Monday, July 23

the Tragic Tragedy of the Commons

There's a bit of a debate about the tragedy of the commons going on over at Letters in Bottles and Dorshorst's.

The tragedy of the commons was a parable used to illustrate how free access to a resource dooms it through over-exploitation. Imagine a community field on which the town's farmers are able to graze their animals. Any farmer acting in self-interest would realize that he could get more money with additional animals. Moreover, he will keep the full profit of each animal and only have to absorb a fraction of the wear it has put on the field. Ergo, each farmer will cram as many animals as he can into the pasture, maximizing his profit while ruining the field that everyone else uses.

There are a few remedies:

  1. Free Market: The field could be privatized so that one farmer could decide how it should be grazed. His interest is making a profit from grazing animals while keeping the field in as good a condition as possible for future years.
  2. Mixed Economy: The government could start regulating the field. It could sell grazing licenses or set up quotas to prevent the overuse of the field. The bad side: we all know how great committees are, then the mayor would have to start sucking up to the farmers' lobby to get reelected and make promises he didn't really have any intention of keeping, and the government then has to decide who gets to graze--farmers who weren't allowed to graze (perhaps one of the farmers doesn't like the other farmers and is friends with the mayor or committee) will then go complaining about a lack of fairness and justice.
  3. Socialism/Communism: The farmers could divide up all their proceeds evenly to spread around the profit as they had to spread around the costs. It will likely be enforced by the government.

(On a side note, trying plan 2 would probably create even bigger problems, perceived as having come from plan 1, which would requiring the condemnation of plan 1 and the implementation of plan 3.)

Dorshorst applies this parable to the real world issue of global warming and air pollution--each of us gets the full profit from whatever we do that makes pollution while getting 1/6.5 billionth of the cost.

I think another example of the tragedy of the commons is city garbage collection. No matter how much trash any individual makes, it all goes on the curb to be collected. The cost from the collection service and landfill expense is then divided amongst the town, so any large trash producer doesn't experience any incentive to not make huge amounts of trash--he pays the same as the grandma who puts out one bag. It would be more fair for the townspeople for the trash to be weighed or volumed and then divided up by amount contributed that way. In that way, people would have an incentive to make less trash.

Or how about considering Wisconsin's plan for state-wide health insurance. Is this not a Commons being set up for a giant Tragedy? People who go to the doctors will spend money on unnecessary extra procedures, devices, and care because they get the full benefit and pay only a tiny fraction of the additional cost. This kind of stuff already goes on with medicare, medicade, social security, or any kind of insurance driving up the costs for all. They're not intentionally evil, the system is just set up so that it's in their interest to do so.

Another example is the way transportation works in the U.S. The government has spent countless billions building highways and airports--the cost is divided somewhat equally amongst all taxpayers--yet some people fly and drive like crazy, using their share much more than others, creating polluting all over the place. If the government did not subsidize and give out corporate welfare then people would pay for the price of the airport in their airfare, gasoline costs, highway tolls reflecting the true cost of transport which would discourage them from doing so. In fact, with the subsidies removed, $558.7 billion to $1.69 trillion per year, the true price of gas is somewhere between $5.60 and $15.16 per gallon, for example.

The government started meddling with the economy to expedite the development of certain industries. The booms in the '20's and '50's could partly be explained as having come from the auto industry and then the nation's development of a road system, respectively. The government spends money and creates jobs and everyone's happy, but the actual costs get displaced onto the taxpayers and consumer's prices decrease spurring more demand.

There is one main problem with a mixed and/or centrally planed economy, besides its lack of flexibility and speed. In a free market, if someone makes a bad decision, he or his company, which may involve a group of stockholders, may lose their investment and go bankrupt while everyone else barely notices a blip. When the government makes a plan, if it makes a bad decision, everyone (who is involuntarily involved) pays the cost. (You can make up your own scenario about involving the farmers, the common field, the mayor & committee, and the town's taxpayers involving, say, a drought.)

And I can reasonably conclude that the government should not interfere with the economy as much as possible.

Dorshorst even brings up prisoners' dilemma, another example of cooperation versus self-interest. In a nut shell, if both parties agree to cooperate, the total benefit is greater than if one cooperates and the other self-interests or if they both self-interest. In my opinion, the prisoners' dilemma makes the case for voluntary exchange i.e. capitalism, over simple stealing or taking by force by means of the government. Given the commons and farmers, I think the best solution would be for the farmers to get together and figure it out themselves. I think the ideal solution would be to privatize the field, why is the government in the field business?

Finally, he concludes that government is formed as "a behavioral instinct to form rules and laws to limit our individual self interest". I disagree, government is formed to protect our property. What is property without a government? People realized that cooperation is in their best interest, and so we form and maintain a government to enforce what is mine and what is yours. If I want your property, I attempt to cooperate with you by involving the voluntary exchange of money. I don't run up and beat you and steal it, and I don't go whine to the government about "justice".


Dorshorst said...

Touche. I do appreciate the critique. But you are wrong on a few points.

First, for the record, Ed brought up the Prisoner's Dilemma. I only mentioned it as a similar but separate game. But you misunderstand the PD. It is always in your best interest to self-interest. However, the strategy of reciprocal altruism performs the best in repeated games. This means everyone gains more if they establish fair rules (ie govt regulation).

Your solution seems to be just privatize the pasture and let the farmers tend to themselves. You forget, the commons is a metaphor and applies to all social interaction. If you want to isolate yourself, fine, but social cooperation (eg the stag hunt) usually results in a better outcome for both partners.

Your suggestion for the farmers to "get together and figure it out themselves" sounds vaguely like a government/committee.

Your arguments against government inefficiency and corruption are valid, but ideally, all government regulation is perfectly fair (I know, I just threw away my entire argument).

Mike said...

I didn't really figure out any solution to air pollution, which was your original aim.

I simply don't think that the government should own fields. Yet there are things that are in the commons such as the atmosphere or the oceans.

In your last paragraph, you say "ideally, all government regulation is perfectly fair." I hope you mean that regulation should be fair as opposed to being assumed fair simply because the government made a declaration.

Anytime the government makes legislation to help, whether it be for businessmen, minorities, poor people, rich people, or for businesses and industry, it is giving an advantage to some group over the rest of its citizens who are now at a slight disadvantage, which is inherently unfair. "Fair" is enforcing the same law equally and without bias on everyone.

The easiest way for a government to be fair is to give as little advantage to certain groups as possible. The federal government, after all, is supposed to be the referee and not a player with a whistle. In the big picture, governments should do as little as possible.

Dorshorst said...

Yes, gov is supposed to be fair. Assuming all people act rationally, they will demand fair rules. Unfortunately, most people are not entirely rational, and even less take the time to find our what the gov is doing. So few laws are rational. I don't think just less gov is the answer, though. Gov regulation is still needed to ensure fair competition and preservation of the common good.