General Equilibrium Tragedy of the Commons

Abstract

Many poor economies depend on open access resources for their livelihoods. Households in resource-based economies allocate their time and other factors between resource extraction and other activities. As a result, factors may shift from one sector to another as marginal returns change. This has two important implications. First, it implies potentially strong linkages between resource and non-resource sectors. Second, it means that unmanaged resources cause inefficient allocations of inputs across all sectors, and the effects of resource management spill into other sectors. We construct a local general equilibrium model that accounts for inputs that over-allocate to an open access resource and create a general equilibrium tragedy of the commons. This model describes resource rent dissipation more adequately in economies with mobile factors than a model with slowly dissipating rents. Perfectly mobile factors dissipate rent in every period, but endogenous wages cause labor and capital allocations to change with the resource stock. We use the model to illustrate medium-run impacts of a limit on capital in an artisanal fishery in Honduras. Simulation results reveal that fishery management has economy-wide impacts on prices and wages. Managers in developing countries thus should consider these linkages when implementing policies to conserve fish stocks.

This is a preview of subscription content, log in to check access.

Fig. 1
Fig. 2

Notes

  1. 1.

    Without the assumption of first-degree homogeneity (i.e., with decreasing returns to scale), a residual claimant would collect an additional value.

  2. 2.

    It is possible that some inputs not in the resource sector are less productive when inputs are over-allocated to resource extraction. As inputs exit the resource sector, productivity can increase for one input.

  3. 3.

    With optimal factor allocation, the resource would receive a payment equal to its (dynamic) opportunity cost so while this is referred to as resource rent, it really refers to a factor payment required for efficiency (Manning and Uchida 2016).

  4. 4.

    The term RAS is used because of common notation for the procedure. Specifically the procedure starts with a matrix, \(A_{0}\) and produces a new matrix \(A_{1}\) by solving for row and column multipliers, \(r_i\) and \(s_j\) subject to the restriction that corresponding row and column totals are equal. In matrix notation, this can be expressed as \(A_{1}=R{A}_{0}S\), giving it the name, RAS.

  5. 5.

    Analysis of the sensitivity to this assumption can be made available upon request. The intrinsic growth rate affects the magnitude of management impacts but all qualitative results hold for intrinsic growth rates between 0.2 and 0.8.

  6. 6.

    Nationwide, Honduras had a per-capita income of US$1,880 in 2010; see IFAD, Rural Poverty in Honduras, http://www.ruralpovertyportal.org/country/home/tags/honduras.

  7. 7.

    In this setting, PROLANSATE is charged with monitoring the national parks, including fishing that occurs within park boundaries, but cannot legally enforce park rules. They report violations to appropriate authorities.

  8. 8.

    Results derived from finding the cap level that achieves maximum physical yield or rent at the new steady state.

References

  1. Abbott JK, Garber-Yonts B, Wilen JE (2010) Employment and remuneration effects of IFQs in the Bering Sea/Aleutian Islands crab fisheries. Mar Resour Econ 25(4):333–354

    Article  Google Scholar 

  2. Abbott JK, Wilen JE (2009) Rent dissipation and efficient rationalization in for-hire recreational fishing. J Environ Econ Manag 58(3):300–314

    Article  Google Scholar 

  3. Abbott JK, Wilen JE (2011) Dissecting the tragedy: a spatial model of behavior in the commons. J Environ Econ Manag 62(3):386–401

    Article  Google Scholar 

  4. Angelucci M, De Giorgi G (2009) Indirect effects of an aid program: how do cash transfers affect ineligibles’ consumption? Am Econ Rev 99(1):486–508

  5. Béné C, Hersoug B, Allison EH (2010) Not by rent alone: analysing the Pro-poor functions of small-scale fisheries in developing countries. Dev Policy Rev 28:325–358

    Article  Google Scholar 

  6. Bluffstone RA (1995) The effect of labor market performance on deforestation in developing countries under open access: an example from Rural Nepal. J Environ Econ Manag 29:42–63

    Article  Google Scholar 

  7. Boucher SR, Carter MR, Guirkinger C (2008) Risk rationing and wealth effects in credit markets: theory and implications for agricultural development. Am J Agric Econ 90(2):409–423

    Article  Google Scholar 

  8. Brooks R, Murray M, Salant S, Weise JC (1999) When is the standard analysis of common property extraction under free access correct? A game-theoretic justification for non-game-theoretic analyses. J Polit Econ 107(4):843–858

    Article  Google Scholar 

  9. Campbell HF, Lindner RK (1990) The production of fishing effort and the economic performance of license limitation programs. Land Econ 66(1):56–66

    Article  Google Scholar 

  10. Carbone JC, Smith VK (2010) Valuing ecosystem services in general equilibrium. No. w15844. National Bureau of Economic Research

  11. Cherry TL, Cotten SJ, Jones LR (2013) The appropriation of endogenously provided common-pool resources. Resour Energy Econ 35(3):329–341

    Article  Google Scholar 

  12. Clark CW (1990) Mathematical bioeconomics: the optimal management of renewable resources, 2nd edn. Wiley, New York

    Google Scholar 

  13. Costello C et al (2012) Status and solutions for the world’s unassessed fisheries. Science 338(6106):517–520

    Article  Google Scholar 

  14. Costello C, Polasky S (2008) Optimal harvesting of stochastic spatial resources. J Environ Econ Manag 56(1):1–18

    Article  Google Scholar 

  15. De Janvry A, Fafchamps M, Sadoulet E (1991) Peasant household behaviour with missing markets: some paradoxes explained. Econ J 101(409):1400–1417

    Article  Google Scholar 

  16. Ellis F (2000) The determinants of rural livelihood diversification in developing countries. J Agric Econ 51(2):289–302

    Article  Google Scholar 

  17. Finnoff D, Tschirhart J (2008) Linking dynamic economic and ecological general equilibrium models. Resour Energy Econ 30(2):91–114

    Article  Google Scholar 

  18. Finnoff D, Tschirhart J (2011) Inserting ecological detail into economic analysis: agricultural nutrient loading of an estuary fishery. Sustainability 3(10):1688–1722

    Article  Google Scholar 

  19. Espinosa JA, Smith VK (1995) Measuring the environmental consequences of trade policy: a nonmarket CGE analysis. Am J Agric Econ 77(3):772–777

    Article  Google Scholar 

  20. Fisher B, Turner RK, Morling P (2009) Defining and classifying ecosystem services for decision making. Ecol Econ 68(3):643–653

    Article  Google Scholar 

  21. Goodman DJ (2000) More reservoirs or transfers? A computable general equilibrium analysis of projected water shortages in the Arkansas River Basin. J Agric Resour Econ 25(2):698–713

  22. Gordon HS (1954) The economic theory of a common-property resource: the fishery. J Polit Econ 62(2):124–142

    Article  Google Scholar 

  23. Hannesson R (2010) The rent drain: a good measure of the gains from better resource management? Mar Resour Econ 25:3–10

    Article  Google Scholar 

  24. Hardin G (1968) The tragedy of the commons. Science 162:1243–1248

    Article  Google Scholar 

  25. Homans FR, Wilen JE (1997) A model of regulated open access resource use. J Environ Econ Manag 32(1):1–21

  26. Jacoby HG (1993) Shadow wages and peasant family labour supply: an econometric application to the Peruvian Sierra. Rev Econ Stud 60:903–921. doi:10.2307/2298105

    Article  Google Scholar 

  27. Janssen MA, Anderies JM, Joshi SR (2011) Coordination and cooperation in asymmetric commons dilemmas. Exp Econ 14(4):547–566

    Article  Google Scholar 

  28. Jardine SL, Sanchirico JN (2012) Catch share programs in developing countries: a survey of the literature. Mar Policy 36(6):1242–1254

    Article  Google Scholar 

  29. Jensen R (2007) The digital provide: information (technology), market performance, and welfare in the South Indian fisheries sector. Q J Econ 122(3):879–924

    Article  Google Scholar 

  30. Johnson AE, Cinner JE, Hardt MJ, Jacquet J, McClanahan TR, Sanchirico JN (2013) Trends, current understanding and future research priorities for artisanal coral reef fisheries research. Fish Fish 14(3):281–292

    Article  Google Scholar 

  31. Liese C, Smith MD, Kramer RA (2007) Open access in a spatially delineated artisanal fishery: the case of Minahasa, Indonesia. Environ Dev Econ 12(1):123–143

    Article  Google Scholar 

  32. López-Feldman A, Edward Taylor J (2009) Labor allocation to non-timber extraction in a Mexican rainforest community. J For Econ 15(3):205–221

    Google Scholar 

  33. Manning DT, Taylor JE, Wilen JE (2014) Market integration and natural resource use in developing countries: a linked agrarian-resource economy in Northern Honduras. Environ Dev Econ 19(02):133–155

    Article  Google Scholar 

  34. Manning DT, Taylor JE (2015) Agricultural efficiency and labor supply to common property resource collection: lessons from Rural Mexico. J Agric Resour Econ 40(3):365–386

    Google Scholar 

  35. Manning DT, Uchida H (2016) Are two rents better than none? When monopolies correct ill-defined property rights. Mar Resour Econ 31(2):141–164

    Article  Google Scholar 

  36. Murray DL (1991) Export agriculture, ecological disruption, and social inequity: some effect of pesticides in Southern Honduras. Agric Hum Values 8(4):19–29

    Article  Google Scholar 

  37. Ostrom E (2008) Tragedy of the commons. In The new palgrave dictionary of economics, pp 3573–3576

  38. Pascoe S, Greboval DF (eds) (2003) Measuring capacity in fisheries. No. 445. Food Agric Org

  39. Perroni C, Wigle RM (1994) International trade and environmental quality: how important are the linkages? Can J Econ 27:551–567

  40. Peterson D, Dwyer G, Appels D, Fry J (2005) Water trade in the southern Murray–Darling Basin. Econ Rec 81(s1):S115–S127

    Article  Google Scholar 

  41. Plourde CG (1971) Exploitation of Common property replenishable natural resources. Econ Inq 9(3):256–266

    Article  Google Scholar 

  42. Robinson EJZ, Albers HJ, Williams JC (2008) Spatial and temporal modeling of community non-timber forest extraction. J Environ Econ Manag 56(3):234–245

    Article  Google Scholar 

  43. Ruddle K, Hickey F (2008) Accounting for the mismanagement of tropical nearshore fisheries. Environ Dev Sustain 10(5):565–589

  44. Sampson GS, Sanchirico JN, Roheim CA, Bush SR, Edward Taylor J, Allison EH, Anderson JL et al (2015) Secure sustainable seafood from developing countries. Science 348(6234):504–506

    Article  Google Scholar 

  45. Samuelson PA (1974) Is the rent-collector worthy of his full hire? East Econ J 1(1):7–10

    Google Scholar 

  46. Sanchirico JN, Wilen JE (1999) Bioeconomics of spatial exploitation in a patchy environment. J Environ Econ Manag 37(2):129–150

    Article  Google Scholar 

  47. Sanchirico JN, Wilen JE (2005) Optimal spatial management of renewable resources: matching policy scope to ecosystem scale. J Environ Econ Manag 50(1):23–46

    Article  Google Scholar 

  48. Schneider MH, Zenios SA (1990) A comparative study of algorithms for matrix balancing. Oper Res 38(3):439–455

    Article  Google Scholar 

  49. Scott A (1957) Optimal utilization and control of fisheries. In: Turvey R, Wiseman J (eds) Econ Fish. F.A.O, Rome

    Google Scholar 

  50. Seung CK, Waters EC (2009) Measuring the economic linkage of Alaska fisheries: a supply-driven social accounting matrix (SDSAM) approach. Fish Res 97(1):17–23

    Article  Google Scholar 

  51. Simon CP, Blume L (1994) Mathematics for economists, vol 7. Norton, New York

    Google Scholar 

  52. Singh I, Squire L, Strauss J (eds) (1986) An overview of agricultural household models: the basic model: theory, empirical results, and policy conclusions. In Agricultural household models: extensions, applications and policy. World Bank and Johns Hopkins University Press, Baltimore, pp 17–47

  53. Smith VL (1968) Economics of production from natural resources. Am Econ Rev 58(3, Part 1):409–431

    Google Scholar 

  54. Smith VL (1974) General equilibrium with a replenishable natural resource. Rev Econ Stud 41:105–115

  55. Smith MD, Crowder LB (2011) Valuing ecosystem services with fishery rents: a lumped-parameter approach to hypoxia in the neuse river estuary. Sustainability 3(11):2229–2267

    Article  Google Scholar 

  56. Stavins S, Robert N (2011) The problem of the commons: still unsettled after 100 years. Am Econ Rev 101(1):81–108

    Article  Google Scholar 

  57. Taylor JE, Adelman I (2003) Agricultural household models: genesis, evolution, and extensions. Rev Econ Househ 1:33–58

    Article  Google Scholar 

  58. Taylor JE, Filipski M (2014) Beyond experiments in development economics: local economy-wide impact evaluation. Oxford University Press, Oxford

    Google Scholar 

  59. Velázquez E, Cardenete MA, Hewings GJD (2007) Water price and water reallocation in Andalusia: a computable general equilibrium approach. No. 07.04. 2007

  60. Weitzman M (1974) Free access vs. private ownership as alternative systems for man-aging common property. J Econ Theory 8:225–234

    Article  Google Scholar 

  61. Weninger Q, McConnell KE (2000) Buyback programs in commercial fisheries: efficiency versus transfers. Can J Econ 33(2):394–412

    Article  Google Scholar 

  62. Wilen J (1979) Regulatory implications of alternative models of fishermen behavior. J Fish Res Board Can 36(7):855–858

    Article  Google Scholar 

  63. Wilen J (2013) The challenges of pro-poor fisheries reform. Mar Resour Econ 28(3):203–220

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Dale T. Manning.

Appendix: Modified Social Accounting Matrix for Northern Honduras Fishing Communities

Appendix: Modified Social Accounting Matrix for Northern Honduras Fishing Communities

See Table 8.

Table 8 Tela Bay area communities social accounting matrix (Millions of Lempiras)

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Manning, D.T., Taylor, J.E. & Wilen, J.E. General Equilibrium Tragedy of the Commons. Environ Resource Econ 69, 75–101 (2018). https://doi.org/10.1007/s10640-016-0066-7

Download citation

Keywords

  • General equilibrium
  • Economic linkages
  • Open access natural resources
  • Artisanal fishery
  • Resource management