The Tragedy of the Commons

Release Date
June 29, 2011

Topic

Basic Economics
Description

People living together must find some way to preserve common resources. Unfortunately, there are strong incentives for people to exploit these resources when they are held in common by everyone. As Prof. Sean Mullholland at Stonehill College explains, the ‘tragedy of the commons’ occurs when individuals acting independently end up depleting shared resources, such as fisheries or pastureland. Prof. Mullholland discusses two potential solutions to this problem: public ownership, where the property is owned and administered by the government, and private ownership. He discusses the strengths and weaknesses to each approach and some key considerations for determining which institutions best protect useful resources.

  • Tragedy of the Bunnies [Game]: Play a game to see how the tragedy of the commons works, and how to avoid it.
  • Tragedy of the Commons [Article]: Garrett Hardin’s classic article explains the fundamentals of how commons are created and eliminated through private and government action.
  • The Commons: Tragedy or Triumph  [Article]: Bruce Yandle looks at historical commons problems that have been solved by human creativity and institutional evolution.
  • How Fishing Communities Protect Their Future  [Article]: Don Leal explains how fishing communities privately work together in the absence of government regulation to solve tragedy of the commons problems.
  • The Tragedy of the Anticommons  [Audio]: Michael Heller and EconTalk host Russ Roberts look at problems that emerge when numerous individual claims to a resource are bundled together.
  • How the Market Can Keep Streams Flowing  [Video]: Rob Harmon describes why rivers tend to be neglected and provides suggestions on how to improve the condition of rivers.

The Tragedy of the Commons
The tragedy of the commons is a concern among biologists and social scientists alike. I’d rather refer to this as the problem of open-access resources. In short, the tragedy of the commons occurs because each user receives direct benefit of using the resource but only bears a fraction of the cost of its exploitation.
So examples abound. I mean, it could be African elephants that are near extinction. It could be Amazon Rainforest deforestation. It could be overfishing of many of the fisheries worldwide. It could be overfishing in the pond, say, right here.
The idea behind this has been around for many years, but Garret Hardin in his 1968 piece in Science was the first to bring this to the forefront about the time that the environmental movement began planning its first Earth Day. In Garret Hardin’s example, he presents us with an open-access pasture. Anyone who wants to can bring their cattle to graze. Each rancher’s goal is to maximize his or her private benefit. Every rancher has the incentive to bring more and more cattle to the pasture because they receive the direct benefit of grazing their cattle there. Unfortunately, they only bear a fraction of the cost of the over-exploited pasture, so they’re going to continue to add cow after cow until the pasture is overgrazed and destroyed and no longer usable as pastureland.
In other words, their individual incentive invites overall ruin, for even though they recognize that the pasture’s being exploited, somebody else will bring a cow if they don’t. And so they’ll continue to do so. It’s not that they don’t know the asset’s being exploited. It’s that if they wait and try to delay it’ll just be exploited by somebody else.
The large issue here is there’s a lack of excludability. The ranchers have no way of stopping others from adding cattle to the pasture. In his piece, Garret Hardin suggested two main ways to go about solving the tragedy of the commons. The first is through privatization or private ownership. The second is through public ownership or government ownership. So whenever we have public ownership, one of the benefits is that we still all share the collective rights of this asset. This is one of the reasons why we have the National Park System: to protect natural open space at Yosemite and the beauty of Yellowstone and things of that nature.
But one of the problems of public ownership is the decision makers don’t bear the cost of their actions nor do they receive additional value from any good decisions they make.
For instance, imagine if you’re a park ranger and you find some innovative way to reduce large forest fires that adds value to the park itself. You don’t receive the direct benefit of the decisions. You and your staff are not going to receive large pay raises or are not going to receive the large stream of value that comes from that decision. However, private ownership does solve this problem. With private ownership, the decision maker bears the direct costs of their actions, and so for any poor decision they’re going to bear the cost of. But any positive, innovative decision, they’ll receive the benefits. So if you were a ranger or a park owner who’d found this innovative way to solve the problem with forest fires, then you would receive the stream of value from that good decision.
There’s not a silver bullet to the problem of open-access resources. There’s not a one size fits all strategy. But we do know that limiting access and ensuring that decision makers bear the cost of their actions allows us to address key concerns with open-access resource problems.