The ‘tragedy of the commons’ refers to the overuse of common land. If people can freely graze their animals on such land and have no responsibility for maintaining it, then the land will be overused and everyone will suffer. The problem is that the benefit of using the land occurs to the individual whereas the cost is collectively incurred.
There are many modern examples of the tragedy of the commons and the articles below look at some of them. Perhaps surprisingly, not all cases of the use of common resources end in tragedy; some common resources are used sustainably. A more thorough analysis must involve deeper questions of human motivation and behaviour.
IT’s tragedy of the commons Datamation (IT Management) (8/4/09)
The Tragedy of the Commons TechFlash (7/4/09)
Encarta’s failure is no tragedy Guardian (7/4/09)
How Self-Interest Destroyed The Economy The Huffington Post (23/3/09)
What does The Pirate Bay ruling mean for the web? Telegraph (17/4/09)
Tragedy of the Commons The Manila Times (23/3/09)
Questions
- Explain how the tragedy of the commons arises and give some examples other than common grazing land.
- How and why does the tragedy of the commons occur in information technology? Consider the benefits and costs of the ‘fix’ to the problem advocated in the first linked article.
- Does the case of Wikipedia (see the third linked article) disprove the proposition that common resources will be overused?
- To what extent is free access to content (music, newspapers, videos, books, etc.) a tragedy of the commons? Is the only solution to devise an effective charging model that rewards content creators?
The first linked article below is from the American business magazine Forbes. It looks at the economics of football (‘soccer’) signings and, in particular, that of Robinho by Manchester City. In September 2008 the club was bought by an Abu Dhabi investment fund, controlled by Sheikh Mansour bin Zayed Al Nahyan, for £210 million. But does the investment in new players make good business sense?
Also, what should determine whether a club sells a player? The third link below considers this issue. The link is to the Embedding Threshold Concepts (ETC) site at Staffordshire University. ETC was funded by the Higher Education Funding Council for England’s Fund for the Development of Teaching and Learning (FDTL). The site has a number of teaching and learning resources.
City of Dreams Forbes (8/4/09)
Man City beat Chelsea to Robinho BBC Sport (1/9/08)
Selling footballers: the economic viewpoint ETC reflective exercise
Questions
- Was it consistent with the goal of profit maximisation for Manchester City pay Real Madrid £32.5 million for Robinho? Was it consistent with the goal of profit maximisation for Real Madrid to sell him?
- If Real Madrid had decided to keep Robinho, how would you estimate the cost of doing so?
- What difficulties are there in developing Manchester City into a ‘global brand’?
- In what sense are the top Premier League clubs a ‘self-perpetuating oligopoly’?
Whilst a recession has a devastating impact on many industries – not least construction and related sectors – there are some firms who will fare much better during a recession. Firms who have products whose demand is income inelastic, or which are even inferior, will feel the impact of the recession much less than those whose goods have a more income elastic demand. The two articles below consider jobs and businesses that are less likely to suffer in recessionary times.
Slump busters: jobs that beat the downturn BBC News Online (27/11/08)
Riding the recession: how some businesses are doing well in the downturn Times Online (23/11/08)
Questions
- Define the terms (i) “normal good” and (ii) “inferior good”.
- What will be the value of the income elasticity of demand for (i) a normal good and (ii) an inferior good?
- Discuss strategies that firms can adopt to minimise the impact of an economic downturn on (a) their total revenue and (b) their profitability.
According to the article linked to below, the demand for offal has risen by 15% in France since the investment bank Lehman Brothers went out of business. Over the same time period French butchers have faced a 2.6% fall in the demand for beef. So is the global financial crisis set to make offal merchants rich?
Recipes for the recession bring offal back into fashion in France Times Online (20/11/08)
Let them eat offal Guardian (20/11/08)
Questions
- Given the recession in France, as what types of good would you classify (a) offal and (b) beef?
- What values would you expect for the income elasticity of demand for (a) offal and (b) beef?
- What are the principal determinants of the demand for offal?
- Using diagrams as appropriate, explain the changes that have taken place in the market for offal in recent months.
- Discuss the extent to which the increase in demand for offal has been caused by the promotional strategies adopted by The National Federation of French Offal Merchants.
The financial crisis has, according to research from the Institute of Grocery Distribution (IGD), begun to lead to a fundamental change in shopping habits. People are now more ready to take packed lunches to work, walk rather than drive and even grow their own food to a greater extent than for many years.
Cash-strapped shoppers in search of Good Life Times Online (14/10/08)
Questions
| 1. |
With reference to the article, suggest products for which demand is likely to increase during an economic downturn. |
| 2. |
Are all the products you identified in question 1 inferior products? |
| 3. |
With reference to the article, suggest products for which demand is likely to decrease significantly during an economic downturn. |
| 4. |
Comment on the likely value of the income elasticity of demand for each of the products you have identified in questions 1 and 2. |