The Fallacy of the Tragedy of the Commons

by Marq de Villiers

I grew up in a small South African town 16,000 kilometers and more than a hundred years away from America’s Wild West, but nevertheless watched many a cheap Saturday morning movie set in the mesquite and chaparral of that mythically violent but oddly honorable land. They mostly had similar themes — honest, hard-working homesteading family set upon by a variety of villains, whether cattle barons, railroad tycoons, “eastern” mining companies and more, each capitalist with armies of thugs for hire, ready to drive our hero off his land. One of the most common revolved around the hapless prospector (usually shown with pickax and mule to show his essential poverty) who finds a rich seam of gold, somewhere up in them thar hills, but never gets to stake his claim, either because he is killed by thugs on the way to the claims office, or because said thugs have raced ahead and filed ahead of him. All generally worked out by the end of the final reel; the prospector (or if dead, his deserving family) vindicated, and villainous mining corporation driven off, often with the help of a virtuous senator or otherwise honest politician. An oddly anti-capitalist saga, for the America of the post-Depression and I Like Ike years.

Unasked, in all this, was a simple question: who owns the gold in the first place? The answer would have been, of course, whoever finds it first.

Those days in the Bijou came back to me after an anecdote told me by Maurice Strong, who had recently chaired the Rio conference on the environment that had come to be called the Earth Summit. Maurice, and a company he controlled, had come into possession of one of Colorado’s historic cattle ranches, the 1823 grant to Luis Maria Cabeza de Baca and still known as the Baca Grande Ranch, in Comanche country near Crestone, looking out on the Sangre de Cristo mountains. Among its other assets, the ranch happened to sit on top of one of the west’s great untapped aquifers. Maurice’s company got into dispute with others about this water. First of all, his opponents suspected he wanted to “mine” the water and ship it north to Canada, a nice reversal of the conventional power politics between the two countries. Then, when it became clear that he really didn’t want to do anything with it, claims were filed by other parties demanding access. The legal rationale was simple: in much of the west, water rights operated under the “use it or lose it” principle. If you didn’t use the water, others had to right to appropriate it and use it themselves. There really couldn’t be a clearer anti-conservationist ethic.

Who owned the gold that the prospectors found in all those Westerns? Who owned the water under Maurice Strong’s Baca Grande ranch? The answer is, no one, everyone, anyone.

The question can be extended indefinitely. Who owns, say, the natural gas deposits that have lain, untapped, under the ocean near Sable Island, a hundred kilometers from my house? Who owns the Gorgon gas field under Barrow Island off Australia’s west coast? Who owns the methane hydrate deposits off the shore of New Jersey? Who owns the limestone deposits under California’s central coast (deposits that yield up some of the world’s sublime wines)? Who owns the great boreal forests of Alaska, Siberia, and Canada? Who owns the rocks of the earth? Who, indeed, owns the air? The birds of the air? The water? The oceans? Fish stocks? Who owns the whales?

Who owns nature?

And then another set of questions, about another kind of commonwealth: who owns culture? Who owns languages, science, the accumulated genius of technology? Who owns history? Who owns, in short, the human library? Who owns it, and who has the right to sell it?

In an empty world, these questions, or at least the ones about nature, didn’t much matter. Nature seemed inexhaustible. Still, natural philosophers, as scientists were once called, have wrestled with the issue for millennia, as have political authorities. In Roman times, the Senate put together a series of laws that classified several aspects of what came to be called “the commons” as explicitly owned by the people collectively. These res communes, common things, included water and the air, but also “bodies of water,” that is lakes, and shorelines generally. Wild animals, as opposed to domesticated ones, were included. After the Roman empire collapsed, overrun by what the Romans were pleased to call barbarians, some aspects of the res communes came into dispute — feudal lords, and then kings, claimed to control them.

The implications of a commons is that since no one owns it, anyone can use it, exploit it, and pollute it at no charge.

So where, in a well-ordered world, do private property rights stop? How best to treat the commons so it survives for the benefit of all? How best to allocate the profits that flow from what exploitation is allowed? Private property is the engine of prosperity. Common property is the backdrop before which private actors perform. Both are necessary. So an answer is critical. We have three economic sectors: the private sector, the public (or state) sector and the commons sector. Only the last has no body of law to protect it, and no accounting systems for its profits or losses.

So the question becomes: if the various natural systems of the earth, especially the air, the water, the land and its minerals, and the complex life systems they sustain, are indeed “the commons,” how do we guard against the “tragedy of the commons?” If no one owns the resource and anyone can use it, how do we protect it from depletion?

The tragedy of the commons as a phrase owes its origins to Garrett Hardin’s essay in Science magazine in 1968, though the notion of a social trap involving a conflict between individual interests and the common good goes back, at least, to Aristotle.

Here is Hardin’s description of the tragedy :

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. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy. As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, “What is the utility to me of adding one more animal to my herd?” This utility has one negative and one positive component. The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is [obvious]. The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction [of the burden] … The rational herdsman concludes [from this] that the only sensible course for him to pursue is to add another animal to his herd. And another, 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. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

Hardin’s argument was widely accepted by economists and free-market enthusiasts. The solution to the dilemma, it seemed obvious, was privatization, the enclosure of the commons.

But it is not obvious. Hardin’s theory was the purest poppycock, and widely adopted only because it seemed to convey the essence of free market competition. It was a truly corporatist view.

The main error was to adopt a key proposition of the free market, and of Adam Smith’s, that man is a rational being who always acts in his own best interests, and then to assume that those interests automatically involved multiplication of personal assets. But what Hardin was describing was not rational behavior — it was the purest selfishness. And there is, after all, a crucial difference. A rational being, faced with a dilemma of the commons, would be able to calculate long-term prospects and conclude, quite rationally, that some sort of short-term limit, arrived at through negotiation, would be in his own interests. In other words, in the context of a limited commons, cooperation is a more rational decision than independence. Hardin derived his views from biology — he wasn’t an economist — and preferred a hard-line version of Darwinism called, not surprisingly, survival of the fittest. But “fit” was interpreted narrowly and stripped of its social context. Hardin simply assumed that when men came together without rules, violence or conflict ensued. He had no knowledge of the equally Darwinist view that natural selection could just as easily select for mutual cooperation as for continual family warfare, a view that has been gaining credence among biological evolutionists in the past few decades. He took no account, therefore, of the human ability to develop rules for accessing and using common resources.

Cooperation, when you look for it, is not hard to find. Fishermen in several places have banded together to set sustainable catch quotas. The same thing is true, as Jonathan Rowe pointed out in an essay for WorldWatch, in the rice paddies of the Philippines, in the Swiss Alpine pasturelands, the Maine lobster fishery, the Pacific haddock fishery, and many other places. The case could even be made that as long as settled communities remain intact, the commons flourishes. The community merely needs to be enabled to protect it.

Marq de Villiers is an award-winning writer of books and articles on exploration, history, politics, and travel.  He is also a graduate of the London School of Economics, and his latest book puts his training in economics to good use.  Our Way Out: Principles for a Post-Apocalyptic World offers a refreshing menu of economic options for an overly consumptive population living on an environmentally stressed planet.

A New View of Work

by Christian Williams

Many of us have been raised according to the “Protestant work ethic.” That is to say, we were encouraged to work hard and thus become a successful and productive member of society. But what if this advice is wrong? As the economy reaches and breaches the limits to growth, working long hours causes market failures, giving weight to the idea that governments should intervene to reduce average working hours.

In the “empty world” of the past, hard work was a public good with few negative externalities on society. In today’s “full world,” work has become a common-pool resource, vulnerable to over-exploitation. In the absence of social or cultural norms to take care of this common-pool resource, governmental intervention is the best option for preventing market failure and encouraging an optimal amount of work. Unfortunately, our work ethic is worsening the situation.

Doesn't a shorter work week seem like a good idea?

Technological development over the past few centuries has allowed for a combination of reduced hours of work and increased consumption. Indeed, these are the only options for dealing with higher labor productivity (and labor productivity has consistently risen) while still maintaining high employment rates. But as the economy hits the limits to growth, the option to maintain employment through further increases in consumption becomes unavailable, meaning that work sharing becomes necessary. But OECD statistics reveal that over the past three decades there has been very little reduction in the amount of time people spend at work. Instead, consumption has risen drastically while unemployment has remained unacceptably high. If governments in high-consuming nations shift their focus from economic growth to wider sustainability objectives, they will quickly see that there are many benefits of a shorter work week.[1]

Here are some of those benefits:

  • Energy consumption would decrease, especially energy spent on getting to and from work;
  • Resource consumption would decrease as people trade some of their wages for more time;
  • With extra time, people could make more sustainable lifestyle choices (e.g., bike, walk, exercise, eat well, garden etc);
  • People would have more time for family and friends, less stress and better health;
  • Fewer people would be unemployed, and they could make an easier transition to retirement;
  • There would be more time for democratic participation, education, and exploration of other avenues to personal and community enrichment;
  • A better-rested workforce is likely to be more productive;
  • Both employers and employees could take advantage of more flexible employment circumstances.

Despite these and other potential benefits, we need a stronger case to justify government intervention. And that case begins with the recognition that “free” labor markets are far from free. Employees, even if they are aware of the benefits of working less, are often unable to reduce their working hours. Previous work time reductions have not originated through individual choice, but through strong union influence or state legislation, such as the Ten Hours Act (1847) in the UK or the Fair Labor Standards Act (1938) in the U.S. Juliet Schor and other scholars have suggested that a rising imbalance of power between employers and employees over recent decades has led people to work longer hours than they would otherwise choose. Most workers simply can’t ask their boss for a four-day week.[2] Other analysts have suggested that the power of marketing has led people to spend above their means and then work more to pay their debts. Furthermore, in times of economic crisis, people feel anxious about losing their jobs. Such anxiety can drive them to work harder to protect themselves, resulting in a work intensification that contributes to the tragic “jobless recovery.”

If people will not or cannot choose to work less, what are the implications? Society suffers from three market failures:

  1. We have an overworked workforce, resulting in social costs from broken families to higher healthcare costs.
  2. We have a large, disenfranchised group of people who can no longer find work, a breach of their human right to work (Article 23 of the Universal Declaration of Human Rights).
  3. Long hours contribute to greater production and, in turn, consumption, with a larger ecological burden being placed on future generations and other species.

These failures are the result of a rush to secure a share of a depleting common-pool resource. But as the amount of work becomes increasingly scarce, it is natural that people try to maintain and enhance their share — a “tragedy of the commons” scenario as described by Garrett Hardin. We can’t deal with this tragedy using outdated, empty-world tactics. In the empty world, we responded to technological improvements by increasing consumption. Moving forward, we must either learn to work less and be content with an excess of leisure, or reject the technological innovations that replace human labor — that is, reject the focus on efficiency and labor productivity.

To ensure that we do not contribute to the impending tragedy, we must all aim to work less. This also requires a social overhaul of the work ethic, and a new respect for idleness and leisure. Keynes, writing some eighty years ago, saw that adjusting to a life of leisure was the primary challenge for coming generations (us), as opposed to meeting basic needs as had been the challenge for all of human history. “To those who sweat for their daily bread, leisure is a longed-for sweet — until they get it”.[3] Personally, a shorter work week sounds fine to me.

[1] See for example, the report from the New Economics Foundation in the UK titled 21 Hours.

[2] For an interesting discussion on individual labor supply curves and hypotheses, see David George (2000): “Driven to Spend: Longer Work Hours as a Byproduct of Market Forces” in Working Time: International Trends, Theory and Policy Perspectives, (eds.) Lonnie Golden and Deborah Figart, Routledge, London. George refers to Schor’s book The Overworked American (1991) among others.

[3] Keynes, John M., 1963, “Economic Possibilities for our Grandchildren” in Essays in Persuasion, (first published 1930), W. W. Norton & Co., New York.

Christian Williams recently completed a Master’s in Sustainable Development at Uppsala University (Sweden). His thesis focused on the shorter work week as part of a transition towards a steady state economy, including a case study and political analysis from New Zealand. If you would like an electronic copy of his thesis (with a more comprehensive version of the above argument), please contact him by email.

Sustaining Our Commonwealth of Nature and Knowledge

by Herman Daly

Herman DalyLet’s start with this phrase: “sustaining our commonwealth.” By sustaining, I don’t mean preserving inviolate; I mean using, without using up. Using with maintenance and replenishment is an important idea in economics. It’s the very basis of the concept of income, because income is the maximum that you can consume today and still be able to produce and consume the same amount tomorrow – that is, maximum consumption without depleting capital in the broad sense of future productive capacity. By commonwealth, I mean the wealth that no one has made, or the wealth that practically everyone has made. So it’s either nature – nobody made it, we all inherited it – or knowledge – everybody contributed to making it, but everyone’s contribution is small in relation to the total and depends on the contributions of others. In managing the commonwealth of nature, our big problem is that we tend to treat the truly scarce as if it were non-scarce. The opposite problem arises with the commonwealth of knowledge, in which we tend to treat what is truly not scarce as if it were.

Clarifying Scarcity

There are two sets of important distinctions about goods, and they make four cross-classifications (see figure below). Goods can be either rival or non-rival, and they can be either excludable or non-excludable. My shirt, for example, is a rival good because if I’m wearing it, you can’t wear it at the same time. The warmth of the sun is non-rival because I can enjoy the warmth of the sun, and everyone else can enjoy it at the same time. Rivalness is a physical property that precludes the simultaneous use of goods by more than one person. Goods are also excludable or non-excludable. That’s not a physical concept, that’s a legal concept, a question of property. For example, you could wear my shirt tomorrow if I let you, but that’s up to me because it’s my property. My shirt is both rival and excludable, and that’s the case with most market goods. Meanwhile, the warmth of the sun is both non-rival and also non-excludable. We cannot buy and sell solar warmth; we cannot bottle it and charge for it. Goods that are rival and excludable are market goods. Goods that are non-rival and non-excludable are public goods. That leaves two other categories. Fish in the ocean are an example of goods that are rival and non-excludable. They are rival, because if I catch the fish, you can’t catch it. But they are also non-excludable, because I can’t stop you from fishing in the open seas. The management of goods that are rival and non-excludable gives rise to the famous tragedy of the commons – or the tragedy of open-access resources, as it’s more accurately called. Now, the other problematic category consists of goods that are non-rival and excludable. If I use the Pythagorean Theorem, I don’t prevent you from using it at the same time. Knowledge is non-rival, but it often is made excludable through intellectual property and patent rights. So those are two difficult categories that create problems. One is the tragedy of the commons, and the other we could call the tragedy of artificial scarcity.

The Commonwealth of Nature

Fish in the ocean are an example of the commonwealth of nature. I’ll ague that natural goods and services that are rival and have so far remained non-excludable should be enclosed in the market in order to avoid unsustainable use. Excludability can take the form of individual property rights or social property rights – what needs to be avoided is open access. For dealing with the broad class of rival but, up to now, non-excludable goods, the so-called cap-auction-trade system is a market-based institution that merits consideration.

In addition to its practical value, the cap-auction-trade system also sheds light on a fundamental issue of economic theory: the logically separate issues of scale, distribution, and allocation. Neoclassical economics deals mainly with the question of allocation. Allocation is the apportionment of resources among competing uses: how many resources go to produce beans, how many to cars, how many to haircuts. Properly functioning markets allocate resources efficiently, more or less. Yet the concept of efficient allocation presupposes a given distribution. Distribution is the apportionment of goods and resources among different people: how many resources go to you, how many to somebody else. A good distribution is one that is fair or just – not efficient, but fair. The third issue is scale: the physical size of the economy relative to the ecosystem that sustains it. How many of us are there and how large are the associated matter-energy flows from producing all our stuff, relative to natural cycles and the maintenance of the biosphere. In neoclassical economics, the issue of scale is completely off the radar screen.

The cap-auction-trade system works like this. Some environmental assets, say fishing rights or the rights to emit sulfur dioxide, have been treated as non-excludable free goods. As economic growth increases the scale of the economy relative to that of the biosphere, it becomes recognized that these goods are in fact physically rival. The first step is to put a cap – a maximum – on the scale of use of that resource, at a level which is deemed to be environmentally sustainable. Setting that cap – deciding what it should be – is not a market decision, but a social and ecological decision. Then, the right to extract that resource or emit that waste, up to the cap, becomes a scarce asset. It was a free good. Now it has a price. We’ve created a new valuable asset, so the question is: Who owns it? This also has to be decided politically, outside the market. Ownership of this new asset should be auctioned to the highest bidder, with the proceeds entering the public treasury. Sometimes rights are simply given to the historical private users – a bad idea, I think, but frequently done under the misleading label of “grandfathering.” The cap-auction-trade system is not, as often called, “free-market environmentalism.” It is really socially constrained, market environmentalism. Someone must own the assets before they can be traded in the market, and that is an issue of distribution. Only after the scale question is answered, and then the distribution question, can we have market exchange to answer the question of allocation.

Another good policy for managing the commonwealth of nature is ecological tax reform. This means shifting the tax base away from income earned by labor and capital and onto the resource flow from nature. Taxing what we want less of, depletion and pollution, seems to be a better idea than taxing what we want more of, namely income. Unlike the cap-auction-trade system, ecological tax reform would exert only a very indirect and uncertain limit on the scale of the economy relative to the biosphere. Yet, it would go a long way toward improving allocation and distribution.

The Commonwealth of Knowledge

If you stand in front of the McKeldin Library at the University of Maryland, you’ll see a quotation from Thomas Jefferson carved on one of the stones: “Knowledge is the common property of mankind.” Well, I think Mr. Jefferson was right. Once knowledge exists, it is non-rival, which means it has a zero opportunity cost. As we know from studying price theory, price is supposed to measure opportunity cost, and if opportunity cost is zero, then price should be zero. Certainly, new knowledge, even though it should be allocated freely, does have a cost of production. Sometimes that cost of production is substantial, as with the space program’s discovery that there’s no life on Mars. On the other hand, a new insight could occur to you while you’re lying in bed staring at the ceiling and cost absolutely nothing, as was the case with Renee Descartes’ invention of analytic geometry. Many new discoveries are accidental. Others are motivated by the joy and excitement of research, independent of any material motivation. Yet the dominant view is that unless knowledge is kept scarce enough to have a significant price, nobody in the market will have an incentive to produce it. Patent monopolies and intellectual property rights are urged as the way to provide an extrinsic reward for knowledge production. Even within that restricted vision, keeping knowledge scarce still makes very little sense, because the main input to the production of new knowledge is existing knowledge. If you keep existing knowledge expensive, that’s surely going to slow down the production of new knowledge.

In Summary

Managing the commonwealth of nature and knowledge presents us two rather opposite problems and solutions. I’ve argued that the commonwealth of nature should be enclosed as property, as much as possible as public property, and administered so as to capture scarcity rents for public revenue. Examples of natural commons include: mining, logging, grazing rights, the electromagnetic spectrum, the absorptive capacity of the atmosphere, and the orbital locations of satellites. The commonwealth of knowledge, on the other hand, should be freed from enclosure as property and treated as the non-rival good that it is. Abolishing all intellectual property rights tomorrow is draconian, but I do think we could grant patent monopolies for fewer “inventions” and for shorter time periods.