Common Pool Resources
Market Failure: Externalities and Common Pool Resources
Syllabus requirement
Resources that are rivalrous but non-excludable, such as fisheries and clean air. Associated with overuse and unsustainable outcomes (tragedy of the commons).
Summary
Common pool resources (CPRs) are natural or man-made resources that are non-excludable but rivalrous, so individuals can use them without paying but one person’s use reduces availability for others. Because no single user bears the full cost of overuse, CPRs are vulnerable to over-exploitation — the tragedy of the commons — producing negative externalities and unsustainable production. Understanding CPRs explains why markets may fail to conserve shared resources and why government or collective action is often needed.
