Asymmetric information   Merit goods   Public goods   De-merit goods    Externalities Abuse of market power   ext in production   ext in consumption   Common Access Resources

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 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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  common access reources

Common access resources are those resources such as rivers and oceans that are not owned by individuals or groups and instead belong to all members of society. Without government intervention to control how common access resources are used by individuals or groups (e.g. how fishermen or landowners use rivers and oceans), the market would typically fail to ensure that these resources are appropriately and sustainably used over time.  

It is an example of a market failure because there would be an over allocation of resources to activities that ultimately threaten the sustainability of the resources over time.  This will mean that many of our common access resources (or natural resources) will be depleted in the long term, leading to sub-optimal outcomes for society. The market failure occurs because these resources (like public goods) are non-excludable, meaning that it is not possible for ‘the market’ to exclude non-payers from enjoying the benefits of these resources.  In addition (and unlike public goods), common access resources are depletable or rivalrous in consumption, meaning that one person’s consumption of the resources does indeed negatively impact on the ability of others to enjoy the consumption of the resources over time.

For example, without government regulations and controls, individual farmers would extract excessive volumes of water from river systems (such as the Murray/Darling river systems in Australia) for irrigation purposes given that the water would not have a ‘price’. Collectively, this is likely to result in a depleted water supply and damage to the ecosystem over time, which ultimately reduces the ability of others to enjoy the benefits of the river and lowers living standards in general.

As a consequence, governments are active in protecting common access resources such as rivers by imposing limits on water extraction, restrictions on the types of effluents that can be released into river systems, as well as a host of other measures that are designed to guarantee resource sustainability.

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