The Dilemma of the Commons (post 13)

The best paper every written on political theory or economics wasn't written by a political theorist or an economist.  It was written by a biologist.  In 1968 Garrett Hardin wrote one of the most famous papers ever to be published in the journal, Science.  He titled it, "The Tragedy of the Commons".

The issues brought up in this article seem to find themselves at the center of almost all significant political and economic debates.  This is true today: the recession, Obamacare, climate change, oil prices, anti-government sentiment, anti-union sentiment, the gulf oil spill, the ongoing disaster in Japan, etc.  All of these issues have near their heart problems involved with distinguishing between public and private access and ownership of resources, services, risk and liability.  How one tries to solve these problems generally defines one's political and economic viewpoint.

I recommend reading the article (or at least the Wikipedia summary), but I will provide my own ultra-short synopsis:

Several cattle owners all graze their privately owned cattle on a public (or collectively owned or accessed) parcel of land.  The problem is that the parcel is becoming over-crowded and over-grazed, and as that happens, the health (and thus value) of each cow is diminished.  As each cattle owner breeds or purchases new cattle, they face a dilemma.  To introduce a new cow to the already over-crowded parcel will provide a short term gain for the individual, but a long term detriment to the group.  What should an individual do?  It is in each owner's personal best interest to continue to add cattle to the parcel - but eventually this will lead to the utter destruction of the parcel, the death of all cattle and the end of all owners' livelihoods.  This is the tragedy of the commons.

It is incredible to sit back and realize, if we exclude jealousy and bigotry, how virtually all of our problems stem from this dilemma.

This is true in every marriage, every household, every community and every nation.

If some of our roommates refuse to clean up after themselves, even after repeated requests for them to do so, then we face the dilemma of the commons: we can continue to pick up after them - thereby expending our time and energy (to their benefit) - or we can stop cleaning up too and live in filth.  (Remind you of college?)

Yesterday I was listening to NPR (a public resource currently facing the dilemma of the commons!) about the problem of incentives for maintaining the safety of nuclear power plants.  The argument was that there is no competitive incentive to maintain safety.

Let me explain.  Let's say that you are in charge of maintaining a nuclear power plant, and you are in competition with other people who provide power to the same region.  What competitive advantage do you gain from decreasing spending on safety precautions?  A lot.  If you decrease the amount that you spend on safety, you can spend that money on other things (like marketing or distribution) - and thus gain an edge against your competitors.  What competitive advantage do you get from increasing spending on safety?  None.  The only advantage to increasing safety is to decrease risk of a nuclear meltdown - but that is not a competitive advantage - because preventing a meltdown at your plant is not only good for you, but it is equally good for your competitors (as a meltdown at your plant would kill them too).  As a manager you are forced to choose between spending on safety (which benefits everyone - even your competitors) or spending on others things (which benefits only you - thus giving you a competitive edge).  Thus we end up with the same situation (albeit on a grander scale) as we had with cow pasture and the college roommates: the dilemma of the commons.

Many different solutions have been proposed to this dilemma.  Two of the most commonly implemented and debated approaches are regulation and privatization.

Regulation seeks to create governing bodies that mandate and enforce regulations on how people can use (or put at risk) common resources (how many cows one can graze on the parcel, how many chores one must do around the house, safely precautions one must take at nuclear energy plants, etc.)

Privatization seeks to solve the dilemma of the commons by transforming common resources into private ones.  This is done by dividing common resources into smaller units that can be individually bought and sold.  The parcel would be divided into subplots which would be purchased by individual owners.  The college apartment would be divided into a duplex which the roommates would individually own.  The risk of a nuclear disaster would be limited to only those who managed or purchased power from the plant (ha ha - see below).

Both of these solutions have merits and flaws.  Let's skip the merits and focus on the flaws.

Regulation is flawed because the restrictions put in place will always seem arbitrary and in many cases may be so suboptimal that they stifle the economy.  Furthermore, this solution is vulnerable to the wealthiest individuals using their wealth to gain influence over the governing body and undermine the regulation.

Privatization is flawed as the process of enforcing property rights is equally vulnerable to corruption.  And there is the problem that there is often no good way to separate resources (or risks) into independent units.  In the case of the cattle, one overcrowded subplot can still have deleterious effects on neighboring plots - as urine, manure, odor and disease all spread.  In the case of the roommates, even if each where to purchase their own house, if one fails to maintain his house it decreases the property value of both houses.  And, of course, there is no way to partition the risk involved with a nuclear meltdown.  It will kill everyone equally.

And here is where we get to the real moral of my story.

Many philosophers, politicians and economists have read Hardin's article and have argued over whether regulation or privatization is the better solution.  Our stance on the issue strongly affects how we interpret the events occurring around us.  The current recession is a perfect example.  Those who favor regulation see the recession as being caused by a lack of regulation (allowing banks to over-leverage themselves while creating and selling toxic derivatives).  Those who favor privatization see the recession as being caused by too much regulation (the government pressuring lenders to grant mortgages to high risk borrowers).  Of course the answer is that it was both - along with many other factors as well.  But our philosophical views often blind us to the entire picture and lead us to focus on just some parts.

To those who favor regulation, I want to remind you that government regulation is often inept and/or corrupt.  My experiences with the public school system has taught me that first hand.  I am not in favor of vouchers for private schools - but I am in favor of dissolving mammoth school districts and promoting the creation of more small charter schools which compete for enrollment and government funding.  It is only through experiment and competition that we are going to find the solution to our educational woes.

To those who favor privatization, I want to remind you that we are not islands.  If one person's freedom ends where it infringes upon the freedoms of another, then there is no freedom - because there is nothing that we can do that does not significantly and permanently affect the lives of everyone around us.  We are connected.  We breath the same air, drink the same water, and are warmed by the same sun.  We are made of the same molecules.  We have all experienced birth, we will all experience death.  And, at some point, we will all be faced with the question of why.

We do and must compete against each other, just as children compete for the attention of their parents.  But as every parent knows, we may smile when our children compete amongst themselves (because it's fun!  And how else will they learn their strengths and weaknesses?) but we also want our children to be kind to one another and to love each other.

The solution to the tragedy of the commons cannot be regulation or privatization.  It must be a solution that encourages us to compete, but also helps us to realize how interconnected and interdependent we truly are.