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The Tragedy Of The Commons, In Musical Form…

September 22nd, 2011 · 5 Comments
Econ 101 · Environmental Econ · Markets

When goods and services aren’t (or can’t be) limited to paying customers, weird things happen in markets. We can end up with public goods such as lighthouses and fireworks displays, or we can get common resources such as (crowded) public parks or fishing waters.

The problem with these types of goods is that, if consumption is not limited to paying customers, then people wait around in large part for others to pay for the good so that they can use it for free. (Economists call this the free-rider problem. I call it being a mooch.) Furthermore, common resources are what economists call rival in consumption, which means that one person consuming the item prevents other people from consuming that unit of the item. (In other words, me watching a fireworks display doesn’t really impede your ability to watch that same fireworks display, but me catching a fish from public waters leaves less fish in those waters for others.) Because common resources are free to consume, people end up overusing them because they aren’t forced to think about the impact that their actions have on others. This leads individual incentives to be out of line with the interests of society overall, and economists call this the tragedy of the commons, since it originally related to common grassy areas (i..e commons) being overgrazed due to lack of coordination of societal incentives.

You can read a whole overview from me on this topic here. My point in explaining this, however, is to set up a video that reader and Facebook fan John Nordstrom referred to as “either awesome or terrible.” (You know something is going to be fantastic if it comes with this sort of introduction.)

“Good for me, good for you, but bad, bad, bad, bad bad for us” pretty succinctly sums up the tragedy of the commons. I also love that the video gives a shoutout to Elinor Ostrom, who won a Nobel Prize in Economics for her research on how organizations work to mitigate the tragedy of the commons. The video talks briefly about solutions to the tragedy of the commons- from an economic perspective, the problem arises because property rights aren’t well-defined, so a potential solution in some instances would be to assign property rights, essentially giving each cow owner its own piece of the common. This isn’t always practical, however, so it’s important to think about alternative solutions that serve to align the incentives of individuals with those of society.

Tags: Econ 101 · Environmental Econ · Markets

5 responses so far ↓

  • 1 Leigh Caldwell // Sep 22, 2011 at 4:25 pm

    Wait…is the second guy Warren Buffett?

  • 2 Eben in NYC, NY // Sep 22, 2011 at 5:00 pm

    Leave my lighthouse alone!

  • 3 oben // Sep 30, 2011 at 12:58 pm

    i want read this article

  • 4 leena // Oct 6, 2011 at 1:07 pm

    nice article… i like this

  • 5 Rajat // Apr 23, 2015 at 8:33 pm

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