What is something that motivates your action, your self-interest? Is it to earn as much profit as you want? Or is it to fulfil your social responsibility? This can vary by individual and this topic is tied very closely with what we're going to discuss today, market failure of common pool resources.
Let’s start off by understanding common pool resources (CPR) which are resources that no one owns, don’t have a price for their use and are available to anyone to use without payment—for example, forests, open seas, lakes, rivers, clear air and the ozone layer.
Now, let’s ask ourselves, is our current generation’s habit sustainable? Quite clearly, the answer is no. The current use of resources compromises the ability of future generations to meet their needs. The resources are being depleted at a faster rate than we are replenishing them and we are polluting the natural environment to such an extent that it is nearly impossible to return these resources to their original form.
In this context, market failure exists when CPR is overused, resulting in the depletion of these resources i.e. tragedy of the common. Some obvious examples are pollution and extinction of resources. This is all due to people acting in their own self-interest rather than considering the long-term consequences of their actions.
For example, take an open lake with a natural supply of fish, fishermen may overfish (fish faster than they can reproduce) to increase their sales and profit in the short term. However, considering long-term implications, they are strangling their own necks, since in the future fish population will dwindle putting all future fishermen at a disadvantage.
Then how can we deal with this problem; meeting the needs of the current generation as well as promising plentiful lives for future generations? The government can impose indirect taxes, carbon taxes and regulations on polluting activities to reduce depletion of resources. However, do we need the authorities to restrict our behaviours for us to preserve our resources?
Elinor Ostrom, who won the Nobel Prize for Economics in 2009 stated that communities can work together to develop rules about the use of the resource as they recognized that it was in their own self-interest to collectively govern the CPR sustainably.
Recognizing and adapting your mindset that managing resources sustainability is in your best interest isn’t just a personal choice - it’s a catalyst for a better planet and future. And I believe that the shift in your perspective isn’t just about you. It’s about triggering a chain reaction that touches countless lives ultimately leading to the success of preserving our planet.
Of course, it is very difficult to make everyone agree to rules especially when there is a large number of users. But I hope that this article will serve as a trigger for many people to realise and articulate what true “self-interest” for themselves is!
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