State Regulation of Open-Access, Common-Pool Resources

Open-access, common-pool resources, such as many fisheries, aquifers, oil pools, and the atmosphere, often require some type of regulation of private access and use to avoid wasteful exploitation. In the absence of constraints on users, such as those provided by informal community norms, more formal property rights, or other types of state regulation, individuals competitively exploit the resource rapidly and wastefully. Short-term horizons dominate, with little investment or trade to channel the resource across time or across users to higher-valued applications. This excessive extraction, which amounts to private plunder, continues so long as it is in the interests of the individual parties, even if society would be better off with less intensive and extensive use. Without some limits on individual behavior to better reflect broader, social benefits and costs, only private net benefit calculations govern resource use decisions.