Public Good and Common-Pool Resourcesiktisat.gsu.edu.tr/wp-content/uploads/2013/10/lecture4-5_updated.pdfPublic Good and Common-Pool Resources Public Economics Course Galatasaray University

Public Good and Common-Pool Resources

Public Economics CourseGalatasaray University

Fall, 2018

Outline

Typology of goods

Public GoodPrivate ProvisionPublic ProvisionPrivate Provision versus Public Provision

Social Choice - Provision of Public GoodPublic Good Contribution Problem - VotingPublic Good Contribution Problem - Lindahl Pricing

Common Pool Resources (Common Goods)Tragedy of the CommonsGoverning the CommonsFishermen Tragedy

Outline

Typology of goods




Typology of goods

excludable non-excludable

rivalrous Private Good Common-Pool Resource

non-rivalrous Club Good Public Good

I Nonexcludability : If the public good is supplied, no consumercan be excluded from consuming it.

I Nonrivalry : Consumption of the public good by one consumerdoes not reduce the quantity available for consumption by anyother.

Outline

Typology of goods




Public Goods and Public Choices, [Ostrom and Ostrom, 1991]

Alternative Use Jointness of Use or ConsumptionFeasible Exclusion Private good : bread, shoes, automo-

biles, haircuts, books, etc.Toll good : Theatre, night club, tele-phone service, toll road, cable TV, elec-tric power

Infeasible Exclusion Common pool resource : water pumpedfrom a ground water basin, fish takenfrom an ocean, crude oil extracted froman oil field

Public good : peace and security, na-tional defense, mosquito abatement, fireprotection, weather forecasts, ”public”TV

I Where competitive pressures are maintained and effective mechanisms forconflict resolution are available, public choice theory suggests that public serviceindustries characterized by multiplicity and overlap, will be more efficient andresponsive to user demands than highly integrated governmental monopolies.

I Economists studying public sector investment and expenditure decisions haveobserved that institutions designed to overcome problems of market failure oftenmanifest serious deficiencies of their own. Market failures are not necessarilycorrected by recourse to public sector solutions.

I The private delivery of public services is a different ball game from the privatedelivery of private goods and services.


Key characteristics associated with public and private goods

Private Goods Public Goods

Relatively easy to measure quantity and qua-lity

Relatively difficult to measure quantity andquality

Can be consumed by only a single person Consumed jointly and simultaneously bymany people

Easy to exclude someone who doesn’t pay Difficult to exclude someone who doesn’t pay

Individual generally has a choice of consu-ming or not

Individual generally has no choice as toconsuming or not

Individual generally has a choice as to kindand quality of goods

Individual generally has little or no choice asto kind and quality of goods

Payment for goods is closely related to de-mand and consumption

Payment for goods is not closely related todemand or consumption

Allocation decisions are made primarily bymarket mechanism

Allocation decisions are made primarily bypolitical process


General characteristics of collective consumption units and production units

Collective-Consumption Unit Producer Unit

Generally, a government, which aggregatesand articulates the demands of its consti-tuents.

May be a unit of government, a privateprofit-making firm, a not-for-profit institu-tion, or a voluntary association

Has coercive power to obtain funds to pay forpublic services and to regulate consumptionpatterns

Aggregates factors of production and pro-duces goods to the specification of a collec-tive consumption unit

Pays producer units for delivering publicgoods

Receives payment from collective - consump-tion unit for delivering public goods

Receives complaints and monitors perfor-mance of production unit

Supplies information to collective consump-tion unit about costs and production possi-bilities

Public Goods and Public Choices, [Ostrom and Ostrom, 1991]Options for Obtaining Public ServicesA government which serves as a collective-consumption unit may ,obtain the desiredpublic goods by :

1. Operating its own production unit. Example : A city with its own fire or policedepartment

2. Contracting with a private firm. Example : A city that contracts with a privatefirm for snow removal, street repair, or traffic-light maintenance

3. Establishing standards of service and leaving it up to each consumer to select aprivate vendor and to purchase service.Example : A city that licenses taxis to provide service, refuse collection toremove trash

4. Issuing vouchers to families and permitting them to purchase service from anyauthorized supplier.Example : A jurisdiction that issues food stamps, rent vouchers, or educationvouchers, or operates a Medicaid program

5. Contracting with another government unit. Example : A city which purchasestax assessment and collection services from a county government unit, sewagetreatment from a special sanitary district, and special vocational educationservices from a school board in an adjacent city

6. Producing some services with its own mill.-and purchasing other services fromother jurisdictions and from private firms.Example : A city with its own police patrol force, that purchases laboratoryservices from the county sheriff, joins with several adjacent communities to payfor a joint dispatching service, and pays a private ambulance firm to provideemergency medical transportation

Public Good Provision 1

I Private Provision - (Market Solution)I Public goods do not conform to the assumptions required for a

competitive economy to be efficient.I Their characteristics of non-excludability and non-rivalry lead

to the wrong incentives for consumers. Since they can share inconsumption, each consumer has an incentive to rely on othersto make purchases of the public good.

I This reliance on others to purchase is called free-riding figure

, and it is this that leads to inefficiency.I Private Good Provision figure

Public Good Provision 2

I Public Provision - (Leviathan Solution)I Contribution can be coercive and needs a central authority

(government)I Commitments needs an external enforcerI Leviathan decides who can pay and consume, when and howI Leviathan can have (un)limited information on contributorsI Public Good Provision figure

Free Riding ProblemFree riding is similar, but not identical, to the prisoner’s dilemma.To see this, let us construct a numerical example of the TVproblem described above. Suppose that each person has a wealthof $500, that each person values the TV at $100, and that the costof the TV is $150. Since the sum of the reservation prices exceedsthe cost, it is Pareto efficient to buy the TV.

Free Riding Game Matrix - payoffs

Player ABuy Don’t buy

Player B Buy -50,-50 -50,100Don’t buy 100,-50 0,0

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Optimal Public Good Provision

Consider two consumer with demand functions

p1 = 10− 110G

p2 = 20− 110G

Suppose that the marginal cost of public good G is 25,The optimal level of public will be

p1 + p2 = MC =⇒ 10− 110G + 20− 1

10G = 25

G = 25

Private Provision 1Source : [Hindriks and Myles, 2013], chapter 5Assume that there are two consumers with income M1 and M2. The preferences ofagent h are expressed by the utility function :

U = log(xh) + log(g1 + g2)

where xh is the consumption good and gh is the contribution to the public good.Solving for each agent :

U = log(M1 − g1) + log(g1 + g2)

Private Provision 2

g1 =M12

−g22

Solve for the agent 2g2 =

M22

−g12

We have the best reaction function of each agent. It is similar to Cournot equilibriumwhere best response function of firms determine the level of output.

g1 =2M1 − M2

3, g2 =

2M2 − M13

When each agent tries to provide the public good. Total contribution will be

G = g1 + g2 =M1 + M2

3

Public (Efficient) Provision 1

Lets suppose that there is utilitarian central planner (equal weights) who maximizesthe welfare of agents and decide the level of public good

maxW =2∑

h=1

[log(xh) + log(G)]

s.t x1 +G2

= M1 and x2 +G2

= M2

G = M = M1 + M2

Thus private provision is less than public provision.

Public (Efficient) Provision 2Use the Samuelson rule :

MRS1 =UGUx1

=1

g1 + g1/

1M − g1

MRS2 =UGUx2

=1

g1 + g1/

1M − g2

MRS1 + MRS2 = MRT

G = M

Samuleson rule says that an efficient allocation is achieved when the total marginalbenefit of another unit of the public good, which is the sum of the individual benefits,is equal to the marginal cost of another unit. The total benefit remains the sum of theindividual benefits.We can contrast with private provision to see the difference between private (strategicinteraction) and collective coordination (voluntary contributions) :

MRS1 = MRS2 = MRT

G =2M3

The difference arises because an extra unit of the public good increases the utility ofall consumers so that the social benefit of this extra unit is found by summing themarginal benefits.

Outline

Typology of goods




Voting 1

Source : [Hindriks and Myles, 2013], chapter 5Contrast between the voting outcome and the efficient level of public goodprovision when people differ in tastes and income levels.

I The cost of the public good is shared equally among the consumers, so, ifGunits of the public good are supplied, the cost to each consumer is G

H .With income Mh, a consumer can purchase private goods to the value ofafter Mh − G

H paying for the public goodI This provides an effective price of for 1

H each unit of the public good anda level of utility Uh(Mh − G

H ,G)

Voting 2

I Let’s assume that consumers are numbered so that their preferred levelsof public good satisfy G1 < G2 < .. < GH.

I Each of the consumers has single-peaked preferences for the public good.I By these assumptions, the Median Voter Theorem ensures that the

consumer with the median preference for the public good will be decisivein the majority vote. The median preference belongs to the consumer atposition (H + 1)/2 in the ranking.

I A remarkable feature of the majority voting outcome is that nobody isable to manipulate the outcome to their advantage by misrepresentingtheir preference, so sincere voting is the best strategy.

Voting 3

Voting and Median Voter OutcomeI Um(Mm − G

H ,G) where Mm denotes the income of the median voter.I MRSm = 1

H is the median voter sacrifice.

I the efficient outcome satisfies the Samuelson rule∑H

h=1 MRSh = 1I Efficient allocation is possible only if median voter sacrifice is equal to mean of

all voters.

I MRSm =∑H

h=1MRSh

HI Since the distribution of income has a very long right tail, we can expect that

MRS is higher for lower income voters, then the nature of the incomedistribution suggests that the median MRS is higher than the mean.

I Thus voting will lead to an excess quantity of public good being provided

Personalized prices

The private coordination fails because of strategic interactions (free-riding),and voting fails since heterogeneous preferences of voter do not guarantee themost efficient level of public good. eg. median voter. The incentives are notenough for a better outcome. Need for a mechanism design :

I Mechanism uses prices that arepersonalized, with each consumer paying aprice that is designed to fit their situation.

I Personalized prices adjust the price of the public good in order to alignsocial and private benefits.

I Personalized prices further adjust the price to capture each consumer’sindividual valuation of the public good.

Lindahl Pricing 1

The government could provide public goods through unanimous (supported byeveryone) consent of its citizens. Lindahl pricing is a system where individualsreport their willingness-to-pay for each quantity of the public good, and thegovernment aggregates preferences to form a measure of the social benefit.

I First, the government announces tax prices for the public good, that is,the share of the cost that each individual must bear.

I Each person announces how much of the public good he or shewants at those tax prices.

I If the individual announcements differ, the government raises thetax price for the person who wants more of the good, and lowers itfor the person who wants less.

I When a tax price is arrived at where both individuals want the sameamount of the public good, the government has reached Lindahlequilibrium.

I The government produces the public good at that level, and finances itby charging each person their tax price.

Lindahl Pricing 2

I Lindahl pricing corresponds to the concept of benefit taxation, whichoccurs when individuals are being taxed for a public good according totheir valuation of the benefit they receive.

I With Lindahl pricing, the government does not need to know the utilityfunctions of individual voters : it gets the voters to reveal their preferencesby stating their willingness to pay for different levels of the public good.

Lindahl ExampleI Let the share (contribution) of the public good that has to paid by

consumer h be denoted τh. The scheme must be self-financing, so, withtwo consumers, τ1 + τ2 = 1. Now let Gh denote the quantity of the publicgood that household h would choose to have provided when faced withthe budget constraint xh + τhGh = Mh

I The Lindahl equilibrium shares τ1, τ2 are found when G1 = G2

I let the utility fuction of consumer h be Uh(Mh − τhGh,Gh)I the Samuelson rule satisfies that MRS1 + MRS2 = τ1 + τ2 = 1

Problems with Lindahl Pricing

I Preference revelation problem : Individuals may behave strategically, andpretend their willingness to pay is low in order to get others to bear alarger cost of the public good.

I Preference knowledge problem : It is hard for people to properly valuegoods they do not shop for on a regular basis.

I Preference aggregation problem : Aggregating millions of voters’preferences is difficult in reality.

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Outline

Typology of goods




Typology of goods

excludable non-excludable

rivalrous Private Good Common-Pool Resource

non-rivalrous Club Good Public Good

I Definition of Common GoodsI Non-excludability : No consumer can be excluded from consuming the

common good. (Natural Resources)I Rivalry : Consumption of the common good by one consumer reduces the

quantity available for consumption by any other.

Tragedy of the Commons (G. Hardin) - 1

Source :[Hardin, 1968] The Tragedy of the CommonsI A class of human problems which can be called ”no technical solution

problems” one candidate : the ”population problem”I Finite resources and finite consumption. No ”the greatest good for

greatest number” as Bentham put.I Goods are incommensurable. But in real life, we need commensurablity.

Only a criterion of judgment and a system of weighting are needed. Innature the criterion is survival.

I The Wealth of Nations (1776) popularized the ”invisible hand,” the ideathat an individual who ”intends only his own gain,” is, as it were, ”led byan invisible hand to promote . . . the public interest”

I Tragedy of Freedom in a CommonsI ”What is the utility to me of adding one more animal to my herd ?” This

utility has one positive component and one negative component.Individual gain and Shared loss (overgrazing)

Tragedy of the Commons (G. Hardin) - 2

I Pathogenic Effects of Conscience : If we ask a man who is exploiting acommons to desist “in the name of conscience,” What does he hear ?I (intended communication) ”If you don’t do as we ask, we will

openly condemn you for not acting like a responsible citizen”I (the unintended communication) ”If you do behave as we ask,

we will secretly condemn you for a simpleton who can beshamed into standing aside while the rest of us exploit thecommons.”

I ”Bad conscience is a kind of illness”, Responsibility and GuiltyI Solution : Mutual Coercion Mutually Agreed upon. We institute and

(grumblingly) support taxes and other coercive devices to escape thehorror of the commons

I Solution : Recognition of Necessity : Hegel ”Freedom is the recognition ofnecessity.”

Extensive Form of Hardin Herder Game

Both players has a dominant strategy : defectBut the equilibrium is not Pareto-optimalBoth prefer (cooperate, cooperate) to (defect, defect)The paradox : individually rational strategies leads to a collectively irrationalresult

Extensive Form of Central-Authority Game with Full Information

The Leviathan imposes here a penalty of 2 profit units on all players that defect.The optimal strategy is now (cooperate, cooperate)[Ostrom, 1990], page 10 ”The optimal equilibrium strategy achieved byfollowing the advice to centralize control, however, is based on assumptionsconcerning the accuracy of information, monitoring capabilities, sanctioningreliability, and zero costs of administration.”

Extensive Form of Institutions with External Enforcer

A negotiated contract between the herders.Commitment to contracts needs an institutional enforcer.The cost of enforcement is e. Equal sharing is the only feasible solution.

Ostrom Examples - Bodrum 1

[Ostrom, 1990] : page 144-145I Fikret Berkes reports that in the 1970s the government of Turkey had

encouraged some Bodrum fishers to construct larger trawling vessels and ”hadrarely enforced the three-mile limit, much to the anger of the small fishermen”(Berkes 1986b, p. 79). The early financial success of the trawlers lured others 10enter the local fishery, until the revenues from the fleet as a whole were lessthan the costs of fishing in the area.

I As Berkes indicates, Bodrum was a ”textbook example of rent dissipation in afishery” (1986b, p. 79). Although the total annual yield of fish remainedapproximately the same, the catch per unit of effort sharply declined. The largervessels operating out of Bodrum could no longer make a living there and beganto travel to the shrimp grounds near Mersin .

Ostrom Examples - Bodrum 2

[Berkes, 1986], p.74I A booming tourist trade lured many part-time fishers and charter fishing boats

into the fishery. A local fishing cooperative struggled unsuccessfully during the1970s to mediate the conflicts among the small-boat fishers, the new entrants.and the trawlers. That cooperative had disappeared by 1983 .

I Six groups of fishers with distinct interests now compete to appropriate from thesame fishery :

I Small·scale coastal fishermenI Larger·scale operators including trawlers and beach seiners.I Semi-professionals who obtain their own fish and sell the occasional

surplus.I Large numbers of unskilled sport fishermen.I Spear fishermen licensed as sponge fishermen but who sell fish on the

open market. andI Charter boat operators who fish ro feed their clients and occasionally sell

the surplus.

Ostrom - Collective Action

[Ostrom, 1990] page 188Recent efforts to modify the theory of collective action to explain the achievement ofcollective benefits by individuals acting independently have focused almost entirely onvariables that are internal to the situation. One or more of the following variables areconsistently shown to influence outcomes :

1. the total number of decision makers,2. the number of participants minimally necessary to achieve the collective benefit,3. the discount rate in use (high discount rates accelerate depletion),4. similarities of interests, and5. the presence of participants with substantial leadership or other assets.

Alanya ExampleSource : [Wydick, 2007] page :163

I The Bodrum example illustrates another important issue in the regulationof the commons : the clear assignment of rules. Consider the example ofa fishery with a number of discrete fishing spots, where some of the spotsare more alluring than others from the perspective of a fish.

Assignment Rules in Common Resource Pool Usage - Game Matrix - payoffs

Player A

Higher Yield Spot Lower Yield Spot

Player B Higher Yield Spot fh2 , fh

2 fh, fl

Lower Yield Spot fl , fhfl2 , fl

2

if fl >fh2 then total outcome will be fh + fl

[Ostrom, 1990] illustrates the importance of assignment rules in CPR use withan example of a more fortunate Turkish fishery, Alanya.[Ostrom, 1990] relays Berkes’s (1986) account of how in the early 1970smembers of Alanya’s local fishing cooperative began to implement a clever setof allocation rules for local fishing spots

Fishermen Tragedy 1

Each fisherman a, b derives well being from eating (or selling) fish ya, yb andexperiences a loss of well-being (disutility) with additional effort ea, eb,according to the utility functions :

Ua = ya − 12 (ea)2

Ub = yb − 12 (eb)2

The activities of each fisherman affects the well-being of the other through theeffect each has on the output of the other. Their production is interdependent.

ya = α(1 − βeb)ea

yb = α(1 − βea)eb

α positive constant each can take per unit of fishing time when the otherdoesn’t fish at all (e.g. varies with size of net)β positive constant measuring the (adverse) effect of each person’s effort onthe otherSource : S.Bowles, D.Foley and S.Halliday. (2018)”Microeconomics : Competition,Conflict and Coordination”

Fishermen Tragedy 2

F.O.C. gives the best response of each agent, since catching fish depends onother’s output. It is equivalent to Cournot Equilibrium where firms in the samemarket partition the market.

Ua = α(1 − βeb)ea − 12 (ea)2

∂Ua

∂ea= 0

ea(eb) = α(1 − βeb)by symmetry, the same holds for agent b so that, the best response will be afunction of her own effort eb and the effort of the other agent ea

eb(ea) = α(1 − βea)

Fishermen Tragedy 3Use the best response functions to find the Nash equilibrium values of eN

a andeN

b

eNa = α

1 + αβ= eN

b

Best Response Functions and NE

Source : S. Bowles, D. Foley and S. Halliday. (2018)”Microeconomics : Competition,Conflict and Coordination”

Fishermen Tragedy 3Pareto inferior outcomes at Nash Equilibrum ?Best Response Function and Utility

Source : S.Bowles, D.Foley and S.Halliday. (2018)”Microeconomics : Competition,Conflict and Coordination”

Fishermen Tragedy 4

So why not reducing efforts to increase the utility of both agents

A : “I’d be better off if you reduce a lot & I reduce a little.”B : “I’d be better off if you reduce a lot & I reduce a little.”

Negociations and Efficient Bargaining

I Property RightsI Enforceable ContractsI Third PartyI Monitoring

Fishermen Tragedy 5Negociations and Efficient BargainingBest Response Function and Utility

Source : S. Bowles, D.Foley and S. Halliday. (2018)”Microeconomics : Competition,Conflict and Coordination”

Fishermen Tragedy 6

Social Welfare Function :

S = Ua + Ub

S = ya − 12 (ea)2 + yb − 1

2 (eb)2

subject to constraints

ya + yb = α(1 − βeb)ea + α(1 − βea)eb

for socially optimum level of effort :F.O.C

∂S∂ea

= 0

∂S∂eb

= 0

Fishermen Tragedy 7

Pareto-efficient effort level :

e∗a = α

1 + 2αβ = e∗b

Comparing Nash equilibria

(eNa , eN

b ) > (e∗a , e∗

b )

The effort level will be less at the social level. A Pareto improving equilibrium ispossible with negotiations

(eNa , eN

b ) = α

1 + αβ>

α

1 + 2αβ = (e∗a , e∗

b )

Fishermen Tragedy 8

1) Symmetrical community managementBargaining-cum-mutual monitoring solution relies on three important factsabout many small group interactions. Participants in small groups :

I are likely to have good information about the other participants’preferences, technologies, and actions

I are likely to agree on what is considered to be a fair division rule (in thiscase fifty-fifty)

I may discipline each other at limited cost due to their proximity andshared norms

I are likely to care about each other and therefore to display altruismtowards each other

Fishermen Tragedy 9

2) Symmetrical community managementAnother approach is to take account of the fact that frequent social interactionamong the fishermen gives them not only information about one another butalso a concern about the others’ well-being.

Ua = ya − 12 (ea)2 + aUb

Ub = yb − 12 (eb)2 + aUb

Best response functions will be :

ea(eb) = α(1 − (1 + a)βeb)eb(ea) = α(1 − (1 + a)βea)

A concern for the well-being of the other might therefore substitute for the taxapproach to attenuating the coordination failure.Take the case a = 1, we have the socially optimum level.

Fishermen Tragedy 10

Repeated Interaction :

One way that the commons tragedy might be averted is if thecommons game is played repeatedly between the same players.

Therefore, let us assume that both agent discount any payoff theyreceive one period into the future by a factor of δ , where δ issome number lying between 0 and 1.


Resource Conservation Game

s the payoff to shared and “sustainable” use of the CPRt the commons “tragedy” payoffr the payoff to the “rogue”v “victim” of the rogue


The parameter δ is subject to different interpretations. As δbecomes closer to 1, it may reflectI a measure of a player’s increasing patience, defined as his

value of obtaining payoffs one period into the future relativeto the present

I the probability that a repeated game continues to the nextperiod

I the frequency of player interactions, where δ closer to onemeans that little time separates episodes of interactionbetween players

I a combination of any of these.


A payoff of x received one period later is therefore equal to δx , twoperiods later equal to δ2x , and so forth.the value today to a player of receiving a payoff of x in everyperiod forever is equal to x

(1−δ)Grim Trigger can sustain cooperation in the Prisoners’Dilemma if

s(1− δ) > r + t

(1− δ)Under mutual Tit-For-Tat strategies by the players cooperation ispossible if

s(1− δ) > r + δv + δ2s

(1− δ)(if a defecting player does not punish the punishing player forpunishing him)

[Herrmann et al., 2008], ”Antisocial Punishment Across Societies”

People might punish not only freeloaders, but cooperators too. For example,participants who had been punished in the past for contributing too little mightretaliate against the cooperators because the cooperators are precisely thoseindividuals most likely to punish the free-riding low contributors

Hawke - Dove Game

Institutions and Bribe Game

Easter Island and the tragedy of commons

[Brander and Taylor, 1998], ”The Simple Economics of Easter Island : A Ricardo-Malthus Model of RenewableResource Use” The American Economic Review, Vol. 88, No. 1 (Mar., 1998), pp. 119-138.Easter Island (also called Rapa Nui) is a small Pacific island over 2,000 miles (3,200 km) from the coast of Chile,with a population (as of the early 1990’s) of about 2,100. Recently discovered evidence suggests that Easter Islandwas first settled by a small group of Polynesians about or shortly after 400 A.D. The population grew rapidly andwas wealthy in the sense that meeting subsistence requirements would have been relatively easy, leaving ample timeto devote to other activities including, as time went on, carving and moving statues.Noticeable forest reduction is evident in the pollen record by about 900 A.D. Most of the statues were carvedbetween about 1100 and 1500. By about 1400 the palm forest was entirely gone. Diet changed for the worse asforest depletion became severe, containing less fish (and thus less protein) than earlier. Loss of forest cover also ledto reduced water retention in the soil and to soil erosion, causing lower agricultural yields. Population probablypeaked at about 10,000 sometime around 1400 A.D., then began to decline. The period 1400 to 1500 was a periodof falling food consumption and initially active, but subsequently declining, carving activity.Carving had apparently ceased by 1500. At about this time, a new tool called a ”mataa” enters the archaeologicalrecord. This tool resembles a spearhead or dagger and is almost certainly a weapon. In addition, many islandersbegan inhabiting caves and fortified dwellings. There is also strong evidence of cannibalism at this time. Thenatural inference is that the island entered a period of violent internecine conflict. However, at first Europeancontact in 1722 no obvious signs of warfare were noted. This visit (by three Dutch ships) lasted only a single day,however, and much may have gone unnoticed.The next known contact with the outside world was a brief visit from a Spanish ship in 1770, followed in 1774 by avisit from James Cook, who provided a systematic description’ of Easter Island. There had been some changebetween 1722 and 1774. Most noticeably, almost all of the statues had been knocked over, whereas many had beenstanding in 1722. Statue worship, still in place in 1722, had disappeared by 1774. Population was apparently lessnumerous than it had been in 1722, and was estimated at about 2,000.Kirch (1984 p. 264) suggests that ”Easter Island is a story of a society which temporarily but brilliantly surpassingits limits crashed devastatingly.” The mystery of Easter Island’s fall is regarded by many as solved. In simple form,the current explanation is that the islanders degraded their environment to the point that it could no longersupport the population and culture it once had. However, Polynesians almost always dramatically altered theenvironments of the islands they discovered. Why did environmental degradation lead to population overshootingand decline on Easter Island, but not on the other major islands of Polynesia.

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Easter Island

References I

Berkes, F. (1986). Local-level management and the commons problem : Acomparative study of turkish coastal fisheries. Marine policy, 10(3) :215–229.

Brander, J. A. and Taylor, M. S. (1998). The simple economics of easter island : Aricardo-malthus model of renewable resource use. American economic review, pages119–138.Hardin, G. (1968). The tragedy of the commons. Science, 162(3859) :1243–1248.

Herrmann, B., Thoni, C., and Gachter, S. (2008). Antisocial punishment acrosssocieties. Science, 319(5868) :1362–1367.

Hindriks, J. and Myles, G. D. (2013). Intermediate public economics. MIT press.

Ostrom, E. (1990). Governing the commons. The Evolution of Institutions forCollective Action. Cambridge.

Ostrom, V. and Ostrom, E. (1991). Public goods and public choices : Theemergence of public economies and industry structures. The meaning of Americanfederalism, pages 163–197.

Wydick, B. (2007). Games in economic development. Cambridge University Press.

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Public Good and Common-Pool Resourcesiktisat.gsu.edu.tr/wp-content/uploads/2013/10/lecture4-5_updated.pdfPublic Good and Common-Pool Resources Public Economics Course Galatasaray University