GEF

Unit 7  |  The Economics of Sustainability 150 7.3  Public Goods and the Free Rider Problem Public goods can result in market failure when ownership of resources is not assigned to individuals, organizations, or governments. Open ocean fisheries are an example of a public good. Unlike national land areas, the open ocean cannot be divided, owned, or protected. In the open ocean, there is no regulation on fisheries and no incentive for them to protect the public resource. This can lead to damage to marine life and ecosystems such as coral. In other words, fisheries in the open ocean profit from their catch, while the cost of declining fish stocks is shared within society. Open ocean fisheries take advantage of public goods. A related concept is the free rider problem , which is a market failure that occurs when people use a common resource that others are paying for, without contributing their fair share. A good example is the atmosphere. Global climate change is driven by the emission of greenhouse gases , regardless of their source. That means that a nation that chooses to do nothing to reduce their greenhouse gas emissions will benefit just as much as a nation that incurs costs to reduce theirs. The free rider problem is one reason why international action on reducing greenhouse gas emissions has been so slow. PUBLIC GOODS Publicly owned goods or services to which everyone has equal access. FREE RIDER PROGRAM A situation in which individu- als or nations benefit from the actions of another party without paying any costs. GREENHOUSE GASES Gases that contribute to the greenhouse effect by absorb- ing infrared radiation.