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In 1968 the ecologist Garrett Hardin (1915-2003) published the article “The Tragedy of the Commons,” in which he argued that the problem raised by population growth had only a moral solution. His use of the word tragedy was meant to emphasize the inevitableness of destiny and the remorseless working of things. He used the celebrated example of a pasture open to all to illustrate what he considered to be a problem facing the human race in general.
Suppose that a pasture is used freely by herdsmen owning their cattle privately. Acting rationally and selfishly, each herdsman chooses the size of his herd so as to maximize his private gain. Adding one animal yields a positive component reflecting the proceeds from selling the animal. It also involves a cost: if pasture space is scarce, the additional animal results in overgrazing. However, that cost is shared by all herdsmen and is only minimally felt by the particular decision maker. The tragedy unfolds when all decision makers disregard the costs imposed on others, which leads all the herdsmen to own too many animals. Heavy overgrazing results, and the cattle are underfed and fetch low prices. In this scenario, herdsmen will add to their herd until they derive no benefit from the additional animal. This is called rent dissipation. With free access, the magic of Adam Smith’s (1723-1790) invisible hand does not work.
In “The Economic Theory of a Common Property Resource: The Fishery” (1954), H. Scott Gordon provided a technical analysis of the problem well before Hardin gave it celebrity. Gordon described a situation in which a private fisherman does not benefit from restraining his activity: the fish he leaves in the water is likely to be caught by some other fisherman. As a result, valuable fish stocks are often overfished, and fishermen are often poor. The collapse of the North Atlantic cod fishery at the end of the twentieth century, as well as the collapse of the Chilean anchovy fishery two decades earlier, are just two dramatic examples.
The particular conditions inducing waste and rent dissipation that are typical of the tragedy of the commons arise either progressively when populations increase their pressure on a common-access resource, or more suddenly when a resource is discovered or when some technological breakthrough makes its exploitation easier. This is why some such tragedies appear as historical events. For example, whales were not endangered before the introduction of harpoon guns reduced the cost of catching them at the same time that they had become valuable for uses other than food for Inuit. In the early twentieth century, oil was discovered and exploited in common pools in the United States. This led to overextraction as one operator rushed to exploit a pool before others could deplete it. In “The Simple Economics of Easter Island” (1998), Jim Brander and M. Scott Taylor interpret the rise and collapse of that island’s civilization as an instance of tragedy of the commons. Climate change is another example: emitters of greenhouse gases treat the atmosphere as an open-access resource, not taking into account the costs borne by present and future humans (not to mention other species).
While pervasive, is the tragedy of the commons inevitable, as implied by Hardin? Gordon’s analysis identifies common property as the culprit. Were the fishery controlled by a single owner who decided how much fish should be caught, that single owner would bear the consequences of overfishing privately and would properly weigh such costs against the benefits of higher current catches. The outcome would be Pareto efficient under perfect competition.
There are many examples of private property rights solving the tragedy of the commons. The enclosures episode which witnessed the construction of fences around previously open-access areas in eighteenth- and nineteenth-century England is a celebrated though disputed example. Coase’s theorem indicates that any system of property rights, by defining a framework for bargaining, will solve externality problems provided costs of transactions are negligible. In Governing the Commons (1990), Elinor Ostrom analyzes many instances where societies have devised institutions other than private property and markets to secure or induce efficient resource use.
A simple look at the organization of economic and social life shows many potential tragedies being avoided thanks to property rights or other social rules: We accept that we must pay for food that we buy in a supermarket; most of the time, cars do not get robbed while parked on the street; we do not freely cut trees in forests for firewood.
Yet solutions or improvements are not easy to come by. The creation or enforcement of property rights, whether private or otherwise, may be institutionally or technologically difficult. Ideally, property rights must be designed in such a way that they cause decision makers to act in the interest of society as a whole in the use of the resource. In many situations, this is not possible either because the required information is not available at a reasonable cost, or because it will not be revealed to the regulator by decision makers, or because there is no authority with the power to impose the required behavior. In such cases, Coase’s theorem does not apply because transaction costs are not negligible. Yet, stakeholders may be aware of the collective costs associated with the tragedy of the commons. They can try to improve the situation by signing contracts or treaties, sometimes involving cooperation. They will do so with due consideration for their position in the status quo as determined by their power.
Bibliography:
- Brander, Jim A., and M. Scott Taylor. 1998. The Simple Economics of Easter Island: A Ricardo-Malthus Model of Renewable Resource Use. American Economic Review 88 (1): 119–138.
- Gordon, H. Scott. 1954. The Economic Theory of a Common-Property Resource: The Fishery. Journal of Political Economy 62: 124–142.
- Hardin, Garrett. 1968. The Tragedy of the Commons. Science 162: 1243–1248.
- Ostrom, Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge, U.K.: Cambridge University Press.
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