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How do we prevent people from overexploiting their resources?

Are people not aware that over-consumption of resources such as underground water could lead to issues in the future? When living in a highly uncertain environment, it is very difficult for most people to think about the long term. As a result we tend to discount our future benefits heavily.

This theme of discounting the future benefits explains our problems when dealing with many Common Pool Resources (CPR) problems. Elinor Ostrom, a Nobel Prize political economist,  defines CPR as a natural or man-made resource from which it is difficult to exclude or limit users once the resource is provided. For example, an irrigation system or a fishing ground that provides resources such as water or fish for future consumption.

A CPR consists of a Resource System like a Fishing ground and a Resource Unit which in this case is the fish. Problem occurs when the rate of appropriation of the resource unit is much higher than its rate of replenishment. As explained by most rational economic theories, individuals voluntary act in order to pursue their own interests without trying to look out for their common or group interests. So, most fisherman will try to maximize their catch of the day and as a result the fishing ground will not be able survive beyond a time period.

But how do we still manage to get our food? While some may argue that “mother earth” is still able to sustain the selfish interests of the humans, we know that there are communities that have been able to maintain their resources systems rather well. In her book, Governing the Commons, Ostrom has given a number of examples of such communities around the world (e.g. Alanya in Turkey). These examples have proven that individuals are capable of thinking long-term. When people start to think beyond their immediate interests, their discount rates that they apply to future benefits tend to change and hence they would value their future much more.

One way to do this is by increasing the vividness of the future. If people can have a better sense of the result of their current actions, then they may act in ways that could lead to a brighter future. Now, we know that the brain always tries to predict what will happen next. In fact “Nexting” is an ingrained propensity of people and it may have developed evolutionarily as a survival mechanism. We applied this principle in a recent project on  preventing vehicle collisions at unmanned level crossings. By using a series of photographs, we showed that the vehicle will be hit if the driver does not stop now and let the train go by.  This solution has been covered by Forbes India in their recent issue. Here is the link

Thus, by aiding the brain’s propensity to predict, we can change the current decisions.  By making the future outcome of the current actions more salient, may be we could nudge people make better decisions.

Image Link: Here

#behaviouraleconomics

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