1. What is Garret Hardin most concerned about?
The theory of the tragedy of commons that illustrates every individuals herdsman incentive to increase its profits at the cost of over exploiting the pasture.

2. How can "the commons" best be defined?
The resources that belong to no one (the oceans, the atmosphere, the rainforests, )

3. Are individuals who overuse "the commons" acting irrationally? Explain.
They are acting rationally because they maximise their own utility by adding one more animals to the pasture. However in the long run it is irrational to continue to over exploit the land because soon the land will become over grazed and be unusable to all herdsmen.

4. Besides the "common pasture", what other resources does Hardin identify as "commons"?
The oceans, National Parks

5. What are some of the possible solutions he suggests for the problems faced by America's National Parks?
Privatizing the parks, or keep them public but restrict the right to enter them.

6. How are air and water different from pastures, the oceans, and national parks in the "tragedy" presented by the common resources?
The national parks and pasture are easily privatized but there are areas of the ocean that are international waters and therefore much harder to privatize, and air is definitely in possible to do so.

7. What are some of the possible solutions Hardin suggests for the "cesspool" tragedy represented by the pollution of our air and water?
Taxing and strict laws that urge firms to internalize their costs so as not to damage the water or air with their waste.

8. How does the tragedy of the commons lead to market failure?
The individual herdsman wants what is best for him/herself and over allocates their resources, over exploiting the pasture in the process.

Fishing for Fishing Solutions

http://www.naturalnews.com/025818.html

Fishing for Fishing Solutions

The near depletion of certain fish species threatens the sustainability of the fish ecosystem balance. Possible solutions include subsidizing aquaculture farms.

The over allocation towards commercial fishing presents a market failure, which is when there is either an over or under allocation of a resource towards a particular product. In this case it presents negative externalities of production, when the production of a good places external costs on a third party uninvolved in the market transaction, or society as a whole. The over exploitation of commercial fishing affects not only the local fishermen whose jobs depends on the sustainability of fish, but it throws the marine ecosystem into imbalance. Fishing is therefore a demerit good because the free market is over-providing it, and the government has to step in to regulate the market failure. Fishing is also a rivalrous and non excludable

Blog posts

http://www.ft.com/cms/s/0/75a053ca-0d84-11de-8914-0000779fd2ac.html?ftcamp=rss&nclick_check=1

Dealing with the issue of hunger and underalloctaion of food towards certain populations. Proposing a cutback on subsidies for rich country agriculture.

http://news.mongabay.com/2008/1020-novomer.html

Switches to renewable materials in the production in order to cut back on costs and reduce environmental damage, thus reduces negative externalities.

http://www.naturalnews.com/025818.html

Over fishing--> market failure. Over allocation towards fishing is damaging marine ecosystem. Urges consumers to consume from trustworthy fishing firms. This resource could become extinct. There are some alternatives to correcting error. Subsidizing demand for sustainable fisheries, taxing fishers who over fish within a certain period of time.

Fuel Tax on Chinese Oil

The Chinese government previously subsidized energy, but due to a growing strain of paying the subsidy they plan on imposing a tax on fuel, to help them subsidize highways building and become a more energy efficient nation.

According to the article, the Chinese government (along with many other countries) has subsidized energy in the past, in particular gasoline. Subsidies are financial payments given to the producers by the government to reduce costs of their products, in this case fuel. Subsidies increase the supply of fuel because they lower the resource costs of production and both subsidies and resource costs are two determinants of supply*1.

The graph below shows the supply curve shifting down and out which illustrates an increase in supply. The decreases in price due to the subsidy will result in a higher quantity demand of fuel; quantity demanded being how much the market demands at a particular price. The article claims that half the world benefits from these energy subsidies which prevent "rising prices from lowering world demand to the extent that the textbooks say they should when prices rise." In other words, as the Law of Demand states, ceteris paribus, as price falls, the quantity demanded increases showing an inverse relationship between price and quantity demanded.



The Chinese government must take into account the consumers reaction to this sudden tax that will be imposed on fuel, in order to know how much damage it could do for both the producers and the consumers. A consumer's responsiveness to a change in price is measured by price elasticity of demand (PED). An inelastic product would be one to which a consumer would not respond strongly to price changes, so a change in price of an elastic product would result in a strong response by the consumer. To determine whether a product is inelastic or not, one must consider the determinants of PED *2. Fuel has a great deal of uses and few substitutes available, which make it an inelastic product. It is also a necessity as it is almost the only way for vehicles to travel, the only medium to heat up buildings or cook. On the graph below you can see that a great change in the price of fuel leads to just a small change in quantity demanded.

Oil is categorized as an intermediate good, a good used as input when producing other goods. It is not only used for transportation, but also in the production of clothing and plastic amongst other goods, therefore a change in price of oil can have major consequences on a larger scale. All imported goods will be affected as the price of their transportation increases their costs. The soybean market is a specific example of an imported good affected by the soon to come tax. The price and quantity equilibrium*3 before the introduction of the tax is shown is where the supply and demand curve intersect. The tax shows a higher equilibrium price and in result a lower quantity equilibrium. On a greater scale, a vast amount of the products in sale in the country will have increased prices causing inflation which is when the value of money decreases.

The time immediately following a change in price is known as the fixed plant period, and during this time factories can only rely on the capital they own to cut back on their production of fuel, this is point A on the PPC below. In the long run, the variable plant period, firms can adjust to the changes in price of fuel better by allocating their resources towards more efficient energy producing plants, as the quantity demand for oil decreases with the increases of price. The Production Possibilities Curve below shows Chinese reallocation of resources towards wind power for example as it is a substitute for oil, shown as point B.

*1: Determinants of supply influence the supply of a good or service. Supply is a schedule or curve showing how much of a product producers will supply at each of a series of possible prices during a specific period of time.

*2: The amount of substitutes a product has and whether it is a luxury or a necessity are two determinants of price elasticity.

*3: Price Equilibrium is the price where the intentions of buyers and sellers are balanced. Price and quantity equilibrium is driven by the competition between buyers and sellers in the soybean market in this case.

http://allafrica.com/stories/200811200005.html

Uganda: Fuel Companies Blamed for Shortage

Dealers hold off fuel to create scarcity to keep the price high. Scarcity pushes up the price of fuel affecting the price elasticity of supply.
- elasticity of supply
- price equilibrium
- supply and demand and scarcity



http://www.reuters.com/article/businessNews/idUSTRE4AK5MD20081121?feedType=RSS&feedName=businessNews

GM cutting production amid slow demand

Due to a decrease in demand in the car industry, GM (General Motors) plans on shutting down plants in various states. Quantity supplied for GM products in the short-run, during the fixed-plant period, become more elastic as the producers have time to shut down sections of their industry in response to the change in consumer's demand.
- elasticity(fixed plant period)
-supply and demand
-subsidies (bailout of the government to help the firms)


http://www.forbes.com/business/2008/11/21/gasoline-china-taxes-biz-energy-cx_pm_1121notes.html?feed=rss_business

Fuel Tax is Coming to China

Chinese government is about to introduce a tax on fuel of about one yuan a liter. This can result in an imbalance in both price quantity equilibrium.

-effects of tax and subsidies (on fuel)
-effects on demand on the fuel market due to the subsidies
- reasons for taxes and why they would need them on

Dung in Demand

Peru Guards Its Guano as Demand Soars Again

May 30, 2008

The demand for guano (an organic fertilizer composed of seabird excrement) is in strong demand today. This bird manure found in abundance all along the Peruvian coast, has caused great commotion (and has even caused wars in the past) as prices for synthetic fertilizers rise. Countries like Israel, the U.S.A, and France have increased their demand for the fertilizer due to its chemical-free characteristics, resulting in an increase of market demand, which is the sum of individual demand schedules in a particular market. This brings us to the concept of supply and demand and the price mechanism that it causes. An increase in demand for a certain good is followed shortly by a rise in the prices of that good, so that only few buyers with enough money can afford to buy it. In fact the guano itself has doubled in price in the last year to about $600 per ton.



If we were to look at a demand curve, we would notice an outward shift of the demand curve because now countries are willing to pay more for an amount that would have been cheaper a few years ago. In this case the reason for the demand change would probably be tastes and preferences because of its distinct chemical-free properties. Another reason for this change in demand would be expectations of future prices, because the birds are predicted to become extinct in 2030, so the future price is estimated to increase dramatically. This means that only richer countries who can afford such luxuries are willing to pay more for each ton of Guano, however if the price of Guano were to go up even further, fewer and fewer countries will remain buying it, assuming that the demand curve does not shift even further. Just like the Law of Demand states, ceteris paribus, as the price of a certain good rises, the quantity demanded for that good will decrease, thus showing an inverse relationship between the two factors.



The Peruvians realized how highly valued this item had become by the high prices that were put on them. Because of this prized possession, many laborers travel to the islands annually to collect the guano. Unfortunately this land resource is slowly becoming scarcer as the country’s supply is slowly being used up. Mr. Ropón states, “there might be 10 years of supplies left, or perhaps 20, and then it will be completely exhausted,” which is due mainly to an estimated decline in the population of the seabirds. In fact it is probably also due to this scarcity that the price has increased. If a resource is scarce, it means it is desirable but limited, and since we live in a world with limited resources but unlimited wants and needs, a high price must be put on scarce resources. Guano is an excellent example of a scarce resource which is highly demanded and due to its scarcity has increased its price (if the price of scarce objects were low, anyone could afford them and they would have no real value). In the article, the supply of guano is compared to that of oil since they both have alternative materials being sought for as they face possible depletion in the near future.