The Tragedy of the Commons

. . . and other sad tales

Once upon a time, there was a lovely village

With a lovely commons where the sheep grazed . . .

Happily . . . and produced happy wool. And the village

was happy.

And happy sheep made great wool.

But as more and more sheep joined the commons

The Commons was overused.

The grass ran out.

and tragedy ensued.

The sheep suffered.

And eventually the sheep produced no wool at all. Brrrr.

Understanding the problem . . .• Say 10 owners each turned out 10 sheep to graze

in a commons that has a carrying capacity of 100 sheep. (CC provides maximum sheep quality/price.)

• As long as the owners don’t exceed the carrying capacity, each sheep fleece will bring $100 in the market, or $10,000 total.

• But if one owner decides to add 1 extra sheep, the value of each sheep drops to $95.

• For the owner of 11 sheep, his revenue will be 11 x $95, or $1045. That single owner gains.• However, the total value of the sheep for all

owners will fall to $9,595.00. The whole group loses.

Common vs. individual loss

• When the 11th sheep is added to the Commons, it reduces the total value of the sheep for all owners in total (to $9595.00), but the overusing owner gains in total (to $1045).

• If that owner had only 1/10th of the Commons to graze his sheep, the impact and cost to him of adding a sheep would be 10x as great. No owner would absorb that kind of loss individually.

What did the villagers miss?

• The villagers should have known that the “Commons” was a common resource.

• As such, it was a rival good, meaning that one person’s (or sheep’s) use diminished another’s enjoyment of it.

• Common resources are always subject to overuse--people (and sheep) are, after all,

MAXIMIZERS.

Common resource solutions

• Private property rights: the right of owners to exclude nonowners. People respond to incentives; when they own property, they have an incentive to maintain its profit producing value.

• Use resources sustainably!

Other tragedies of the commons: Ocean fishing

Bluefin Tuna Decline 1995 – 2012 (projected)

Buffalo nearly became extinct by 1900. What prevented their extinction?

More importantly, why have cattle never been threatened with

extinction?

Other common resource tragedies:• African elephants and other large

game• Blast fishing in the Tongan Islands • The Amazon rainforests• Green turtles in the Cayman Islands

Let’s check out a couple things…

Bunny Game!!!

Garrett Hardin