Discussion Questions, Econ 309, Professor Hackett

Week 10

I. (i) What are the defining characteristics of a common-pool resource (CPR)? (ii) What is the tragedy of the commons? Name and describe the externality at the heart of the tragedy of the commons that explains why self-interested behavior in a CPR appropriation setting results in this tragedy. (iii) What are the various categories of solutions to the tragedy that have been proposed? Describe each, and clearly distinguish property rights institutions from the physical properties of a CPR.

II. (i) List and briefly describe Elinor Ostrom’s design principles for local self-governance of localized CPR’s. (ii) Pick two or more of the design principles and describe why they lead to successful common property institutions that sustain the CPR and avert the tragedy of the commons. (iii) Briefly summarize a few place-based examples of self-governance successes and failures and relate them to the design principles. (iv) How are cultural homogeneity, population stability, and modest economic value of the CPR related to sustainability of the resource and community? (v) How is successful local self-governance of CPR’s related to the economics of a sustainable local community?

III. Think of a local economy as a bathtub that contains a stock of income (the amount of water in the tub) that is spent and re-spent, with the spigot being income injections from outside the local economy, and the drain as income that leaks out of the local economy due to spending on imports. (i) In the case of Humboldt County, what are the sources of income injections? (ii) In the case of Humboldt County, what are the sources of income leakages? (iii) If the leakage rate is large, such as in a mining town that produces almost nothing for itself, what happens to the stock of income in the local economy if injections shrink due to depleted local natural resources or declining local industry?

IV. Review the concept of the local economy in the textbook chapter, the PowerPoint slides, and at the Prosperity! Website for Humboldt County’s Comprehensive Economic Development Strategy (CEDS) at http://www.northcoastprosperity.com/ (i) What are base industry clusters in general, and for Humboldt County in particular? (ii) Describe the economic development strategy focused on building the local base industry clusters, and relate it to the bathtub metaphor. What implementation measures are available to do this? Of these, which are more consistent with a sustainable local community, and which are not? (iii) Describe the import substitution economic development strategy, and relate it to the bathtub metaphor. What implementation measures are available to pursue this? Relate this strategy to a sustainable local community. (iv) What is the focus of the Prosperity! CEDS approach? What elements of it are consistent with the principles of a sustainable society (as you understand it), and what are not?

V. (i) Go to http://www.humboldt.edu/~indexhum/projects/humcoecon.htm and briefly characterize the economic history of Humboldt County. Then go to http://www.calmis.ca.gov/file/lfmonth/humboPDS.pdf and characterize the sectors of the current Humboldt County economy based on employment. (ii) Is Humboldt County’s economy mostly made up of timber and fishing? How would you describe the key sectors of the county economy today? (iii) Go to http://www.calmis.ca.gov/file/indproj/NorCoastIndProj.xls. What employment sectors are projected to grow the most, and how might this affect education, workforce training, and other forms of economic and community development in the county?

VI. (i) Write out the formula for the multiplier effect and relate it to income leakages. (ii) If a new business generates annual export-generated income of $10,000,000 that is injected into a local community, and if it spends $6,000,000 on inputs ($2,000,000 of which were locally sourced), then what is the net income injection? If on average 60 cents of every dollar spent in the local community leaks out, then what is the multiplier for the community? What is the net economic impact of the net income injection on the local economy? (iii) Suppose that an owner-resident local ice cream shop uses nearly all local inputs, and thus its leakage rate is only 0.25, while a corporate-owned franchise coffee shop uses mostly imported inputs, and thus has a leakage rate of 0.75. Describe the difference in the local economic impact of a $50,000 net injection at these stores.

VII. On your own: Review the City of Arcata’s Economic Development Strategic Plan at http://arcatacityhall.org/econ_dev_strat_plan/final_plan/table_of_contents.htm. (i) To what extent is this economic development strategic plan consistent with the economics of a sustainable society, as we have developed that concept? (ii) What are some of your favorite implementation measures, and why? (iii) Is this plan idealistic or practical? Explain.