Tragedy of the Commons
It refers to a situation in which every individual is tempted to consume a resource at the expense of others.
In economics, the tragedy of the commons refers to a situation in which every individual is tempted to consume a resource at the expense of others.
The resource of interest is accessible to all individuals without barriers (i.e., "the commons"). Nobody is excluded.
To develop this hypothesis, it was asked what would happen if shepherds let their flocks graze on a common field in their self-interest.
The apparent act of self-interest and overconsumption is harmful (all the grass is eaten, to the detriment of all). Consequently, there will be underinvestment and, ultimately, total resource depletion.
In an environment where the demand for a resource exceeds the supply, every individual consuming an additional unit causes harm to others and themselves. Nobody benefits in the long run.
In economics, it implies that individuals are likely to exploit shared resources in such a way as to outweigh supply, causing a shortage of resources for the entire community.
To prevent such, people must cease exploiting natural resources for their self-interest. The goods which are both competing and not excludable are prone to create such tragedy.
When common resources are consumed with a view to short-term gain, the result can be a tragedy of the commons. When an industry consumes resources faster than they can be produced, the immediate gains are overshadowed by a loss of productivity later on.
The theory's accuracy is a subject of debate among economists, and its applications are believed to be limited. However, "The Tragedy of the Commons" by Garrett Hardin was published in a peer-reviewed scientific journal in 1968.
The paper discussed the growing concern about overpopulation. Hardin used a lambing field, as described by the early English economist William Forster Lloyd, to demonstrate the adverse effects of overpopulation.
According to Lloyd's example, privately owned grazing lands are restricted by prudential measures to protect the land's value and the herd's health. As a result, private landowners are incentivized to preserve the land they own at all costs.
Grazing lands held in common will deplete their natural resources because all the shepherds share the animals' food.
Hardin's point was that if humans faced the same situation as herd animals, everyone would act in their self-interest, consuming as much as possible of the scarce resource as soon as it became available, making it even harder to find.
The Economics Effects
There is evidence that this may occur when an economic good is both rivalrous in consumption and non-excludable from consumption.
Goods of this type are common-pool resource goods (as opposed to private goods, club goods, or public goods).
It is essential to understand that a rival good means only one person can take advantage of it (i.e., it cannot be shared as with watching a TV show alone or with friends), and as soon as someone consumes a unit of the good, it is no longer available for others to take advantage of.
In other words, all consumers are rivals competing for the same unit of the good, and each person's consumption subtracts from the total amount of stock available for the good.
For a tragedy for the commons to occur, the good must also be scarce since a good that is not scarce cannot be rivalrous in its consumption; by definition, if the good is not scarce, there is always plenty to go around (e.g., breathing air).
Having a product that is non-excludable means that the individual consumer cannot stop others from consuming the product before they can buy a unit. Therefore, no incentive exists to protect or develop the resource.
A combination of these characteristics (common pool, scarce, rivalry in consumption, and non-excludability) precedes a tragedy. Consumers maximize their value from a good by consuming as much as they can as fast as they can.
In this case, the resource is depleted, and no one has any incentive to reinvest in maintaining or reproducing the good, as others can take advantage of it by consuming the product.
Eventually, the goods will become increasingly scarce and entirely depleted.
Who is Responsible?
In an ideal world, governments would define and manage shared resources, from local to national to international. Instead, the management and control of common grazing land can be in the interests of a landowner, a shepherd, a butcher, a restaurant owner, or a consumer.
This, however, might not always be possible.
Although management within clearly defined boundaries is relatively straightforward, it becomes more complicated when resources are shared across different jurisdictions.
There is a great deal of red tape and self-interest in the legislative process, personal resources, and allocation of financial resources.
At the international level, for example, states are not bound by a joint authority and may regard restrictions on extracting natural resources as an infringement of their sovereignty.
Moreover, it becomes even more problematic when the resources cannot be divided proportionally, as in whale treaties where fishers are separately regulated in what they are allowed to fish for.
Scott Barrett, an economist at Columbia University in New York, believes international law "has no teeth, so treaties are voluntary agreements."
"Even when countries are willing to take part in collective conservation efforts, they can simply pull out when they want to," as Canada did in 2011 when it opted out of the Kyoto Protocol and as America did in 2017 when it announced its withdrawal from the Paris Agreement.
It is becoming more evident that the downsides of the Commons will become more significant as the global population increases and the demand for resources follows.
It could be argued that this will redefine the concept of international governance by testing the role and practicality of nation-states.
Some may argue that managing the commons may not provide a viable solution in the face of dwindling resources; it could raise questions about the role of supranational governments, such as the United Nations (UN) or the World Trade Organization (WTO).
Ways to Overcome
Understanding and overcoming this requires understanding the role institutional and technological factors play in the rivalry and excludability of goods.
Throughout history, human societies have created many methods for dividing and enforcing exclusive rights to economic goods and natural resources or for punishing those who exploit natural resources to the point of overconsumption.
1. Collective Responsibility
To overcome this, it would be best if all individuals came together and decided collectively to limit their consumption. In accepting a fixed amount per person for consumption, people adjust their expectations of one another based on what is agreed to.
Rather than expecting each other to take as much as possible, they know a limited amount will be accepted per person. However, this solution has the significant drawback of requiring considerable trust in others.
Nothing can prevent the resources from being seized by one rogue citizen. However, this solution is more suitable for communities living in small places, such as small villages and towns, where there is a sense of collective identity.
2. Privatization or Private Ownership
In the case of private ownership of shared resources such as land, lakes, or forests, the owners have a direct incentive to ensure that it is maintained.
To completely deplete the lake of all the fish, for example, would be detrimental to their interests as there would be no fish to sell.
Providing private entities with property rights makes them more inclined to maintain the resource. Since they directly benefit from this, they will invest capital into maintaining and ensuring the longevity of these resources.
For example, private foresters have a solid incentive to plant new seedlings, control weeds, prevent wildfires, and prevent deer from eating tree saplings.
It is unlikely that anyone would be willing to maintain a resource without private ownership. Therefore, wildfires become common, deer eat the seedlings, and the forest is exploited. Ultimately forests are decimated, and a sustainable source of wood is destroyed.
3. Government Regulation
A third possible solution is to use law and enforcement to restrict the overuse of the common good. The EU, for instance, issues quotas on the number of fish that anglers can catch.
Furthermore, there are restrictions on the types of fish that can be caught. For example, some endangered species must be returned to the sea after being caught. A violation of these laws can result in criminal charges and hefty fines.
In the report, Hardin recommends a system of regulation called 'mutual coercion', mutually agreed upon. It is thus possible to create a system in which private entities can contract and agree to restrict their activities in ways that suit them.
The concept of collective responsibility is similar to this but on a larger, involuntary scale. A method like this works particularly well in large populations where setting up voluntary agreements between individuals becomes more challenging.
4. The Mid-Way Solution
Co-shared communities have been proposed as one of the significant areas where potential solutions could reside. These are communities in which the government has part ownership, and the community has part ownership.
Ownership, in this instance, refers to planning, sharing, using, benefiting from, and overseeing the resources so that the power is not concentrated in one or two hands alone.
It is essential to involve multiple stakeholders to ensure that responsibilities are shared based on their capabilities and capacities related to human resources, infrastructure development abilities, and legal aspects.
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There are examples of the tragedy of the commons throughout environmental science, especially in discussions about climate change. Historically, such tragedy has been associated with overgrazing on public land.
Even though the hypothetical is a bit dated, this principle can easily be applied to the rate at which the Earth is depleting its natural resources due to an ever-growing human population. Some specific examples include:
1. Animal extinction
The action of overfishing and hunting is an example of an individual acting purely in their self-interest, depleting a resource that should be shared amongst all.
2. Depletion of natural resources
A tragedy of the commons can result from the short-term consumption of shared resources for short-term gain. For example, when water is withdrawn from an aquifer faster than it can be replenished, the immediate benefits are overshadowed by the long-term danger of drought.
3. Climate change
In some ways, global warming manifests as a tragedy of the commons, as governments, corporations, and individuals fail to consider the cumulative effect their actions have on our shared environment.
4. Air Pollution
Everyone in the world has access to the air we breathe. It is a natural right that cannot be denied for any reason. All people have access to air, but not all of them have access to clean air. So, as a result, when we look at the quantity of clean air itself - it is limited.
Each time an individual pollutes, the air becomes less clean for everyone else. Herein lies the tragedy of the commons.
Why would one company restrict its emissions of CO2 when another company is releasing tonnes of gas into the atmosphere?
Undoubtedly, a more environmentally friendly supply chain will cost more in the long run. Consequently, companies may elect to take the most economical steps - as influenced by competition, for example.
The tragedy is that no one can breathe clean air anymore. There are, however, potential solutions. The first is a pollution tax, which means companies will be subject to a tax based on how much pollution they produce. Another option is to give each company a quota.
5. Traffic Jams
A traffic jam may be caused by an accident, a disabled vehicle, road construction or maintenance, adverse weather conditions, or demand fluctuations.
Slower speeds, longer trip times, and increased vehicular queueing are all characteristics of traffic congestion. However, recurring congestion is a complex phenomenon affected by socioeconomic, technological, and human factors.
Roads are a common good for everyone, but congestion can make them virtually unusable. Tragically, many people cram the road to get to their destination.
More cars result in traffic and increase the likelihood of an accident. In addition, due to the limited capacity of some roads, and the high travel demand, workers waste hours in traffic - not to mention the stress it causes.
Deforestation refers to the intentional clearing of forests. Forests have been cleared throughout history and into the modern-day for agriculture, animal grazing, and wood for fuel, manufacturing, and construction.
The overexploitation of the planet's forests has had immense environmental consequences. Unfortunately, due to poor management, our forests have been disappearing at an alarming rate over the last century.
Furthermore, deforestation not only destroys natural wildlife and threatens the sustainability of forests but can also affect the atmosphere.
The destruction of trees, which naturally absorb C02, harms global carbon emissions. The tragedy of deforestation is that private entities are plundering and turning typical forests into farmlands.
Whatever the reason for deforestation, the result is always the same: destroying an ecosystem that once played a vital role in defending our planet.
Brazil, the Amazonian rainforests are destroyed continuously. Even though deforestation of the Amazon is illegal, it is still occurring due to its vast and unpoliceable size.
Besides polluting the water and land, litter can also pollute the air. According to researchers, more than 40% of the waste on Earth is burned in the open air, which releases toxic emissions.
Littering creates a toxic environment in the ocean, on the street, and in public parks for humans, fish, and other animals. In addition, hazardous chemicals left in the litter can pollute not only the soil but also the water.
These chemicals, in turn, can enter the food chain and cause significant health problems. There is a tragedy in that that so much of our environment is free and accessible, but the quality of our water, soil, and supply systems is inadequate.
Littering does not have any real consequences, so people's consciences are the only thing that prevents them from doing it. Rather than finding the nearest bin, it is easier to drop a chocolate wrapper.
The illegal hunting of animals is known as poaching. Unfortunately, a significant number of countries around the world are victims of this highly destructive practice, which is forcing many species to the brink of extinction.
It is a known fact that animals like white elephants and rhinoceros are endangered species, and they are still sought after for their tusks and horns. When these animals are roaming freely, there is nothing to stop poachers from tracking and capturing them.
It is also important to note that even though rangers protect them in some cases, around 600 of them have been shot down between 2009 and 2016. Therefore, there is a growing interest and a need to protect these animals for the sake of future generations.
The tragedy here is that driven by an interest in ivory, the poachers are depleting the 'resource' to the point where it is exhausted. The elephants will become extinct, and there will cease to be a supply of ivory.
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Researched and authored by Saif Ali | LinkedIn
Edited by Colt DiGiovanni | LinkedIn
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