Chapter 12 — Exercises

Section A — Classification

A1. Classify each of the following into the 2×2 matrix (private, public, common-pool, or club). Justify each classification. - (a) A city fire department - (b) A private security guard hired by a gated community - (c) Ocean fishing in international waters - (d) A Spotify subscription - (e) A sandwich - (f) Wi-Fi in a coffee shop (free for customers) - (g) A crowded public beach - (h) National defense - (i) A movie theater showing - (j) Groundwater under a farming community

A2. Some goods change categories depending on conditions. A road is non-rival when empty but rival when congested. A Wi-Fi network is non-rival at low usage but rival at high usage. Identify two other goods that change categories and explain when and why.

A3. The internet is sometimes called a "public good." Is it? Apply the rivalry and excludability tests.

Section B — The free-rider problem

B1. Suppose a neighborhood needs a streetlight that costs $500 to install. 10 households each value the streetlight at $80. If each household contributed $50, the streetlight would be funded and everyone would benefit. Why might the streetlight not get built? Use the free-rider problem.

B2. Public broadcasting (NPR, PBS) is funded partly by voluntary listener contributions. Why do most listeners not contribute? Is this a free-rider problem?

B3. Wikipedia is funded by donations. Anyone can use it without donating. Apply the free-rider analysis. Why does Wikipedia survive despite the free-rider problem?

B4. Open-source software (Linux, Firefox, Python) is provided for free by volunteer developers. Is open-source software a public good? Why does it get produced despite the free-rider problem?

Section C — The tragedy of the commons

C1. Apply the tragedy of the commons to overfishing in the Atlantic. Why did each boat have an incentive to fish more? What was the aggregate result?

C2. Apply the tragedy to traffic congestion. Why does each driver have an incentive to drive even during rush hour? What is the aggregate result?

C3. Apply the tragedy to climate change. Carbon emissions are a common-pool problem (the atmosphere is rival in its absorption capacity and non-excludable). Why does each country have an incentive to emit more?

C4. Your apartment has a shared bathroom with three roommates. Apply the tragedy. How might you design rules (Ostrom-style) to prevent the bathroom from being persistently filthy?

Section D — Ostrom's design principles

D1. Pick one of Ostrom's eight design principles and explain why it matters for successful commons governance. Give an example of a commons that succeeded because this principle was present, and one that failed because it was absent.

D2. Apply Ostrom's principles to a real-world commons you know about (a community garden, a shared laundry, a fishing community, a homeowners' association). Which principles are present? Which are missing? Is the commons being managed well?

D3. Can Ostrom's approach work for global commons like the atmosphere or the ocean? Why or why not?

Section E — The Millbrook parking case

E1. The proposed Millbrook parking garage will have 400 spaces. Should the spaces be: - (a) Free (first-come, first-served) - (b) Metered at $2/hour - (c) Metered at $5/hour - (d) Allocated by monthly permits

For each option, predict the effect on congestion, on equity, and on revenue. Which do you recommend?

E2. Some Millbrook residents argue that downtown parking should be free because "parking is a public good." Is this correct? Apply the 2×2 matrix.

E3. Suppose the parking garage is built and priced at $3/hour. Predict the effect on: (a) traffic congestion downtown, (b) revenue for the city, (c) foot traffic for downtown businesses, (d) demand for nearby residential parking.

Section F — Policy debate

F1. "The government should provide more public goods." Make the strongest economic case for and against this position.

F2. "Privatization is the best solution to the tragedy of the commons." Evaluate. Where does privatization work? Where does it fail?

F3. "Community governance (Ostrom-style) is romantic but impractical for large-scale problems." Evaluate this claim.

F4. Should national parks charge admission? Apply the rivalry/excludability framework and the surplus framework from Chapter 8.

Section G — Data lookup

G1. Look up data on global fish stocks (FAO's State of World Fisheries and Aquaculture report). What percentage of fish stocks are overfished? Has the percentage risen or fallen over time?

G2. Look up data on the Ogallala Aquifer depletion rate. How fast is it being drawn down? When is it expected to become economically unviable for irrigation in parts of Kansas?

Section H — Reflection

  • Before this chapter, did you think of parking as an economic problem? Has the framing changed your view?
  • Which of the three solutions to the commons problem (privatization, regulation, community governance) do you find most appealing? Why?
  • Ostrom won the Nobel Prize for showing that the "tragedy of the commons" is not inevitable. Does this change how you think about environmental policy?

Selected answers in appendices/answers-to-selected.md.