Monday, 22 August 2016

Prisoners dilemma or tragedy of the commons: What is the difference between a public good and common resource good?

One thing that causes a lot of confusion, both in popular and academic debate, is the distinction between a pure public good and common resource good. Concepts like tragedy of the commons, prisoners dilemma, and free-riding get used far too liberally, and often incorrectly. So, here is one way of trying to untangle the differences:
          Suppose that I decide, out of the goodness of my heart, to provide a 'gift' to my local community. For example, I build a children's play-area, or renovate the village hall, or play very loud grunge music. This is a form of public good in the sense that it is non-excludable - anyone in the village is free to enjoy my gift. What distinguishes between a pure public good and common resource good is rivalry in consumption - does one person's enjoyment of my gift depend on the number of other people who make use of the good. Here are some examples:

  • Loud music is a pure public good (or public bad) because one person opening (or closing) their window wide to enjoy the music does not in any way change the amount of the good available to others. In this case there is no rivalry in consumption.

  • A children's play-area can be a pure public good or common resource good depending on how big it is. If it is big enough to easily accommodate all the children in the village then it is a pure public good because, again, one child using the play-area does not change the amount of good available to others. More realistically, the play-area will be of a size that it can get crowded. For instance, children might have to wait to get on the swings or slide. Then we have some rivalry in consumption and the play-area is a common resource good. Clearly, the amount of rivalry can vary from low to high depending on the size of the play-area and number of children who might want to use it.

  • If I drop a £10 note on the village green then it is a private good (with a price of zero). In this case there is very high rivalry in consumption because the first person to find the £10 note denies all others the chance to consume it.

            More generally, we can see that there is a continuum between the very high rivalry of a private good to the no rivalry of a pure public good. So, why do we so often see confusion between pure public goods and common resource goods? I think it is driven a lot by a failure to recognise the distinct issues that arise:

  • When looking at a pure public good the key issue we study is how much of the good will be provided. How big a play-area we will build, how loud will be the music etc. To free-ride in this setting is to not contribute very much towards the public good. There is little point in us questioning how much people will use the public good because that is largely self-evident.

  • With a common resource good, by contrast, our focus is on how much people will use of an existing public good. How much will people use the play-area, fish in the oceans etc. To free-ride in the context is to consume a lot.

It is tempting to say that these two problems are similar. Indeed, the literature on framing often treats contributing to public goods and withdrawing from a common resource as strategically equivalent. They are, however, not equivalent, as pointed out by Jose Apesteguia and Frank Maier-Rigaud in an article in the Journal of Conflict Resolution. For instance, if I contribute to a public good then everyone benefits. If I withdraw from a common-resource then only those using the resource will suffer. This is a subtle but important difference.
           Rather than attempt 'shortcuts' it seems better and safer, therefore, to treat to treat the issue of contributing towards public goods and withdrawing from common resource goods as distinct issues. Then we are less likely to ignore rivalry and draw illusory parallels.