M. Scott Taylor

Trade, Tragedy, and the Commons

B. Copeland and M. Scott Taylor

American Economic Review, Vol. 99, No. 3, June 2009, 725-749.

We develop a theory of resource management where the degree to which countries escape the tragedy of the commons, and hence the de facto property rights regime, is endogenously determined. Three forces determine success or failure in resource management: the regulator’s enforcement power, the extent of harvesting capacity, and the ability of the resource to generate competitive returns without being extinguished. The model can explain heterogeneity across countries and resources in the effectiveness of resource management, and it predicts that changes in prices, population, and technology can cause transitions to better or worse management regimes.

Important related work:

Besley, T. (1995) “Property Rights and Investment Incentives: Theory and Evidence from Ghana,” Journal of Political Economy, 103(5), 903-37.

Blanchard, O. J. (1985) “Debt, Deficits, and Finite Horizons,” Journal of Political Economy, 93(2), 223-47.

Dasgupta, P. (1982) The Control of Resources, Cambridge, MA: Harvard University Press.

Ostrom, E. (1990) Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge, MA: Cambridge University Press.

Shapiro, C. and J. E. Stiglitz (1984) “Equilibrium Unemployment as a Worker Discipline Device,” American Economic Review, 74(3), 433-44.

Weitzman, M. L. (1974) “Free Access vs. Private Ownership as Alternative Systems for Managing Common Property,” Journal of Economic Theory, 8(2), 225-34.

International Trade between Consumer and Conservationist Countries

J. Brander and M. Scott Taylor

Resource and Energy Economics, Vol. 19, No. 4, November 1997, 267-297.

We consider trade between a 'consumer' country with an open access renewable resource and a 'conservationist' country that regulates resource harvesting to maximize domestic steady-state utility. In what we call the mild overuse case, the consumer country exports the resource good and suffers steady-state losses from trade, as suggested by the conventional wisdom that weak resource management standards confer a competitive advantage on domestic firms in the resource sector but cause welfare losses. Strikingly, however, when the resource stock is most in jeopardy, the conservationist country exports the resource good in steady state and both countries experience gains from trade.