The theory of the tragedy of the commons was given for the first time by the British economist William Forster Lloyd in 1833. However, this theory came in focus when Garrett Hardin, an American philosopher and ecologist, wrote about it in 1968. The problem of the tragedy of commons arises when individual consumers take the rational decision of maximizing their utility. But it leads to collective irrationality through depletion of resources.
This problem arises in the case of usage of those goods that are regarded as common or that are not owned by any individual or business. These types of goods are mainly natural resources such as wildlife, pastures, forests, etc.
The tragedy of the commons is an economic problem that arises when individual consumers lead to the overuse and eventual depletion of common resources in the process of utility maximization. This problem arises in the case of goods that are rivalrous in consumption and are also non-excludable. Rivalrous goods can be defined as goods that can be consumed by a single user at a time. These goods can be both durable as well as non-durable. Non-durable goods are exhausted after consumption, whereas durable goods are not destroyed after consumption, and only one consumer can use a unit at a time.
For the tragedy of the commons to occur, the consumption of goods should be non-excludable, which means that it is not possible to prevent a person who has not paid for the good from consuming it. For instance, defense, air, forests, etc. are non-excludable goods. Also, to be rivalrous in consumption, goods should be scarce. Goods that are abundant are less likely to be rivalrous.
These three properties in a good, namely scarce, rivalrous, and non-excludable goods, make it possible for the tragedy of commons to occur. These properties provide the incentive to the consumers to consume these goods as much as they can before they are exhausted by others. Also, no individual has the incentive to invest in the good to make it sustain since they cannot stop others from depleting it. So, people overconsume the goods and underinvest in their restoration, which eventually leads to depletion of the goods.
Examples of Tragedy of the Commons
A historical example of the tragedy of the commons is the extinction of the dodo bird. The bird was found in the islands of the southern Indian Ocean by Dutch sailors in 1598. It was a flightless bird, easy to hunt, and a perfect source of meat for sailors. But overhunting made these birds more and more scarce until they eventually became extinct. In this case, overconsumption led to the permanent depletion of the common-pool resource.
Another historical example of this theory is the depletion of cod fish on the coast of Newfoundland. Fishermen considered the number of cod fish to be abundant for hundreds of years. Using old technology, they were able to fish a good amount, while enough quantity was left for reproduction. In this way, the fish population was sustained for 100 years. However, with the coming of new technology, the fishermen were able to fish huge amounts. This made fishing a rivalrous activity. As more and more fishing took place, fewer fish were left for others. Regulations were not imposed on fishermen, eventually leading to depletion as there were not enough fish left for breeding. Consequently, the fishing business collapsed.
Other common examples of the tragedy of the commons are pollution, deforestation, global warming, climate change, etc. Individually, it is beneficial to cut forests, use timber and use forest land for other purposes. However, the adverse effects of deforestation will be borne by everyone.
Ways to Overcome Tragedy of Commons
The problem of the tragedy of the commons arises because of the properties of rivalry and non-excludability in common-pool resources. This problem can be solved by exercising control of common-pool resources. There are methods that can be adopted to resolve the problem of the tragedy of commons:
Government Regulation: The government can directly control common-pool resources. It can reduce the overconsumption of resources through legal exclusion and invest in the conservation of resources to prevent depletion. However, this method also involves certain drawbacks such as the principal-agent problem.
Exercising Property Rights: The problem can also be solved through the provision of assigning property rights to private individuals or entities. The government needs to develop some mechanism to allocate private property rights. This method also involves drawbacks such as rent-seeking and the principle-agent problem Collective Action: Another method to resolve the problem is through cooperative collective action. This method was suggested by Elinor Ostrom. A strong sense of civic responsibility is required to make this method successful. Individuals can voluntarily agree to monitor resources on the local level through informal arrangements. Methods such as crop rotation and seasonal grazing can be used to conserve resources.