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| | | | | Principles of Microeconomics, Third Edition
John B. Taylor, Stanford University
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Using Economics to Explain the Tragedy of the Commons
As discussed in Chapter 15, the key to reducing the harm caused by negative environmental externalities is to get people to internalize the harm they cause to the environment. The Tragedy of Commons, described below, provides one way to view the problem.
One of the most powerful metaphors for this problem is a cattle-grazing example put forth by a biologist, Garrett Hardin, in an article called "The Tragedy of the Commons." Hardin wrote:
The tragedy of the commons develops this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons.
. . . As a rational being, each herdsman seeks to maximize his gain.
Hardin assumes that the gain is 11, and then goes on to talk about the externality.
The effects of overgrazing are shared by all herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of 21. . . . Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limitation—in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in freedom of the commons.
In history, the problem with the commons was frequently solved by parceling out land to each herdsman and fencing each parcel. Then each herdsman had the incentive not to overgraze. Thus, defining property rights internalized the externality.
Source of quotes: Garrett Hardin, "The Tragedy of the Commons," Science, 1968, pp. 1243–1248.
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