Weak property rights encourage faster extraction than would otherwise maximize the long-term stream of profits.

Question

Quizplus · Accepted Answer

Weak property rights lead to a "tragedy of the commons" scenario, where individuals have an incentive to extract resources as quickly as possible because they cannot ensure they will be able to benefit from the resource in the future. This results in faster extraction than would be ideal for maximizing long-term profits, as it does not allow for sustainable management of the resource.

Weak Property Rights Encourage Faster Extraction Than Would Otherwise Maximize