What do we call the act of working together to solve problems related to the tragedy of the commons?

• A. Internalizing the externality
• B. Privatization
• C. Free riding
• D. Market efficiency

Answer: (A)

Solving the tragedy of the commons through cooperation is about turning the social costs of using a shared resource into costs that each user bears. When people collaborate to set limits, assign rights, or create rules and enforcement, they internalize the externality: the use of the resource directly affects the user’s own costs and benefits, so individuals adjust their behavior accordingly. This alignment of private incentives with social welfare reduces overuse and helps sustain the resource. While privatization can also address the problem by creating private incentives, the act of working together to manage the resource is best described as internalizing the externality.