The Tragedy of the Commons
what's the fully loaded cost?
Cooperation when there are eight billion of us on the rock is tonight's topic. Figuring out how to share things equitably is hard in families, the workplace and in the world at large. Selfishness, at some level, is a core principle in survival.
Here's something to ponder. Animal studies tell us that mammals have a propensity to kill their own kind. The primates do this in even greater proportion. I find it interesting and sobering that the "highest-order" thinking animals we seem to admire and put on a pedestal tend to be the most violent toward each other. Kinda weird. I little competition is good perhaps, however...
My sons are eloquent in different ways and drive me to consider things differently. They were undoubtedly inspired by my wife frequently and perhaps myself on occasion. Today’s title is inspired by chats with some of them.
The tragedy of the commons as a concept is credited for its introduction to British economist William Forster Lloyd in 1833. The “problem” was theoretical at the time. Britain had portions of the countryside designated as commons. These were grazing areas that anyone could avail themselves of. Free grass to feed on for shepherds meant that lots of people brought their animals and overused the land. For any given shepherd, adding an animal was an advantage because his food would be free and the shepherd retains all of the benefits of the raised animal. Unfortunately, this was obvious to others and each individual will act in their own selfish interest. The end result will be overused and poor-quality land. The public will be responsible for the repair and recovery of the “common” and the individual will capture the private gain from free access in this case and sale of the animal for food. Individuals, in ALMOST ALL cases, will act selfishly.
A wonderful and concise way to describe the situation is to privatize the gain and socialize the loss. In our modern world and amidst rapid change, this transfers wealth to few and adds to the burden for the many. This is great for capital appreciation and will even reflect economic growth (just like building an unnecessary bridge in the wrong place). The rancher with an additional head of cattle to sell is thrilled. The taxpayer who supports the maintenance and recovery of the public land is burdened to subsidize the rancher. Since most of us don’t raise cattle, I question the thinking.
The tragedy of the commons is a relatively new phenomenon. While it always may have existed, our modern world and the velocity of change present many instances of the problem for us to deal with. When the phenomenon was identified there was one world power, Britain, and less than one billion people on the Earth. The tragedy of the commons lives in the philosophical domain as we consider what is the capacity of the Earth? Is it more than the alarmists might fear? Can it just heal itself? Will we always just find a new idea to bail out our latest man-made challenge? I expect that many doubt the contribution and pressure of human beings to be as significant as I am describing. My favorite statistic for my thesis is the estimate that 1/3 of ALL THE RESOURCES of the planet used in its history (100-200 thousand years) has been consumed in the last 30 years! Mistakes made today are amplified quickly as pressure on the whole planet.
The problem is easy to understand and the consequences of ignoring it are easy to foresee. Despite the clarity, the ability to deal with it is hard because of individuals and belief systems. I imagine the issue became obvious and prevalent after industrialization. People for the very first time were causing the consequences to appear before our eyes. I am sure that at the time, the emergence seemed rapid. One theme that emerges in my writing is the velocity of change in our world. I generally see this is as a great positive force making this the very best time to be alive. However, when it comes to the tragedy of the commons, our inability to respond to the threats it can present is very serious and perhaps even catastrophically harmful. Mankind always had the luxury of time to observe, consider and adjust their actions when the tragedy of the commons problem became obvious. We no longer have that luxury today in a world where a new idea can give rise to rapid growth and expansion long before the consequences can be understood and addressed before the tragedy is irreversible.
The economist Lloyd envisioned it as an economics problem in which every individual has an incentive to consume a resource, but at the expense of every other individual -- with no way to exclude anyone from consuming. Initially, it was formulated by asking what would happen if every shepherd, acting in their own self-interest, allowed their flock to graze on the common field. If everybody does act in their apparent best interest, it results in harmful over-consumption (all the grass is eaten, to the detriment of everyone)
The tragedy of the commons is a problem in economics that occurs when individuals neglect the well-being of society in the pursuit of personal gain.
This leads to over-consumption and ultimately depletion of the common resource, to everybody's detriment.
Solutions to the tragedy of the commons include (1) the imposition of private property rights, (2) government regulation, or the (3) development of a collective action arrangement.
In our polarized time in America, the three reasonable options to address the problem have now become part of the quagmire in which a reasonable compromise can no longer be reached. Keep the three possibilities posed as solutions in mind as we explore some examples of the problem in everyday life.
McDonald’s and the $1 McDouble
At times, McDonald’s offers a bun, two patties of ‘beef’, a slice of government cheese, and assorted condiments, made warm, wrapped, and delivered into your hand in an average of 2 1/2 minutes. Did you ever wonder how McDonald’s can sell a McDouble for $1 or $1.50? This is not a discussion about the relative merits or quality of food at McDonald’s. Believe it or not, it is a discussion as the title suggests about an economic principle.
My current eating preferences in pursuing a plant-based diet are not the issue today. While I doubt that providing subsidies that lead to such ultra-low-priced beef is sensible, it is interesting to just hear the facts and make an informed decision. Once you understand what you think about it, speak up! It is our indifference that has led to more and more perversion of markets.
Other Examples and Consequences
There are many examples of this to concern all of us. Here are some that come to mind for me:
Public pastureland is the original concern raised by the economist. If the cost to graze an animal on private property is close to $20 per animal per month (in the US), what is the sensibility of the federal government providing the same for less than $2? The current rate charged is about seven cents on the dollar to ranchers on public land. The test is simple. Find someone, besides the rancher, who sees this as reasonable. Average taxpayers pick up the tab. Western so-called “ranchers” simply squat on Federal land. McDonald’s gets cheap beef. The rest of us get the remediation bill.
What does this all add up to? The U.S government spends $38 billion each year to subsidize the meat and dairy industries, but only 0.04 percent of that (i.e., $17 million) each year to subsidize fruits and vegetables. What does science tell us we should be eating. The facts above explain otherwise.
Imagine if the government subsidized the price of paint so that you could buy paint WITH LEAD IN IT for $2.10 while regular paint costs $30. This is the extent of the subsidy granted to Western ‘private ranchers’ to bulk up cheap beef. Each time we do this, a business, an idea, an improvement, a more perfect world dies.
On October 4th, 1957 The Soviet Union launched Sputnik. Up until then, there were a couple of near-earth objects (NEOs) like asteroids that orbit the earth in some fashion. There is also, of course, the Moon. So until Sputnik, the space above Earth was wide open. Fast forward to today and low earth orbit sustains about 7500 satellites, some operational and some just floating space junk. Each time a new satellite launches, it makes it incrementally more dangerous for the devices up there today. Avoidance of space junk is a major activity for everything in low-Earth orbit (LEO).
SpaceX is now launching an enormous group of small Starlink satellites and reports a desire to put up to 16000 of them up there. One business, privately EXPLOITING space, extracting the profitability and socializing the loss to the whole human race. Every space station, every satellite is on its own to avoid collisions and coordination is optional when the tragedy of the commons is ignored. There have been recent reports of a space station being hit a couple of times trying to avoid them. NASA abandoned a recent spacewalk due to the risk of space junk.
So what will it be? Shall we allow for-profit companies to exploit and clutter space for private gain? Perhaps “privatize” orbits as market-solutions might dictate? Perhaps regulation but alas we know that has become the latest four-letter word for a significant number of our fellow citizens and politicians. That always leaves option 3, a collective action arrangement. That sounds an awful lot like a compromise. Perhaps we should focus our efforts on sending politicians to Washington who actually commits to compromise and occupy the middle way forward. Food ($1 hamburger) for thought.
I expect to come back to this topic again someday. The tragedy of the commons in modern parlance fits very well with a discussion about freshwater, contaminating groundwater, and air pollution. All “free assets” are quite tempting to exploit. The best part for the exploiter is that taxpayers pay to fix the mess. What is the real, fully loaded cost of some of these activities we currently encourage in ‘the free market’. The real value is the ability to pass these costs onto the unsuspecting which is invariably taxpayers. In a future post, I am going to discuss how a simple concept of insurance and bonding can ensure that business risk and the damage associated with it cannot be transferred so easily to taxpayers. Managing behavior by measuring the fully loaded cost is a proven method to accomplish that kind of goal. Maybe it is time to talk about compromise, ie. a collective action agreement.
Here’s a great tune that is on point.
WHAT’S NEXT
My next post is titled Bowling Shoes. Your guess is as good as mine.