Question

4. (a) Describe and explain “Tragedy of the Commons”. What implications does it have on the pollution problems in terms of whom to be assigned the responsibility of “fixing” it? (b) Apply “tragedy of the commons” to the BP Oil Spill in the Gulf of Mexico in 2010. Explain why it happened (to the extent that it did) and what could have been done (prior to the incident) that could have reduced the probability of it happening. (c) After the incident, Obama vowed to fix this. He ordered a moratorium (temporary suspension of ALL oil rigs in the Gulf). Who does this moratorium benefit?

Answer 1

4a)Tragedy of commons refers to the situation in shared resource system where the individual users are concerned about their own self interest ,totally ignoring the benefits of the common people.The resources get exhausted by the constant use by the individual users. This term is used in environmental science.Deforestation is an eg of tragedy of the commons. Tragedy of commons deplete the resources through over-consumption and no one has an incentive to maintain it.Thus there is under investment and it gives rise to serious economic problem.One solution for fixing it is to convert common good into private property and the new owner should be given the responsibility of sustaining it.Government regulation , collective action arrangement can help in fixing it.

b)BP oil spill of 2010 is one of the biggest environmental disasters in the American history.The US government report pointed to defective cement on the well ,BP and its partners cost cutting decisions,Inadequate safety system of BP,etc.They also pointed out that that this might recur if the systemic root causes are not addressed and reforms are made in the industrial practices and government policies.The accident in the rig could have been prevented by BP workers,had they been consulted.BP workers did not take the device of the engineer who visited the rig . Had the engineer been consulted, this might not have happened.

c)After the BP oil spill the government imposed a moratorium on deep water oil drilling in the Gulf of Mexico.The question is whether BP should be considered at fault for moratorium related economic losses .Apparently BP should not be penalised because even though the moratorium was a result of the spill ,it is a event which is beneficial to the society as it will prevent any such occurrence in future. But the Obama administration is of the view that BP should be held responsible and should pay for the losses..Thus if we consider the risk reduction benefit of the moratorium which is more than the moratorium related losses ,then the moratorium is beneficial to the society and is a socially desirable event.