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Now, the second type of resources that

give the economists a lot of trouble is one called common resources.

In order to understand the issue with common resources,

let's do a little example here, of a classic common resource, which is fishing.

So suppose that fish cost you $1 per pound, and

the marginal cost of running a vessel is about $200 per day.

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Now suppose that the catch is given by this simple table here.

And depends on the number of vessels, right?

Number of vessels that go out fishing,

tells you how much fish is caught completely.

And so, when there's one vessel out, the total catch is 400.

When there's two vessels out fishing, the total catch is 800.

When there three vessels out fishing, the total catch is 1,200.

And so forth and so forth.

So when you have seven boats fishing the total catch for

all the boats together is 2,100.

And the question is, let's say there's seven boats out fishing, and

you own the eighth boat.

You don't own any of the other seven, you only own the eighth boat.

You can sell the fish you catch, at $1 per pound.

And it costs you only $200 to go off fishing.

The question is, should you go out fishing with that eighth boat?

If you own the eighth boat, and there are seven other boats fishing already, and

you don't own any of them, should you go out fishing that day?

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The total cash would be 2,000.

You divided by the eighth boat, then each boat get 250 tons of fish.

They sell it at $1 each.

So each boat makes $250.

So you make $250 if you go out fishing.

It only costs you $200 to go out.

So clearly, if you own the eighth boat, and you don't own the other seven,

you should make that rational choice, to maximize your own individual interest,

and go out fish, and you make $50.

Now, how will you answer this question, if you own the eight boats.

If you had a company that owned eight boats, and

these are the only eight boats, how many boats would you send out?

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Well, that's a whole different story.

In order to do that,

you have to calculate the cost and benefits of all of them together, right?

And you see that this table is showing exactly that.

When you have one vessel out, you make a revenue of $400.

When you have two vessels, you make 800, and so forth, and so forth.

So every time you add one more vessel, when you have one, two, three,

four, you make $400 extra.

Now, when you add the fifth vessel, you only add $300 extra.

When you add the sixth vessel, you only add $200 extra.

And when you add the seventh vessel you actually don't add anything.

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And actually, you can look at the profits actually to know what you're going to do.

If you own all the boats, you're going to send boats that maximize your profits.

And that is, when either you can take either five or six.

Definitely no more than six,

because if you send seven boats out, your profits go down to 700.

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And if you send eight vessels out, your profits go down to 400.

So if you own all the companies, and

all the boats, you would only send six boats out.

Beyond that point, your additional revenue that you get for

each boat is less than the cost of 200.

So here's a paradox right?

because if one company owns this, the best for

the whole company would be to only send six boats.

But if each boat is owned by individual fishermen, they will go out,

eight boats will go out fishing.

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Now the problem, here as you can see, has to do with the catch, right?

The catch, up to when you have six boats, the catch is kind of growing, right?

But beyond six boats, the cash counted per boats starts to go down.

And if you think about what's happening in the water, is that basically when you have

eight boats in the water, people are catching too much fish already.

And they're kind of driven that fish stock to extinction.

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So here this is the classic paradox called, the Tragedy of the Commons.

If this was owned by one company, the better for the commons will be for

only six boats to go out.

Because if six boats go out, the fish has enough time to replenish.

And technically, every year, you could go out and

catch whatever extra fish you have every year, and you'll be okay, right?

And if one company owns this resource, they will operate in that way,

because they will operate based on profits, and revenue, and cost.

But the problem is that there's difficult for only one company to do this,

because access to the water is public, right?

It's really hard to prevent people from going out fishing.

And the problem is that each individual fisherman does behave selfishly, right?

As we predict they will behave in a market condition.

And they all need to consider their own costs and

their own benefits, not the costs and benefits of all the other fishermen.

And every time they go in together to the commons,

they making all of them worse off.

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So this is the classic problem.

If we let this open to all fishermen to go,

their resources will be driven to extinction.

And we see that in all the cases that we have had this.

These are examples of some famous fisheries that actually crashed.

The Peruvian Anchovy Catch.

You see, it started at the beginning a lot of people started to go out.

Stopped continued to eat and

eventually at some point they were catching too many fish.

They weren't letting fish reproduce, and

from that point on, the fishery crashes pretty quickly.

There's many, many examples of that happening.

When the resource is left to open access,

the behaviors of each individual person is to drive the resource to extinction.

Even though, if they all behave as a community, if

they all behave in commons as one company, they will actually not do it because they

will protect their resources in the best possible way for all of them together.

There are examples of this, and the fisher is a classic example,

but there's examples of this all around.

Think about clean air, clean water, traffic congestions in the highways.

We opened the week in the library, where we have a lot of noise.

And it's a common resource, but the more people use it,

the worse it make it to everyone else.

If you ever live with someone, you have a classic example of a common resource,

which is the apartment.

And the more that you people use it, the dirtier their apartment will be.

In order for the apartment to stay clean, when you live with people,

you have to come up with some kind of way of

managing the resource between all the people that live there.

So there's different ways of trying to deal with the issue of common resource.

We go over a couple of them in the next section, but a lot of them have to

do with a topic we'll talk in a different section which is called Actionalities.

But we'll spend a little time in the next section, talking about the classic

ways in which people have tried to solve the issue of the Tragedy of the Commons

of the paradox, that forces people to drive common resource to extinction.