By Shreya More

Edited by Madhavi Roy, Senior Editor, The Indian Economist

You are traveling in a car. One of your friends rolls down the window to throw a bottle. You stop him. He replies “Oh! Come on, there’s anyway not going to be any change. Somebody else will litter the road if I don’t. So, how does it matter?”

This is what is called the “Tragedy of the Commons”. It is an economic term which explains a situation in which multiple individuals, acting independently, deplete a shared resource even when it is in no one’s interest to do so. The theory was proposed by Garrett Hardin. To explain this situation, the best example is the plummeting fish population. Nobody really owns the fish resource, so there are multiple fishermen competing for fish. Each fisherman will try to catch as many fish as possible to maximize his profits. However, it is also in their best interest to leave enough fish to repopulate, so that, down the road, they still have fish to catch. But there’s a lack of trust. If one fisherman limits the amount of fish he catches, he’ll be screwed if other fishermen don’t follow suit. So, every fisherman believes that the fish population will be depleted anyway.

The root of this problem is insufficient and poorly protected property rights. As consumers do not own these common goods, they have little incentive to take care of and maintain it, but rather an incentive to extract as much benefit from it as possible. A lack of trust prevails amongst the users of the “commons”. Adam Smith originally argued that ‘an invisible hand’ will always lead rational actions to socially optimal outcomes, in the case of the tragedy of the commons, the invisible hand fails to work.

Hardin had pointed out that overpopulation was a tragedy of the commons and that “freedom to breed will bring ruin to all”. However, this has served as the biggest flaw in the theory. Nobel Prize winner Elinor Ostrom argued that people have an economic cost attached to raising children. Children need to be fed, housed, clothed and educated. Rationally speaking, a couple will have children only when it’s capable of raising them. Breeding isn’t a race where if one doesn’t, the other does.

Can’t we triumph over this tragedy? Is it that inevitable? Can’t we successfully manage a resource that doesn’t belong to anyone? The tragedy of the commons is a problem- a problem with a solution, definitely. The government regulations that include enforcement of proper property rights is one solution. However, economists have always favoured the other way because market failure of any kind is better than political failure. Privatization of property is another solution which also promotes intensive use of resources. There is another solution that was first seen in Switzerland. There, the land didn’t particularly belong to a private institution or the government; it belonged to a community of people who used it. This instance of “collective institution” proved to be stable and efficient.

The tragedy of the commons does distort market outcomes. Nonetheless, instead of living with the tragedies, people CAN triumph over the commons.

Shreya More is a student of Economics at Shri Ram College of Commerce, Delhi University. She is an avid movie buff and loves reading. A foodie, she loves exploring new places to eat. She prefers lazing around to partying on weekends. A great listener, she will always stand by people whom she calls friends! 

Posted by The Indian Economist | For the Curious Mind