Economics for Advocates: The Tragedy of the Commons

The tragedy of the commons refers primarily to a basic demonstration that pure utility-maximizing economic logic leads to a situation in which everyone winds up worse off than they would have if they had cooperated. The phrase “Tragedy of the Commons” is from Garrett Hardin’s 1968 article of the same name in the journal Science.

Hardin sets up the argument,  “Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons.” In this situation, each herdsman gains a benefit from grazing an extra animal. They also suffer from overgrazing and depleting the commons. The linchpin of the argument is that the suffering from overgrazing is shared among many people, while the benefit of the additional cattle belongs to the individual. So, “the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another…But this is the conclusion reached by each and every rational herdsman sharing a commons. 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.”

In a nutshell, the cost of overusing (or polluting) a resource is smaller than the benefit to the individual, and so the individual overuses the resource. However, because every individual does this, the result is resource depletion.

Hardin originally applied this argument to overpopulation,  however this was shown to be a misapplication as population growth tapered off in rich countries even in the absence of the mutually agreed upon mutual coercion that Hardin recommended. It also did not make sense on a theoretical level, as children do not bring the same economic benefits as cattle. Nonetheless, the general form of the tragedy of the commons does apply to issues like pollution and over-fishing.

In 2009, Elinor Ostrom won a Nobel Prize in Economics for following up on when the tragedy of the commons will take place and how best to manage the commons. Hardin had advocated either turning the commons into private property or strong government regulation on the national or international level. Ostrom instead pointed to the role of social capital and local organizations. Instead of basing her analysis on a the purely rational economic agent, Ostrom looked at actual human beings (Imagine! Why didn’t economists do that years ago?) and found that they were more cooperative and that the indicators of social capital and local institutions often lead to a non-tragic resolution to commons management.

Ostrom’s overall analysis is far too detailed and nuanced for a short blog post, but she did also recognize that not all commons problems could be dealt with on a local level.  One of the most interesting things about the tragedy of the commons argument is that it has been used to justify both pure private-property solutions (by conservatives) and increasing governmental regulation (by liberals). Ostrom challenges both those approaches by pointing to the importance of context and social interaction.

The Tragedy of the Commons is an often-cited and often misused argument. The problems Hardin points to are real, but not insurmountable. The ability of human beings to cooperate to tackle economic problems has significant implications not only for natural resource management but also for fields like poverty. Resources can be shared in a way that is equitable and reduces (or eliminates) poverty in part by strengthening social capital on the local level. There are very real macroeconomic problems that can’t be solved that way (and I write about those a lot) but it’s good to remember that there are also some problems that can be tackled simply by strengthening local institutions and organizations.

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