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Public Goods and Common Goods 4 Common Pool Goods - YouTube
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- Let me go ahead
[2]
and now talk about what are
called common goods
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or sometimes common
pool resources.
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So these are goods that are
non-excludable but rival.
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So we can't stop people
from using them,
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and one person's use makes
another person worse off.
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And before we go too far
into this, let me go ahead
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and talk about what is known
as the economic concept
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of congestion.
[40]
So congestion refers to
the following sort of idea.
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Let's think about a road.
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And if we have a road
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where nobody is driving on it
and it's public access,
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then a public access,
uncongested road,
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the fact that it's public access
means that it's non-excludable.
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The fact that it's uncongested
means I can drive on there
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without making traffic
any worse for anyone else.
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So to say something is
uncongested
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is to say that the marginal cost
per user is approximately
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zero which is also to say
that the good is non-rival.
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So an uncongested public
road is a public good
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in the economic
sense of the word,
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but as more and more
people start driving on it,
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then the total costs that are
being imposed on other people
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due to traffic start to rise.
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And at first, it's a very
small marginal cost.
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I only make everyone
else very slightly worse
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off when I drive on the road,
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but as more and more
people drive on the road,
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it gets worse and worse
and worse until finally
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there is that straw
that broke the camel's back
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and adding one more car causes
an accident and gridlock.
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So congestion refers
to this idea
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that many public goods
out there
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actually have a certain
level of capacity.
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And as you get close
to that level of capacity,
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then the non-rival nature
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of the public good starts
to go away.
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So a public
access congested road
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is a kind of common
pool resource.
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It's non-excludable
because it's public access,
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and it's a rival good
because each car
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that we add
to this already-congested road
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makes the traffic a little
bit worse for everyone else.
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There are lots of other examples
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out there of common
pool resources.
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Many of them are actual natural
resource examples out there,
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so we can think of fish
in the ocean.
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We can think of beavers
that were un-owned by anyone
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back in the colonial period,
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and so they were hunted
near to extinction
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or something like that.
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We could also think of--
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we have the classic example
here is a grazing commons.
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So in older
agricultural societies,
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there is the cropland which is
typically private property,
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and then there is
a village commons
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which everyone is allowed
to graze their animals on.
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And there was sort of a famous
paper written by a biologist
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back in the late 1960's called
"The Tragedy of the Commons"
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which sort of alludes
to this problem that when I
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put an additional animal
on the pasture,
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I get all of the benefits
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but only pay 1 over N where N is
the number of other users,
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1/Nth of the cost,
which is exactly
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like the situation
of oligopoly again.
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When an oligopolist sells 1
more unit,
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they get all the benefits
of selling it,
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but they only suffer
1/Nth of the harm
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because a lot of the harm falls
on all the other people
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in proportion
to their market share.
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So just like that, we often
use a prisoner's dilemma game
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to analyze a situation
that has a common pool resource.
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We can also think of it
as an example
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of a negative externality.
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So equivalently, we could think
about negative externality,
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and that suggests one
of the potential answers
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or ways of regulating
a common pool
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resource to avoid this "Tragedy
of the Commons" problem.
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We could think of
charging people a fee
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for putting their animals
on the common grazing area,
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or we could think about what's
called congestion pricing
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where we're going to go ahead
and have people pay a toll
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to go on a road
and maybe even the size
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of the toll varies according
to traffic conditions.
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And some cities
like London have implemented
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things exactly
like that.
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So those are some of
the solutions out there.
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Another solution is to
potentially split up the common.
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If we make it so that we
divide the common land up
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and it's now private property,
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then we've gotten rid of this
whole non-excludability problem
[340]
and we're back
to having private goods.
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And we think that the market
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will tend to allocate
private goods efficiently,
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maybe not equally or fairly--
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that's a whole separate
topic of conversation--
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but it will tend to provide
these things efficiently.
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So common pool resources are
definitely going to be
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an example of a market failure.
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And to sort of go back to our
original classification scheme,
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there is a sort of evolution
that tends to happen.
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So when we look at lots
of resources out there,
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at very, very low
population densities
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or very low intensity of use,
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a natural resource would
probably be non-rival
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and non-excludable.
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So let's suppose
we think of this as land use
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when we had hunters
and gatherers
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because there is enough land
that it's not really sort
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of a strain to support
one more person out there,
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and typically
property rights are
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not really strictly enforced at
least at the individual level.
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They might be enforced
at the level of a whole tribe,
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that one tribe wouldn't
want another tribe
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to come and roam
on their territory,
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but they're not
enforced at the level
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of maybe a single individual.
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Then as populations grow
and use becomes more intensive,
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people start to become rivals.
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So as population growth goes
up here,
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we move into this rival
but non-excludable
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because societies have not yet
invented social institutions
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for moderating people's use,
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or regulating
people's use.
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So then at that point,
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we're going to see
that societies
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are going to face a choice.
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Either they can invent
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some kind of social
institution-- you know,
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you get to hunt on a Monday,
I get to hunt on a Tuesday,
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assuming people keep
a calendar--
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or they're going to go ahead
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and have some kind of private
property or something like that.
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So then essentially,
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people are going
to invent social institutions
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that are going to go ahead
and shift us over to here.
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One way of looking at all
this is also something
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like the ability of the earth
to absorb carbon dioxide--
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or earth's atmosphere,
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more technically-- used
to not be a problem.
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The earth used to have plenty
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of ability
to absorb carbon dioxide,
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and so one person's
carbon dioxide emissions
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didn't make anyone
else worse off.
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And we had no legal
or technological institutions
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to enforce excludability.
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But as we have emitted
more carbon dioxide,
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then we have entered a situation
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where people have become rivals
in the sense
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that my carbon dioxide
emissions make the situation
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a little bit worse
for everyone else.
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So we're now in this area
with something like CO2,
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and we are in the process of
inventing societal institutions
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to in some way regulate
people's use.
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And it could be that we
have tradable emissions permits
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which are essentially one way
of creating private property
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in the emission
of carbon dioxide.
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Likewise, when the West was
originally settled by whites,
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water was pretty plentiful,
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and people didn't worry
that much about it.
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And then as time went on,
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water became more scarce because
more people were farming,
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and so we
have water rights assigned.
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So you can see that same sort
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of transition from a situation
of sort of primordial plenty,
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I guess you would call it,
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to a situation where we
have problems associated
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with the overuse of it,
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and then we invent some sort
of social institution.
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It might be a social custom.
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It might be
a regulatory apparatus.
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It might be a tax on people
who use the common.
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It might be private property,
some kind of solution
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out there that is going
to allow us to escape
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this very inefficient situation.
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Another thing to say here in all
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this is markets tend
to be really efficient
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at providing these rival,
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excludable, private goods.
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That would be the thing
the market is most efficient at.
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Markets also tend
to provide these non-rival,
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excludable goods,
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so something like movies
and intellectual property,
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but there is some level
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of inefficiency associated
with this.
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Markets might not
provide public goods at all.
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In the example I did before,
the numerical example,
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there was a level of provision
of the public good,
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but it was
at a less-than-efficient level.
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And then finally,
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increasing economic activity is
actually going to make
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the situation of
a common resource worse.
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The more people we have and the
higher-productivity equipment
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we have and bring
to bear on these situations
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of common pool resources,
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the worse the situation gets.
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So this is--
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whoa there, okay--
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the worst situation here
of these common pool resources.
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So we can sort
of think about how well
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the market functions with
these various types of goods.
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