Download If not, why?

Eminent Domain is sometimes necessary because
People will not want to donate their property
Marginal Private Costs exceeds their portion of the Shared
social benefit.
MPC > portion of the MSB
Or by holding out
They can take advantage of the lack of choice.
Ind. Decisions involve trade-offs and thinking on the
margin and responding to incentives
Decisions will result in both private and social impacts
Relate the concept of scarcity to types of good and to
the TOC
Recognize the MPC/MPB/MSC/MSB to different types
of goods
Develop both gov’t and free market approaches to
solve contemporary TOC
Types of Goods
Free Riding
The Tragedy of the Commons
Station 1 Show me the Money!!!!
Directions: You have been credited $10. Being that I am a kind and generous person, I agree to
double any amount of money that is invested in the “doubling pool” and then divide this
doubled amount amongst everybody in the class.
All students will receive an equal amount from the doubling pool regardless of what they
contribute.
For example if $240 was collected I would double it to $480 and divide it equally amongst all
students regardless of the contribution.
If there were 30 students in the class each student would receive $16.
If a student gave $10 – they would now have $16.
If a student gave $0 – they would now have $26
If a student gave $5- they would have $21
This is a contest between all three classes.
There are two types of winners
Class winner
Students in the class that donated the largest amount of money will receive a small piece of
candy to enjoy during Thursday’s quiz.
This will be determined by how much each student receives from the pool of money.
Individual winner
The individual winner is determine by which student of the three classes ends with the most
money.
They will be able to enjoy a larger food item (candy bar, bag of pretzels, etc.) of their choice
during the test.
On a scrap paper you will write two items:
Your name
Your donation
I will only publicly announce the donation.
Nobody will ever know how an individual donated.
1. What strategy for the class would maximize the total amount of the money received by
each student?
If all students donated $10, they would double their money.
2. Did you follow that strategy? If not, why?
Many don’t because they realize if they cannot be excluded they will attempt to receive the
benefits without the cost.
Additionally, others may end not contributing once they realize that others would be
benefiting at their expense.
3. Did your class experience a free-rider problem, meaning that students attempted to
benefit from the investment of others without contributing their fair share?
Station 2 (reading) According to John Stossel,
“Every November, schoolchildren are taught about that wonderful day when Pilgrims
and Native Americans shared the fruits of the harvest. "Isn't sharing wonderful?" say
the teachers.
They miss the point.
Because of sharing, the first Thanksgiving in 1623 almost didn't happen.
The failure of Soviet communism is only the latest demonstration that freedom and
property rights, not sharing, are essential to prosperity. The earliest European
settlers in America had a dramatic demonstration of that lesson, but few people
today know it.
When the Pilgrims first settled the Plymouth Colony, they organized their farm
economy along communal lines. The goal was to share everything equally, work and
produce.
They nearly all starved.
Why? What was the problem?
Free Riding
1. According to John Stossel, when the Pilgrims first settle the
Plymouth colony how did they organize their farm economy? What
were the results?
They created community farms
Starvation Death
2. Why do you think some Pilgrims so unproductive?
Free Riding
If people can all share in the benefit but not have any cost, they will.
3. Why do you think the Pilgrims had more success after they
sectioned off the land and privatized the land?
Their marginal benefit equaled their marginal cost, they received what they put
into it.
Free Riding results from public goods.
MPC
MSB
In terms free riding an individual’s __________
is less his/her portion of the _________.
They will keep going
Fill in the blanks with either
MPB
MPC
MSB
MSC
On the other side
The contributor’s ind. Mpc exceeds their portion of the MSB
They will stop
Consider the case where an individual doesn’t want to move.
How does their private costs compare to their portion of the social benefits?
Keep in mind the financial loss of losing their home is offset by just compensation.
Marginal Private Cost
______
>
<
=
Their Portion of the Benefits
Free Riding results from public goods.
As a result of free riders, many private individuals will not produce public goods. Why? Use
marginal cost and benefits in your answer.
Because they cannot exclude others from using the good their MC will always exceed their
MB
This in turn leads to a market failure because the quantity being supplied is less than the
quantity being demanded.
In one class the non-free rider who donated $10.00
Their MPC= $10.00
Their portion of the MSB= $8.40
They will stop in the future.
4. Other than the game and the Pilgrim story, provide examples goods that might face freeriding problems.
Public goods such as lighthouses
Vaccines
Healthcare reform
Articles of Confederation
5. What role could government play in providing the socially optimal quantity of public goods
while avoiding free-riding problems?
Tax the users
Provide the public goods
Create mandates and regulations
Station 3 Types of goods
2 questions
What is the level of excludability? How easy can someone
be prevented from using the good or service.
What is the level of consumption rivalry? If one person uses
the good is it available for other to use?
Excludable
Private Goods
Non- Excludable
Common Goods
Club Goods
Public Goods
Rivalrous
NonRivalrous
Eagles tickets
Cable TV
Lighthouses
Candy
The atmosphere
Street lights
Fish in international waters
Pair of pants
Roads
16
Excludable
Non- Excludable
Private Goods
Common Goods
Cars, Houses, electronics, IPhones,
food, clothing, or any product on the
free market
Rivalrous
Rationed by price
Fishing waters, grazing lands,
Renewable resources
Rationed by quotas, licenses, seasons,
laws, and regulations
Watch of for Tragedy of the Commons
Is privatizing the answer?
Club Goods
Cable TV, swimming pools, mail,
movie theaters
Non-Rivalrous Artificial scarcity because in many
cases supply additional goods doesn’t
add to cost
Rationed by congestive pricing
Public Goods
Tornado warning sirens, lighthouses,
street lights, national defense
Rationed by congestion price, patents
and copyrights, laws
Watch out for Free Riders
The free market will NOT supply it
17
Where the Moose Roam
You are a meat and fur trader in the rugged North. As a moose hunter, you are aware of the
following facts:
Group of 10 or more
You are not allowed to speak with any other hunters
1. Each hunting season last 30 seconds
2. If there a fewer than eight moose at the end of a hunting season reproduction will not
occur.
3. Given that there are at least 8 moose, the number of moose will double after each hunting
season.
4. Even though moose appear cute and friendly, so are your spouse and children. Thus, you
want to maximize your “harvest.”
5. You plan to hunt for many seasons but you don’t know how many hunting seasons remain.
You want to set the market by capturing the most moose.
The winner of each round receives candy.
Round 3
The number of the original moose have returned to the forest.
You and your fellow hunters will have 2 minutes to strategize methods to maintain the moose
population.
Once the hunting begins it is just like rounds 1 and 2.
Round 5
The forest is sectioned off and each hunter can only hunt in the section that is their private
property.
If a moose is on your property, he is considered your property.
The teacher will enforce private property rights.
Each section will start with 3 moose.
1. What were your ideas in round 3? Did the idea(s) work? Why or why not?
2. What is the role of property rights in the allocation of moose?
3. Why were people more likely to exploit the moose population located in the common forest
as opposed to the moose that they considered their own property?
The Tragedy of the Commons
Tragedy of the Commons
Each farm has private land
and shared common land.
The common land can
support the grazing of a
certain amount of cows.
Each farmer can have their
cows graze on their private
lots or common land.
As more farmers use the
common land it becomes
increasingly depleted.
Tragedy of the Commons
Each farm has private land
and shared common land.
The common land can
support the grazing of a
certain amount of cows.
Each farmer can have their
cows graze on their private
lots or common land.
As more farmers use the
common land it becomes
increasingly depleted.
Tragedy of the Commons
Each farm has private land
and shared common land.
The common land can
support the grazing of a
certain amount of cows.
Each farmer can have their
cows graze on their private
lots or common land.
As more farmers use the
common land it becomes
increasingly depleted.
1. Are people more or less likely to depleted their private property or public property faster?
Why?
2. What does the tragedy of the commons tell us about human self-interest and natural
resources and public goods?
3. What are some real-life example?
Fishing, common fields, global warming, resource depletion, traffic
4. What are some methods of preventing resource depletion? Government or Private
ownership?
5. Thinking in terms of cost- benefits why is the tragedy of the commons unavoidable?
It is rational (at least in the short run) to serve self-interest.
In terms of benefits, individuals who defect receive the entire private benefit.
And in terms of cost, individuals share the cost with everybody else. This normally results in a
net positive for the defector.
Marginal Private Benefit > Portion of shared Marginal Social Cost
6. Are there places in school that suffer from the tragedy of the commons?
1. Are people more or less likely to depleted their private property or public property faster?
Why?
2. What does the tragedy of the commons tell us about human self-interest and natural
resources and public goods?
3. What are some real-life example?
4. What are some methods of preventing resource depletion? Government or Private
ownership?
5. Thinking in terms of cost- benefits why is the tragedy of the commons unavoidable?
6. Are there places in school that suffer from the tragedy of the commons?
6. Are there places in school that suffer from the tragedy of the commons?
Relate to an essential Question
from unit 3
Working with your group of three complete the following exercise:
1. Read the short description for each topic.
2. Determine if there could be a government solution to the issue.
Regulations, laws, quotas, restrictions, fines, etc. Come up with a
solution but be prepared to discuss the costs and benefits of your
idea.
3. Determine is some level of privatizing will work. How could you
accomplish this?
4. What do you feel would work best. Explain your logic.
Real-life Example
Grand Banks Fisheries
Bluefin Tuna
The atmosphere
Gulf of Mexico Dead Zone
Traffic Congestions
Unregulated Logging
Government Solution
Free Market Solution
Best
Many people suggest that private property and private
property rights are the solution to the problem.
Of the three options below which would be the easiest to
divide into private property and which would be the most
difficult? Why?
Fish in the sea
Forest on a mountain
The atmosphere
Relate this to pollution by companies and/or nations without regulations
Spending in Congress
Deals that are too good to pass up in stores.
Teacher copy numbers increasing before copy restrictions
Bank runs
Gasoline before a hurricane
There is also competition in the sense
that people will think . . .
“If I don’t use it someone else will.”
Relate what you learned about the different
types of goods and the T.O.C. to either scarcity,
incentive, or competition.
In situations that are considered tragedy of the
MPB
commons an individual’s __________
exceeds
MSC
their portion of their shared _____________.
Relate to an EQ from unit 3
If time allows
Station 4 Fishing Game
1. There are four contestants- each has a magnetic fishing pole.
2. The game is divided into two rounds
Goal:
a. The first 1 minute seconds (spring)
Green Fish are worth $50
Red Fish are worth $100
Gold Fish are worth $250
Blue Fish are worth $500
Each Fisherman wants to set the
market by catching the most fish.
After each year fish will need to
reproduce.
b. The second 1 minute (fall fish are bigger)
Green Fish are worth $100
Red Fish are worth $250
Gold Fish are worth $500
Blue Fish are worth $1000
Winners for each round receive
chocolate
If there are two of each species at
the end of the year all receive a
pack of smarties
Round 3
Each fisherman will be able to fish in his/her section of the ocean
Each area of the ocean will have
4 green fish
4 red fish
4 gold fish
4 silver fish
Predict what will happen
1.How did the self interest of each fisherman
impact what fish were caught first?
2.If there was a round 3 predict what would
happen?
3. Develop a solution to this problem either
through the government or the free market
Station 1 – show me the money
1. What strategy for the class would maximize the total amount of the money received by
each student?
2. Did you follow that strategy? If not, why?
3. Did your class experience a free-rider problem, meaning that students attempted to
benefit from the investment of others without contributing their fair share?
Station 2- types of goods
Why will free markets not provide public goods?
Working with your group of three complete the following exercise:
1. Read the short description for each topic.
2. Determine if there could be a government solution to the issue.
Regulations, laws, quotas, restrictions, fines, etc. Come up with a
solution but be prepared to discuss the costs and benefits of your
idea.
3. Determine is some level of privatizing will work. How could you
accomplish this?
4. What do you feel would work best. Explain your logic.
Real-life Example
Grand Banks Fisheries
Bluefin Tuna
The atmosphere
Gulf of Mexico Dead Zone
Traffic Congestions
Unregulated Logging
Government Solution
Free Market Solution
Best
1. Are people more or less likely to depleted their private property or public property faster?
Why?
2. What does the tragedy of the commons tell us about human self-interest and natural
resources and public goods?
3. What are some real-life example?
4. What are some methods of preventing resource depletion? Government or Private
ownership?
5. Thinking in terms of cost- benefits why is the tragedy of the commons unavoidable?