Economists Do It With Models

Warning: “graphic” content…

Bookmark and Share
Quiz: Does This Really Count As The Tragedy Of The Commons?

October 7th, 2011 · 18 Comments
Decision Making · Econ 101

I wrote about the tragedy of the commons a couple of weeks ago, and I even included a musical number for your viewing pleasure. (As a follow up to one of the reader comments on the earlier article, I am pretty sure that that is not Warren Buffet in the video, but it would be totally amazing if it were.) Now that we’re all familiar with the concept, does this really count as the tragedy of the commons? I can’t decide.

It’s certainly a coordination failure of some sort. It’s also totally a thing that an economist would at least consider doing. (In fact, an economist friend scolded me one time for publicizing a really good deal on massages since the increased business would make it harder for us to get appointments. He’s not wrong, but…sigh.)

The tragedy of the commons is usually used in the context of consuming more of a resource than is socially optimal because it is costless to do so. This seems more like a…hmmmm…pecuniary externality? A pecuniary externality, according to the Internet:

A pecuniary externality is an externality which operates through prices rather than through real resource effects. For example, an influx of city-dwellers buying second homes in a rural area can drive up house prices, making it difficult for young people in the area to get onto the property ladder.

So one could argue that this guy’s reviews are inflicting a negative pecuniary externality on the hotels? Or perhaps they are inflicting a positive pecuniary externality on other consumers who get the good hotels for cheaper because of the reviews? Maybe the review is just offsetting the pecuniary externality that the guy’s hotel demand created. The particular terminology is all very unclear. If you need me, I will be working on developing an economic term for “being a dick.”

Tags: Decision Making · Econ 101

18 responses so far ↓

  • 1 Daniel // Oct 7, 2011 at 2:01 pm

    For the term to describe “being a dick”, may I humbly suggest “exhibiting phallic properties (or tendencies)”? I’ll keep working on it, but I do have something called work to keep me busy!

  • 2 bd // Oct 7, 2011 at 2:10 pm

    I think the phallic character is free riding on everyone else’s adherence to social norms and common interpretive frames (“good review implies good experience”). I think “free riding” covers a lot of “being a dick” territory.

  • 3 bd // Oct 7, 2011 at 2:13 pm

    Now that I think about it, being free rode upon covers a lot of “being a pussy” territory. How about that!

  • 4 JBaldwin // Oct 7, 2011 at 2:15 pm

    Price flacidity?
    Flacidity crisis?
    Phallic Theory of Value?
    Fiscal Phallacy?

  • 5 econgirl // Oct 7, 2011 at 2:34 pm

    I love all of you. 🙂

  • 6 Punditus Maximus // Oct 7, 2011 at 2:42 pm

    Since he’s both free-riding on social norms and causing harm to the site’s predictive value, Tragedy of the Commons is reasonable. So is rent-seeking.

  • 7 Dan L // Oct 7, 2011 at 2:45 pm

    “being an economist?” *rimshot*

    Btw, my take is that the use of the term “tragedy of the commons” in that comic is total nonsense. For a tragedy of the commons, there needs to be a “commons.” If there isn’t, then the best you can say is that something is “kinda like” or “analogous to” a tragedy of the commons, in which case you are being vague enough that you cannot actually be wrong.

  • 8 Reecha // Oct 7, 2011 at 4:29 pm

    This is hilarious! And shall I say that I guess I have wanted to be such a ‘dick’ although I have none. 😉 Everytime I’ve find hidden ‘gems’ in Los Angeles, I’ve had to think twice about giving them an ‘OMG!!’ review for this precise reason.
    In saying that, while you are trying to find an economic term for being a dick, may I request you to find a feminine term as well?

  • 9 Russ Abbott // Oct 8, 2011 at 1:36 am

    It’s a tragedy of the commons in the sense that it makes use of a resource — a recommendation system and the trust that underlies it — for a private purpose and in so doing damages the system. If “everyone” did the same thing, recommendation systems would become worthless since no one would know whether any given reviewer was being honest or dishonest.

    The commons that’s being abused is the communal reservoir of trust we create for these systems. The selfish anti-reviewer is taking advantage of that trust in a way that leads to it being depleted.

    Obviously this is not a normal commons. Isn’t this really more analogous to someone using a public mechanism in a selfish way? Is printing counterfeit money an abuse of a commons? It’s not what one would normally think of as an abuse of a commons, but it’s similar in that it abuses and weakens a common framework. I wouldn’t want to push the analogy too far, though. I’d prefer to limit the term “tragedy of the commons” to more narrow uses.

  • 10 bdbd // Oct 8, 2011 at 3:30 pm

    “Being a dick” is any behavior for which “I was just responding to the incentives I was given” is the only plausible explanation for the behavior.

  • 11 wildpokerman // Oct 9, 2011 at 10:58 am

    I think Russ has some great observations. You too Jodi. Of course with your background with Mankiw, you know that the reason massage appointments are more difficult to get are because menu costs prevent the massage therapist from changing prices quickly. In a flexible pricing environment with low search costs the massage therapist will be fully booked at a market price whether or not they are booked because you recommended them.

    What the guy is doing is destroying an institution that provides recommendations. If you are in an environment with sticky prices, the reason you would make a recommendation to someone is because you have incentives to make a recommendation that outweigh the costs you will incur from the higher prices.

    This is also why the social networking space is becoming so valuable for advertisers and businesses. What am I doing today? Going for coffee at a place picked by a friend of mine, then reading a book recommended by another friend, then having a meal at a restaurant another friend recommended. I could have made these decisions based on recommendations from public forum, but I trust my own social network so much more.

    This is because social networks have built in incentives. Who wants to go out with the friend that keeps picking terrible restaurants?

    So really all the guy in the comic is doing is hastening the demise of an unreliable system.We should actually thank him for that so that we can move on to more trusted recommendation systems that much sooner.

  • 12 Eat The Babies! // Oct 10, 2011 at 11:40 am

    On the massages…
    usually if you’re an earlier customer of someone in that kind of service industry they will keep their old prices for you. Or at least raise your prices more slowly. I’ve had that experience before, anyway. The service provider has a way not to disincentivize people spreading the word.
    In a more digital world, that should get easier and easier,
    in fact, creating that software could be a pretty smart move for some geeky econ phd candidate.

  • 13 Tragedy of the Commons? « Financial Markets // Oct 14, 2011 at 4:12 am

    […] not an original (in the sense I found it at the EconGirl’s), but what the heck, it was too good not to […]

  • 14 leena // Oct 14, 2011 at 8:32 am

    i like your article… you have nice article….

  • 15 jonathan // Oct 16, 2011 at 4:57 am

    An econ term for being a dick…combining from Monty Python’s Life of Brian, ‘Biggus Dickus’ with the old rationalist Homo Economicus we get ‘Economicus Dickus’….

  • 16 jonathan // Oct 16, 2011 at 5:02 am

    The You tube link is to Life of Brian; the computer has automatically tried to generate the first one which doesn’t exist

  • 17 Epie // Oct 16, 2011 at 11:37 pm

    Hi Everyone,

    We are Launching very soon our website about Journal Publications,Coming soon, First Issue Will Be Published in November, 2011
    Submit Your Article for Free Publication in the Very First Issue.

    T & S Journal Publications publish a collection of double blind peer-reviewed journals covering many areas of Management, Marketing, Education, Real Estate and Property, Business and Economics, and Business Information System. T & S Journal Publications invite high quality articles in the following journals according to their capacity. If you are interested to submit your article in one of the following journals,

    All papers are double blind peer-reviewed and internationally renowned reviewers have been appointed to ensure that review is done rapidly and to the highest standards. These journals serve as a platform to promote the exchange of ideas with researchers around the world. All these journals get published bimonthly.
    Management Journals (Different areas of Management):
    *Marketing Journals:
    *Education Journals:
    *Business and Economics Journal:
    *Information System Journals:
    *Real Estate and Property Journal:
    Please send it to us through the following email address below:
    Submit Your Article :
    editorial.panel@tandsjournalpublications.com

    Regards,
    Editorial Team

  • 18 Jonathan M // Oct 30, 2011 at 5:51 pm

    Economic term for being a dick: Penilitarian

Leave a Comment