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Casy Study of the Tragedy of Common

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Discussion on Tragedy of the Commons | This paper intends to discuss the basic theories within the scope of the tragedy of commons, especially from the ethics perspective. In addition, the paper also explicitly explores two possible ways to solve the tragedy of the commons, the free market solution and the socialism solution, and applies these ways to a real case of Euro’s Tragedy. In the end, referring to Elinor Ostrom’s theory in 2009, the paper recommends the collective agreement from the moral perspective to be the possible ideal solution to the tragedy of the commons. | |

1. Introduction 1
2. Formation 2
2.1 Theoretical explain of the formation 2 2.2 Hardin’s grazing model 4
3. Ethics Involved 5
3.1 Ethical Egoism Theory 5
3.2 Utilitarian Theory 5
3.3 Moral Foundation Theory, Virtue Theory and Confucius 6
3.4 Right Theory 6
4. Solutions to the Tragedy 7
4.1 Free market solution 7
4.2 Socialism solution 9
4.3 Comparison of the Two Solutions 10 4.3.1 Attitude towards self-interest 11 4.3.2 Attitude towards common resources 11 4.3.3 Government Function 11 4.3.4 Incentive structures 11 4.3.5 Outcomes 12
5. Case of Euro’s Tragedy 12
5.1 How Euro’s Tragedy Happened 13
5.2 How it related to Tragedy of the Commons 14
5.3 Free Market Capitalism Solution and the Tragedy of Euro 14
5.4 Socialism Solution and the Tragedy of Euro 15
6. A Third Solution 17
6.1 Ethical Obligation 17
6.2 Cultivating Ethics 17
6.3 Elinor Ostrom’s Theory 18
7. Conclusion 20
Bibliography 21

Tragedy of the commons is an economic issue as well as an ethical problem rising from daily life. This paper would provide a broad discussion on the tragedy of the commons and come up with some solutions to it. We would start with the introduction of the tragedy by its definition and formation, analyze the ethics involved in it, and conclude the two traditional solutions to the tragedy. Theories of the tragedy would also be applied to a case of Euro’s tragedy. In the end, we have summarized a new way from the perspective of ethics, referring to the advanced theory in the field by Elinor Ostrom on how to solve the tragedy. 1. Introduction
Concerning its origin, the dilemma of “tragedy of the commons” was first described in Garrett Hardin’s article “The Tragedy of the Commons” which was published in 1968. Hardin (1968) described tragedy of the commons as follows:
“Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons.”
Commons refers to the resource owned by the human society. It has economic value and intrinsic properties that could meet humans’ demands and relates to humans’ understandings of the resource. Such resource is not owned by anyone in the community, which means no one can claim exclusive use to it, and no one can stop anyone else from using the resource. Oceans, forests, fish stocks, and national parks are all commons. In Hardin’s opinions, the result of the commons would be a tragedy, that is to say, the resource would lose all of its value in the end, becoming depleted, unusable, worn out, and no longer possessing any value to the use.
We often use the concept of “tragedy of the commons” in relation to environmental protection, sustainable development and global warming issues. The dilemma of tragedy of the commons also helps us understanding behavior in the fields of economics, evolutionary psychology, taxation, and sociology.

2. Formation
2.1 Theoretical explain of the formation
The formation of the tragedy of the commons contains several steps, and people involved in the situation are those resource users who seek profits for themselves. When adding multiple self-interested individuals and the commons together, a number of things are going to happen. Since the users need to maximize their own profits by consuming the commons, they would have more incentive to overuse the resource instead of maintain the commons. If one engages in maintaining the public resource, other people in the community will also gain benefit from the maintenance, which means he or she would bear all the cost of maintaining, but much of the benefit will go to other people who are using the resources as well. Therefore, under a personal cost-benefit analysis, he or she will find it not worthy to do the maintenance and would have less incentive to do so, therefore leading the resource to depleting more quickly. Also, just as people have no incentive to do the maintenance, they would not like to engage in any improvements with the benefits dispersed to all of the others.
As time goes by, all the people in the community would have even much stronger intention to overuse the resource. Because resource is used unlimitedly, and people keep unwilling to do any maintenance or improvement, resource shortage comes along. When people recognize that the amount of resource is declining and their profits are dropping, they would care more about the short-term profit (maintenance and improvement are long-term). As a result, the overuse of resource increases.
Moreover, as people begin to compete for the limited resource, the relationship between individuals starts to get worse, and the tick-tack-toe competition appears. People treat others as enemies, because one would think that others are using the resource that would bring benefit for him or herself. This situation contributes to the zero-sum competition among multiple individuals. Eventually, it starts to go the vicious cycle (Chart 2.1.1) when the incentives get worse and worse until finally, people end up with a depleted resource. Then they have to abandon the resource all together, which explains how the tragedy of the commons happens.
Chart 2.1.1

Vicious Circle

3.2 Hardin’s grazing model
Hardin also raised a concrete model, which tells a story about a group of the herdsmen and better illustrated the formation of the tragedy.
This tragedy of the commons model develops in grazing issues. At the very beginning, every herdsman keeps one cattle in a pasture open to all. As the population is appropriate, and also due to the tribal wars, diseases and limited technology, all the herdsmen can increase the number of cattle they keep as large as they want. However, the number of animals and people would reach the carrying capacity of the land as time passes by.
According to Hardin’s theory, the positive component is a function of the increment of one animal while the negative component is a function of the additional overgrazing created by one more animal. Since the herdsman receives the entire sale from the additional animal, but the effects of overgrazing are shared by all of the herdsmen, so the positive utility is much higher than the negative utility. Therefore, as a rational herdsman, he would like to add another cattle on the land, because the profit of raising the additional one would exceed the associated cost, and he could absolutely get benefit from it, even if he knows that the total number of animals keep on the pasture reaches the carrying capacity of the land, and adding additional cattle declines the quality of the land.
All the herdsmen who share the commons apply this rationale, and then each of them would add an additional animal to the land. The number of cattle begins to increase dramatically, resulting in the overgrazing and deterioration of the land. Soon after that, the total number of animals keep on the pasture exceeds the carrying capacity of the land, and finally, the number of cattle decreases and all of the herdsmen encounter huge losses. 3. Ethics Involved
3.1 Ethical Egoism Theory
In Hardin’s setting of tragedy of commons, when the herdsman seeks to maximize his gain, the utility of adding one more animal have both negative and positive effects. The incremental profit is gained by the herdsman himself while the overgrazing is shared by all of the herdsmen. In the moral field, the Ethical Egoism theory plays the basic role leading to tragedy of commons. The self-interested and short-term orientated herdsmen found the positive effect outweighs the negative one and chose to add more and more animals without limit.
Adam Smith has the famous theory of “invisible hand” in his The Wealth of Nations. It indicates the assumption that decisions reached individually will be the best decision for the entire society as a whole. The population as a whole is better if everyone acts selfishly. This could rationalize laissez-faire in reproduction, which results to the tragedy of commons.
However, in the long run, the unsustainability caused by tragedy of commons would be not in the best interest for every individual in that period then. The depletion of resources caused by overgrazing of animals, as well as overpopulation of human society, is also the major concern in Hardin’s view.
3.2 Utilitarian Theory
As a consequentialist theory, Utilitarian theory would tell a different story. With the premise that resource is always finite, the total resource is depleted by the abuse of every individual and it can never recover to former quantity. This doesn’t promote the best for the majority or the whole population involved.
In Jeremy Bentham’s utilitarian theory, maximizing population does not maximize goods. And Hardin concludes that optimum population is less than the maximum. This is in conflict with the ethical egoism theory which encourages people to have children or breed animals with no limit.
3.3 Moral Foundation Theory, Virtue Theory and Confucius
In the moral foundation theory, temperance is one of the five moral foundations of mankind. It is also considered a virtue of the four cardinal virtues. Temperance is generally defined by control over excess and can be applied to many cases, such as self-regulation and thrift. Relating to the tragedy of commons, the virtue of temperance could avoid people from over population and the extravagant lifestyle.
Not only in the virtue theory, but temperance is also encouraged in ancient Chinese ethical theory by Confucius. Confucius taught people to be li (propriety) and zhi (wisdom), which reminds people to take the appropriate part from the resources and thinking about future.
3.4 Right Theory
What if the society appeals to an individual exploiting a commons to restrain oneself for the general goods by means of his or her conscience that he or she should maintain the virtue of temperance? Charles Galton Darwin said that “It is a mistake to think that we can control the breeding of mankind in the long run by an appeal to conscience” (Hardin, 1968).
Concerning the horror of tragedy of commons, Hardin came out with the solution of forbidding the freedom to breed by mutual coercion. According to right theory, it is unethical to do so that it involves the infringement of human liberty. At the same time, under libertarianism theory, this seems go against the freedom of human beings and is not ethical then. However, Hardin believes that the freedom of short term self-interest is not what freedom really is.
Although it should be everyone’s negative right to do whatever he or she wants to the shared resources, however, maybe in the long run, the less and less available resources would impede everyone’s freedom.
In conclusion, the ethical rationalization behind the tragedy of commons which based on human nature is complicated. We would also consider about the paramount role played by morality in the later part of the paper. 4. Solutions to the Tragedy
As we introduced before, tragedy of the commons is mainly caused by two factors: self-interested characteristic and un-owned common resources. How can we avoid the tragedy? Based on the two causing factors, two solutions are brought up. If the “un-owned common resources” is considered as the problematic factor that results in the tragedy, free market approach, where we make common resources private property, would be a solution that avoids tragedy of commons. If the “self -interested characteristic” is considered as the problematic factor, socialism would be a solution to avoid tragedy of the commons where government control should be applied.
4.1 Free market solution
If we believe the tragedy results from resources shared as commons, what we need to do is to abandon the commons and privatize the resource so as to change the incentive structure.
As is explained in chart 4.1.1, free market solution tries to eliminate tragedy by privatizing property. Under shared property, everyone can’t stop others from using the resources; while under private property policy, each person can only use his or her own resources, and legally prevent others from utilizing the resources. Furthermore, people are willing to take the responsibilities to manage their own resources to promote both short-term and long-term development. Moreover, people will respect the resource capacity and seek methods to increase resource capacity. They may also try to borrow good experience from others to supplement themselves and get more. By this way, a win-win situation will be successfully created. People maximize their own benefits with their own efforts, and at the same time, the common resources are successfully sustained under the joint efforts of everyone.
The advantage of free market solution is obvious. Since performance of people’s work is directly tied to their personal gains, people are more incentive to engage in maintenance and improvement work and take long-term benefit into consideration. However, on the other hand, this solution has its disadvantages, among which lies tragedy of anti-commons. Tragedy of anti-commons is the mirror-image of the tragedy of commons. “In anti-commons, multiple owners are each endowed with the right to exclude others from a scarce resource, and no one has an effective privilege of use. When there are too many owners holding rights of exclusion, the resource is prone to underuse.” (Michael A. Heller., 1998)

Chart 4.1.1

4.2 Socialism solution
From another perspective, if we believe tragedy of the commons lies in people’s self-interest characteristic rather than common resources, socialism would be an efficient way to avert tragedy of commons.
Self-interest characteristic makes people only to consider their personal advantages and ignore the impacts on others or the community as a whole. So instead of privatizing common property as in free market solution, what we should do is to stop or at least limit individual profit seeking behavior through government management. In other word, the resource is public property and government is the agent that makes decision on how to utilize it. Under this solution, government has the power of rationing (how to allocate resources), conscription (how to assign people to do improvements or maintenance work), and legislation and punishment (how to make sure everything is in order). With the good governance of the community, long-term win-win situation could also be achieved. Chart 4.2.1 shows how socialism solution rationalizes.
Chart 4.2.1

Same as free market solution, socialism solution has its advantages and disadvantages. The government or community may have a broader vision than individuals and know how to benefit the community as a whole. In this way, the entire community would benefit in the long run. On the other hand, socialism has obvious disadvantages. If an unwise decision is implemented imperatively, the whole community will suffer great loss. Moreover, socialism may lead to government centralization and decrease the democracy level. 4.3 Comparison of the Two Solutions
Free market and socialism are two classic solutions for tragedy of the commons. Both solutions aim to avoid tragedy of the commons and share some similarities. At the same time, they differ from each other.
4.3.1 Attitude towards self-interest
Free market solution supporters consider self-interest as moral and good traits while socialism supporters treat it as a bad phenomenon. Free market solution utilize self-interest characteristic to incentive people to engage in improvement and maintenance activities and to take good care of private property for their own benefit. Socialism solution intends to limit individual profit seeking behavior by government management and controls.
4.3.2 Attitude towards common resources
On one side, free market solution believes common resources are problematic; while on the other side, socialism considers common resources are better for the whole community. So, the former solution abandons common resources to make people responsible for their own property; while the latter one protects resources shared as commons.
4.3.3 Government Function
Base on different purposes, government function differs. Under free market solution, government’s major function is to protect private property rights. The way that the economy functions is through people working for their own benefit. On the contrary, government under socialism has broader power in rationing, conscription and control resources.
4.3.4 Incentive structures
Under free market solution, people figure out what his or her short-term and long-term benefits are and manage private property for themselves. People volunteer to engage in work to some extent. While in the socialism solution, people are incentive by compulsory. In other word, people should obey legislation or they would be punished.
4.3.5 Outcomes
As we analyzed in 4.1 and 4.2, both solutions have advantages and disadvantages and may lead to different outcomes. Chart 4.3.1 briefly shows different outcomes of the two solutions.
Chart 4.3.1 | Successful outcome | Unsuccessful outcome | Free market Solution | Avert tragedy of commons | Tragedy of Anti-commons | Socialism Solution | Avert tragedy of commons | Government centralization | 5. Case of Euro’s Tragedy
In this part, we would introduce a particular case of Euro that could be applied in the scenario of tragedy of the commons.
In the early 2000s, Euro was officially introduced into the world market as a legal tender. Euro had experienced a short prosperous period since its introduction. However, after a short boom, crisis subsequently followed—the purchasing power of European countries as a whole began to decrease. How did this happen? How does this case relate to the tragedy of the commons? Does a perfect solution exist to solve these problems? Detailed explanation would be illustrated in the followings.
5.1 How Euro’s Tragedy Happened
In 2009, European Monetary Union (EMU) countries began to suffer from deficits. To finance the deficit, governments of these countries could have two choices. They could either finance through taxation, or finance indirectly from the European Central Bank (ECB) through banks.
The former way may pose direct burden to the citizens and lead to people’s dissatisfaction with the government. The second way could satisfy government’s economic needs as well as help the politician gain more support from the citizens. The only shortcoming of the second way is that it may transfer the economic burden to the whole European Union (EU).
From the government’s perspective, the attractiveness of the second choice far outweigh its shortcomings. Therefore most of the governments in EU adopted the second method by financing from ECB. They issued the bonds to the banking system. Those banks would sell the bonds to ECB as collaterals. By this way, ECB subsequently increased the base money and allocated this money to the deficit countries through expanding the credits of banks. Finally, the banks could print new money by credit expansion and then purchase more government bonds. The governments therefore were able to finance its deficits with the new money.
However, when governments used this new money for procurement, the prices of goods bid up because the new money did not create any real value. Due to the lag nature of market, the high-deficit countries that first used the new money enjoyed the most benefits because they gained a fruitful income earlier than others, and the painful results of increased prices and shrink purchasing power would be shared by all members throughout the Euro area. 5.2 How it related to Tragedy of the Commons
Let us put the Euro system into the script of Herdsmen’s model. The Euro is like the common pasture, and the sovereign countries are like the herdsmen. Just like the herdsman who gets the most usage of the pasture would get more profits, each of the countries strives to request more money from the EMU, because the country that gets and uses the money first would gain the most benefits. However, when the pasture would be overexploited, all the herdsmen’s profits would be hurt, no matter whether the herdsmen have overused the pasture. Likewise, when one country over-created the currency, all the other countries would bear the burden of the increasing price and the shrinking purchasing power of Euro, no matter whether the country requested EMU to finance their deficit. When an analogy is made between the two cases, it is easy to see the tragedy of the commons in the Euro case. In the following paragraphs, we would call it the tragedy of Euro.
5.3 Free Market Capitalism Solution and the Tragedy of Euro
The core of the free market capitalism is privatization, asserting that resources should be distributed to individuals and individuals’ property be protected from others. In the herdsmen model, it means that each herdsman owns partial of pasture and manages their own parts by themselves.
However, when applied to Euro system, the direct result of the privatization would be that all countries manage their own currency. For instance, the currency of Greece is and can only be influenced by Greek economy, so does the currency of Spain and Germany. Such situation is just as what it was in the early 1990s, when the Euro countries had their own different legal tenders. The privatization may relieve the tragedy of commons to some extent, but it may also lose the merits of the Euro and the original intention of the introduction of Euro.
If the purchasing power of Euro keeps going down, sooner or later, the collapse of euro area could not be avoided. However, countries of Euro area could not give up Euro currently. The reasons are as follows. Firstly, it is costly to transfer a currency. The cost of introducing Euro to the market was already a large amount, so it’s no doubt that another huge amount cost would occur to quit EMU and give up Euro. Secondly, for Euro area members, the merits of Euro outweigh the drawbacks. As a unified European currency, Euro is more stable and powerful than a single state’s currency (even under the crisis); it can eliminate the existing exchange rate fluctuations between a numbers of currencies and therefore reduce the transaction cost; and it can stimulate trades between members and promote the circulation of free capital. Lastly, the Europe Union needs the Euro to be a powerful currency to compete with the other currencies, such as US, China, India and Brazil currency. As a result, the privatization or free market-capitalism is not a good choice to resolve the tragedy of Euro.
5.4 Socialism Solution and the Tragedy of Euro
Under the “socialism” solution, it is vital to use regulation to restrain self-interested behaviors. However, as a union of sovereignty states, the regulations were lack of enforcement. For instance, the debt and deficit clauses of the Maastricht Treaty and the SGP (stability and growth pact) were adopted in 1997 to limit the deficit rate of the EMU members. However, without effective enforcement policies, it failed to prevent states from violating this pact. Even Germany, a state asserting conservative fiscal policy, had violated the pact from 2003 to 2006. So the tightened control could not be an effective solution to the tragedy.
There is another action under socialism EU can take to reduce the impact. Currently, interest rates are the same for countries with high deficit rate (such as Greece) and for countries with good “credit records” (such as Germany), which poses a threat that the risk of government bonds from Greece is higher than the bonds from Germany’s. So if ECB (European Central Bank) could apply different interest rates for different states according to their credit rating, it would be able to control the reckless deficit policy in small countries more effectively. Unfortunately, two barriers exist. Firstly, it is difficult for the members of the EMU to get an agreement on this plan. Secondly, even the application of the rate policy is successful, the EMU still doesn’t have enforcement power to regulate or punish its members. Therefore, this solution to the tragedy of the commons would be ideal but unfeasible as well.
According to the mechanism of the tragedy of the Euro above, it is concluded that neither of free market capitalism and socialism solution is optimal to solve the tragedy of the Euro. Does a third way exists that can solve the tragedy? When Garrett Hardin (1968) first came up with the idea of the tragedy of the commons, he said: “the population problem (a kind of tragedy of the commons) has no technical solution; it requires a fundamental extension in morality”. Maybe new ways to solve the tragedy could be considered from the scope of morality.
6. A Third Solution
6.1 Ethical Obligation
As we have analyzed above, to solve the tragedy of the commons, people could choose either the method of private property or the central authority. However, both of the methods have their shortcomings and may not lead to an effective and sustainable use of the resources at the end.
In our opinion, one of the best approaches to avert the tragedy of the commons is not to simply limit and reduce personal use of the commons, but to establish the ethical obligation to reach a collective agreement within the whole community.
Reduction of the use under only one person’s effort would not lead to the sustainable use of the whole common resources. However, under a collective agreement, people would adopt a mutual rule to manage the common resources and would be willing to obey this rule for themselves and for the community. They also believe that other individuals in the community would not violate the rule and would do things just like what they do. In this way, the common resources could be used wisely and sustainably.
6.2 Cultivating Ethics
In order to establish the ethical obligation of collective agreement, we recommend the community to cultivate ethics to the second level of Kohlberg’s theory, and to build a mutual moral standard within the community.
First of all, in order for people to volunteer to obey the mutual agreement for sustainable use of the common resource, they should arrive to at least the second level of moral reasoning in Kohlberg’s theory. People with moral reasoning at the first level would take actions according to the external consequences, either the punishment or the rewards. Individuals at this level would not take the actions good for the commons, for there are no specific rewards or punishments seen in the short time for him or her to maintain and improve the commons. When their moral reasoning arrives at Level Two, they would value the social group more. Behaviors good for the commons would be done in order to get confirmed or to obey the mutual agreement among the community.
Furthermore, the community should have a mutual moral standard that is aware by all of the residents, distinguishing ethical behaviors from unethical behaviors. For example, if the community accepts utilitarianism as the standard, then all of the residents should be educated what the long term benefit is for the community; if the community takes right theory as the standard, then people should be aware that the commons is their own property but as well as the property of others. If a mutual moral standard is established and well educated, people in the community would be willing to obey the mutual agreement from the bottom of their heart, resulting in the effective and sustainable use of the common resources.
6.3 Elinor Ostrom’s Theory
In fact, in 2009, the political economist, Elinor "Lin" Ostrom (1933 – 2012), who was awarded the Nobel Prize in Economics, raised her opinion that common resources could be successfully managed without government regulation or privatization.
She has observed several cases around the world, including inshore fishing, allocation of irrigation and grazing. One of her cases was in a Swiss village, where farmers share a communal meadow to graze their own cows. This was just like a classic model of the tragedy of the commons, however, in reality, no overgrazing problem exists. To investigate the reasons, Ostrom found that the farmers had a common agreement that one is allowed to graze cows only on the meadow that they can care for over the winter, which could date back to the year 1517.
Ostrom concluded in her Governing the Commons that eight principles applies to avert the potential tragedy of the commons:
“1. Define clear group boundaries.
2. Match rules governing use of common goods to local needs and conditions.
3. Ensure that those affected by the rules can participate in modifying the rules.
4. Make sure the rule-making rights of community members are respected by outside authorities.
5. Develop a system, carried out by community members, for monitoring members’ behavior.
6. Use graduated sanctions for rule violators.
7. Provide accessible, low-cost means for dispute resolution.
8. Build responsibility for governing the common resource in nested tiers from the lowest level up to the entire interconnected system.” (Baylor L Johnson, 2003)
All of the cases Ostrom studied owned these characteristics and principles in the community, and they all survived from the tragedy of the commons. The eight principles mainly focus on motivating people to participate in managing the common resources democratically, so that they would comply with the collective agreement voluntarily. These principles provide a third point of view that could help solve the tragedy of the commons more thoroughly.
7. Conclusion
Tragedy of the commons is a popular ethic topic for a long time and worth even more consideration nowadays. From our analysis above, to solve the problem is never easy and what we could do is to reach out for help in the perspective of morality.

Bibliography * Baylor L Johnson, Ethical Obligations in a Tragedy of the Commons, Environmental Values (White Horse Press 2003.Aug) * Elinor Ostrom, Governing a Commons from a Citizen’s Perspective * Garrett Hardin, The Tragedy of the Commons, Science, New Series, Vol. 162, No. 3859. (Dec. 13, 1968), pp. 1243-1248. * Happy Fishing Game, Lincoln High School * Jay Walljasper, Elinor Ostrom's 8 Principles for Managing a Commons * Michael A. Heller, the tragedy of the anti commons: Property in the transition * From Max to market, page: 624 * Phillip Bagus, 2011, The Tragedy of the Euro, the Independent Review page: 563-576 * Robert Axelrod, Beyond the Tragedy of the Commons, Review Symposlum * The Euro: Advantages and Disadvantages of a Single Currency * * Video: Sustainable development and the tragedy of commons * Video: Tragedy of commons * Video:Tragedy of the Commons 1: What the Tragedy Is

[ 1 ]. Garrett Hardin, The Tragedy of Commons, Science, New Series, Vol. 162,
No. 3859. (Dec. 13, 1968)
[ 2 ]. Garrett Hardin, The Tragedy of Commons, Science, New Series, Vol. 162, No 3859
[ 3 ]. Michael A. Heller. "He Tragedy of the Anti-commons: Property in the Transition from Marx to Markets." Harvard Law Review 111.3 (1998): 624. Print.
[ 4 ]. Garrett Hardin , The Tragedy of Commons, Science, New Series, Vol. 162,
No. 3859. (Dec. 13, 1968)
[ 5 ]. Baylor L Johnson, Ethical Obligations in a Tragedy of the Commons, Environmental Values (White Horse Press 2003.Aug)

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