Tragedy of the Commons
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Published on: 04 Apr 2018
The Concept
Before defining the tragedy involved, let us define what is meant by ‘commons’. Commons refer to all those goods which are available freely for use/consumption by all individuals. A very basic example of such a good might be a pond that is open to all the fishermen for fishing, and thus, the pond is a ‘common’ good. Coming to the ‘tragic’ part, the tragedy involved in the consumption of the commons is an economic problem whereby individual people end up over-consuming the good in the pursuit of personal gain while ignoring the total social welfare which the society (the group of people from which the individuals came) could have gained.
Economic Logic
The economic theory behind this concept is pretty simple to understand. Let us assume a constant Marginal Cost (MC) which is the same as the Marginal Private Cost (MPC) and Marginal Social Cost (MSC). Now let us define the typical downward-sloping Marginal Private Benefit and Marginal Social Benefit curves.
As we can see from the graphical cost-benefit analysis, the individuals equate their Marginal Costs with their Marginal Private Benefit and thus, end up consuming Q2 units of the shared resource. On the other hand, the social optimal would be Q1 units of consumption since, at this level, the Marginal Cost gets equated with the Marginal Social Benefit, and an over-usage equal to (Q2-Q1) is prevented.
A Brief History
The concept originated in an essay written in 1833 by the Victorian economist William Forster Lloyd who coined the term ‘tragedy of the commons.’ He used a hypothetical example to explain this concept by taking a common land (called "the commons") and explaining how unregulated grazing could end up lowering the social welfare. Ecologist Garrett Hardin further popularized the concept over a century later in 1968 by writing an article on it.
Real-Life Examples
Although there are numerous examples of the tragedy of the commons, a couple of common (pun intended) ones are:
Road Congestions
Road Congestions
Roads, being one of the most important shared resources, fall under the category of commons. What happens is that initially when there is low congestion, more people decide to travel using their own personal vehicles. Now, a socially optimal number of cars on road would mean that there is more benefit derived as compared to the costs when the car-owners use their personal vehicles. This net benefit is often defined in terms of travel time. If left unregulated (as is the case almost everywhere), the number of cars that are actually on road would exceed the socially optimal point, leading to a reduction in consumer welfare of all car-owners.
Fishing Business
Fishing Business
Another example is that where a water body is seen as a pooled resource. The fishermen are free to fish as much as they want. Due to lack of a regulatory body, fishermen come to the lake or the sea in large numbers which easily exceeds the social optimum number, resulting in the fish population being affected adversely. This problem has been so grave that in many areas like the Atlantic Ocean, the Mediterranean and the Grand Banks of Newfoundland Island, there have been drastic reductions in the fish populations.
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