Tim Taylor has an interesting post on antibiotics resistance as an example of a ‘tragedy of the commons’: overuse of a shared resource. Antibiotics are miracle drugs, but their widespread use causes bacteria to react by mutating into resistant forms.
Many natural resources–like fisheries or forests or clean air–share the trait that if they are used in moderation, they have an ability to renew themselves and to continue. However, if they are overused, the resource can be depleted in a way that it has great difficulty in recovering. Moreover, as the “tragedy of the commons” scenario points out, every individual has an incentive to overuse a common resource, because the gains of using that resource all flow to the individual, while the social costs of overusing the resource are shared across society. This is the economic basis for arguing that natural resources need to be managed in some way: perhaps through private property rights like ownership or marketable quotas, or perhaps through more direct regulation of use, to prevent their overuse and depletion.
The effectiveness of antibiotics fits this scenario. Each doctor and patient has an individual incentive to use a wide spectrum of antibiotics to treat any given condition. The benefits to the patient are immediate, while the potential costs of creating greater resistance to antibiotics are shared across society. The effectiveness of antibiotics is an extraordinarily important social resource, but it is being eroded by overuse. Exactly how to prevent overuse of this resource is debatable, but the need to take steps to do so is clear.
Timothy Taylor, “Economics of Antibiotics Resistance“, Conversable Economist, 3 August 2012.
There is more at the link. Tim doesn’t mention this, but inappropriate use of antibiotics can also be modelled as a negative externality. It might be interesting to compare the two models in the classroom, to show how two different thought processes reach the same conclusion.