DEFINITION of 'Common-Pool Resource'

Common-pool resources (CPR), in economics, are goods that exhibit the characteristics of both private and public goods. But unlike a public good – which can be consumed without reducing its availability to other individuals – common-pool resources have a finite supply and provide diminished benefits to everyone, if each individual pursues their own self-interest.

BREAKING DOWN 'Common-Pool Resource'

Common-pool resources are susceptible to overuse and congestion. Because individual and group interests are in conflict, they create incentives for users to ignore the social costs of their extraction decisions, as the group has to bear the cost of managing, protecting and nurturing the resource. This is why they are prone to the tragedy of the commons, when every individual tries to reap the greatest benefit from a given resource.

For example, fishermen have an incentive to harvest as many fish as possible, because if they do not, someone else will – so without management and regulation, fish stocks soon become depleted. And while a river might supply many cities with drinking water, manufacturing plants might be tempted to pollute the river if they were not prohibited from doing so by law, because someone else would bear the costs.

Examples of a Common-Pool Resource

Common-pool goods are typically regulated and nurtured in order to prevent demand from overwhelming supply and allow for their continued exploitation. Other examples of common-pool resources include forests, man-made irrigation systems, fishing grounds and groundwater basins.

California, where there is a huge demand for surface water, but supplies are limited, is susceptible to common-pool problems, which are exacerbated because the state does not manage groundwater basins at the state level. During the 2016 drought, farmers with ‘senior’ water rights dating back to the 19thCentury could use as much water as they wanted, while cities and towns had to make drastic cutbacks to water use.

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