Wednesday, July 04, 2007


“People like the freedom to choose their lifestyles, what they consume and when they consume it,” observes Attari. “However, the environment is a ‘commons’ that we share with other citizens of the world, and when individual choices start negatively impacting others, we need to understand how to change or alter those behaviors.”

Whenever the cost of one’s behavior is not factored into a price at which a choice can be valued, a commons problem exists. This is in essence what we get from Hardin ( ‘The Tragedy of the Commons’) after applying a little basic economics to his reasoning.

However, according to Coase (‘The Problem of Social Cost’) with the establishment of property rights and markets (bargaining) the externality of the commons can be internalized. Behavior is changed or altered to account for the negative impact our choices impose on others. Demsetz (Towards a Theory of Property Rights) goes on to say that property rights often evolve as a means to internalize externalities. Sometimes given the current state of technology, the costs of developing property rights and markets are greater than the benefits that would arise. However, with technological development, these cost structures change and new options become available. Today we can see how technology has allowed for many externalities (or commons problems) in agriculture to be internalized with examples such as biotechnology and GPS. The article linked above focuses on how engineering can contribute to this end.

The literature referenced above may be broad, but it opens the door for many applications. It is certainly not as narrow and limited as the much older line of reasoning developed by Pigou, which advocates changing and altering behavior based on taxes or command and control governement regulations.


Towards a Theory of Property Rights.
Harold Demsetz
The American Economic Review. Volume 57, Issue 2. May, 1967

The Problem of Social Cost
R. H. Coase
Journal of Law and Economics, Vol. 3, Oct., 1960 (Oct., 1960), pp. 1-44

The Tragedy of the Commons
Garret Hardin
Science, Vol 162 no 3859 Dec 13, 1968 p. 1243-1248

The Economics of Welfare
Arthur C. Pigou Macmillan and Co. London, Fourth edition, 1932. First published: 1920.

A Meta-Analysis of Effects of Bt Cotton and Maize on Nontarget Invertebrates
Michelle Marvier, Chanel McCreedy, James Regetz, Peter Kareiva
Science 8 June 2007:Vol. 316. no. 5830, pp. 1475 - 1477

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