New York University Stern School of Business
Conflict & Decision Making
Summer 1999 Professor Seth Freeman
Class 6 - The Problem of Over Usage

I. The Subway Pull Case
II. Closing Thoughts about Critical, Creative, Humanistic, and Economic Thinking
III. The Envelope Game
IV. Introduction- What Should We Do About African Elephants?
V. The Tragedy of the 'Commons'- The Problem of Open Access

A. Introduction- water bills and grazing land
B. The social dilemma of 'use it or lose it'
C. Social dilemma- the problem of destructive self interest
D. User gains benefit of taking a bit more w/o paying for it
E. Result- depletion, overcrowding
F. Examples of the tragedy at work

1. Natural gas fields 5. Clean air
2. Satellite paths 6. Use it or lose it budgets
3. Wild elephant hunting 7. Office supplies
4. Fish  

G. Different cultures respond to the dilemma differently (individualism, communitarianism)
H. Implication- lack of ownership (by one or many) is a leading cause of over-usage

VI. How Can We Solve the Problem of the Tragedy of the 'Commons'?
VII. One Solution: the Economics of Private Property

A. Private property encourages conservation
B. Private property means one who is most willing to pay gets it ('efficient')
C. Hobbes and Locke- we create private property systems to overcome destructive self-centeredness
D. So why not privatize Air? Drinking water? Outer space?
E. The practical limits and costs of a private property system

1. Exclusion (identifiable boundaries)
2. Transfer (ability to assure buyer he really owns something now)
3. Enforcement (ability to punish trespassers)

VIII. Does it ever make sense to create a Use It or Lose It rule?

A. The Rule of First Possession
B. The Cost of Creating Property Rights
C. Rapid, Wasteful Development Development
D. Privatize every scarce thing? Body parts and Office supplies
E. The social limits and costs of a private property system

1. Loss of trust- prenuptial agreements and office supply lock downs
2. Fairness- societies where 1% own 99%

IX. Another Solution: Common ownership

A. Definition- property owned by a group that excludes outsiders
B. Examples- marriage, corporations, very cohesive communities, public lands
C. Dangers and limits of privatization
D. Dangers and limits of common ownership

X. Implications for your work

A. Ownership is a way to solve economic problems (office supplies, air pollution)
B. Think broadly about ownership solutions (efficient, fair, creative, critical)
C. Globalization is bringing competing responses to social dilemmas into conflict


The Envelope Game

I have with me $60. I am giving each of you an envelope. In the next few moments, I will ask you to submit your envelope to me any amount of money you choose, if any. If you do not have the exact amount of money you'd like to enclose, write a piece of paper stating any amount of money you choose, with your name on it. I can make change if you need it. No student will ever know how much money you or any other student puts in the envelope. Please consider the following offer quietly without discussion:

Please make your decision under the table so no one else sees what you have decided.