Prizatization of Resources to Promote Sustainability

I've written on the concept of the Tragedy of the Commons in the past. An example in Field's Natural Resource Economics presents more than one potential solution to the problem of over-consumption in the commons, exacerbated by the lack of property rights in the world's oceans:

The tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently, and solely and rationally consulting their own self-interest, will lower the yield a shared limited resource, even to the point of ultimately depleting it, even when it is clear that it is not in everyone's short or long term interest for this to happen.

The net result is that no individual has any economic incentive to practice sustainable harvesting of fish, and in fact has the opposite incentive; if others are harvesting greater amounts, they are receiving greater compensation in the market for producing greater quantities of goods. This creates a situation whereby depletion of natural resources happens at an ever-increasing rate, with the end result being a supply of fish unable to meet the demand. The responsible firm who practices sustainable fishing in fact drives themselves out of the market. Each firm has an incentive to harvest as much as possible and deliver those goods to the market, guaranteeing each a continued ability to operate and profit.

Another unfortunate effect of this concept in practice is through the act of prohibition by the state. When a particular market for goods or services is prohibited through fiat, that simply drives the market underground, rather than bringing an end to that particular market. Prohibition also has an incentivizing effect on that market, as it drives up the potential profits due to the heightened risks associated with the black market demand. The illegal drug trade is one such example, with the inherent violence associated being an unfortunate unintended consequence of prohibition (see also alcohol prohibition).

One solution with proven effectiveness is the privatization of those resources at risk of depletion by over consumption. With the evident reversal in the decline in the populations of elephants, where the prohibition of poaching elephants had little effect in Kenya compared to implementing a property rights scheme in Zimbabwe, it becomes apparent that under the right circumstances, the free market is more effective at alleviating over-consumption of resources than efforts by governments.

As long as profit is the motive for exchange, the concept of the Tragedy of the Commons will likely continue in practice to present a need to consider implementing property rights schemes that encourage sustainability over the long term. Property rights promote a long-term sustainability by creating a system whereby profits can be guaranteed in the future, but only by moderating trade in resources today.