1. Warm-up Brainstorm some key characteristics of a market economy:
Prices act as signals
Diverse products, lots of choices
Factors of production privately owned
Efficient use of resources
Minimal intervention by the government

2. Clearly Defined Property Rights

3. Environmental Protection Mysteries
Why are there so few pheasants & so many chickens?
Why are native wild salmon declining in population & wild ducks increasing?
Why might paper recycling actually result in fewer trees and forests?
Why do hunters over-hunt?
Why do fishermen over-fish?

4. Fishing Game You will be fishermen (err..fisherpeople)
The fish you catch provide the income that gives your family food, shelter, & clothing
It is crucial to catch fish
1st round 30 seconds
1 Fish = 1 Candy
2nd round 30 seconds
1 Fish = 2 Candy
Any Questions?

5. Tragedy of the Commons
Garrett Hardin. Science Pastureland and the Cows.
Examples
City parks
School cafeteria
Freeways
Open Range in the wild west
Wild salmon populations in the Northwest US
African elephant
North American Bison

6. Fishing Game…Again You will be fishermen
The fish you catch provide the income that gives your family food, shelter, & clothing
This time you will have property rights
It is crucial to catch fish
1st round 30 seconds
1 Fish = 1 Candy
2nd round 30 seconds
1 Fish = 2 Candy
Any Questions?

7. 3 Possible Responses to the Tragedy
1. Moral Suasion – a public relations (PR) campaign to convince people to pollute less, preserve habitat, protect species
2. Regulation/command – establish rules against poaching, hunting, polluting, “destroying” habitat; then impose fines and/or imprisonment on those who don’t comply

8. Responses to the Tragedy
3. The Economic Solution
…create incentives which will get people to behave in more environmentally friendly ways
Establish property rights, through pollution credits, ownership of habitat, even ownership of certain animals.
The assumption is that people will see it is in their self-interest to pollute less, preserve habitat, species.

9. The Rhino in South Africa

10. Lessons Learned People Respond to Incentives
Individuals and Societies Face Tradeoffs & Must Make Choices
Choice Involves Cost –Opportunity Cost
Rational People Think at the Margin
Government policies can sometimes improve market outcomes— well-defined, enforced, and marketable property rights are essential