Tragedy of the Commons

The tragedy of the commons is an important economic concept which is frequently used to describe the difficult task of tackling climate change. The ‘commons’ part of the term refers to a common-pool, shared resource. This resource – for example common grazing land, common fishing water or our common climate and atmosphere – is used by individuals who are only acting according to their self-interest. Nobody can be excluded or restricted from using the resource, therefore, we see overconsumption and depletion of the resource [1]. The tragedy of the commons, therefore, occurs when the common good, or well-being of society, is harmed because of individuals pursuing personal gain at the expense of society [1]. 

Link to Climate Change  
Climate change has been described as the ‘ultimate tragedy of the commons’ [3]. The Earth’s atmosphere is a common, shared resource [5]. Every country acts in its own rational self-interest, for example by emitting more than they should to reach the social optimum. However, this depletes the resource and is against every parties’ long-term interest [6]. This problem also plays an important part in international agreements and why they are often unsuccessful [2] – we will cover this in more detail in another article.

Economic Conditions
For a resource to be a common-pool resource, it has to be rivalrous (and scarce) in consumption, as well as non-excludable [1]. A rival good is defined by the fact that every individual’s consumption of it decreases the total stock of the good that is available and therefore prevents others from consuming it. To be rivalrous, a good also has to be scarce. A good is non-excludable when individual consumers cannot stop others from consuming the resource too. 

Examples 
Aside from the example of global warming itself, there are innumerable other examples of the tragedy of the commons problem. Overfishing, water pollution, littering in public areas, or even the hoarding of specific items during a crisis like Covid-19 are all examples of the tragedy of the commons. The Grand Banks fishery in Newfoundland, Canada, is an example of overfishing – competition by fishermen to catch the most cod in the late 20th century reduced the cod fish population by so much that the whole industry collapsed [1]. 

Solutions
Solutions to the problem of the tragedy of the commons can be found, for example, through government regulation, assigning private property rights, or simply doing nothing and relying on collective action. Government regulation can impose restrictions on the use of a particular resource, for example issuing fishing quotas [1]. Assigning private property rights effectively aims to transform the common-pool resource into a private good [1]. This could involve dividing up a common-pool resource, for example a grazing area, into several private plots. Finally, Nobel Prize winner Elinor Ostrom suggested that collective action could be enough to maintain a common resource, since all users would want to keep the resource intact. She names the example of Swiss farmers organising the use of a common grazing area among themselves [4]. 

[1] https://www.investopedia.com/terms/t/tragedy-of-the-commons.asp
[2] https://www.tutor2u.net/economics/blog/
[3] https://www.bloomberg.com/opinion/articles/2019-10-31/climate-change-is-peak-tragedy-of-the-commons
[4] https://www.forbes.com/2009/10/12/elinor-ostrom-commons-nobel-economics-opinions-contributors-vernon-l-smith.html#40e426d25c35
[5] https://www.econlib.org/library/Columns/y2020/Schwartzclimatechange.html
[6] https://blogs.scientificamerican.com/observations/climate-change-is-a-fourfold-tragedy/

Categories Climate Economics