1968, he quoted tragedy of commons as "the tragedy of the commons is a dilemma arising from a situation in which multiple individuals, acting independently and rationally out of their own self interest, exploit the use of a common good and ultimately render it unusable to all, despite it not being in anyone’s interest for this to happen".

Before we know how common property resources incentives lead to tragedy of commons, it is important to know free rider problem. In economics, a free rider problem arises when a good or any resource is availaible for free and individuals who are rationally have desire to maximize their utility expect others to cut their consumption while they continue to consume. This creates a situation of over consumption.

So, any common property resources is associated with a free rider problem(over consumption) which pertains due to incentives given to individuals through common property resources, both chance of maximizing their utility without any budget constraint and also individuals are required to pay for the damages or over use. This is how incentives of common property resources lead to tragedy of commons. Examples given by Hardin himself is over grazing by cattles in a common property resouce. This will lead to problems of loss fertility in soil as well as deforestation which are problems of commons.