Methods of pricing common property use and some implications for optimal child-bearing and the social discount rate

Each individual consumes a numeraire capital-consumption good, harvests “fish” from a common property resource, and makes child-bearing and capital bequest decisions in her one-period life. The model is developed in a way that traces the physical impacts of harvest choices across generations. Consistent with previous results in models with pollution, it is shown that the efficient resolution of the stock externality can be accomplished by a combination of Pigouvian harvest and a child-bearing tax. Results are extended to show that the creation of asset-like individual transferable quotas (ITQs) induces efficient harvest and child-bearing decisions without a child-bearing tax. Clarifying previous results, it is shown that the social discount rate is equal to the common net-of-Pigouvian-tax rate of return on capital in both industries.