The tragedy of the commons

Meaning. The tragedy of the commons is the tendency of a common resource to be used beyond its efficient level, because no one can be kept from using it. A common resource has two features together: it is rival, so what one person takes is not available to others, and it is non-excludable, so it is extremely hard to keep anyone out.

How the tragedy arises.

• Each user decides by weighing his own gain from taking more against his own cost.
• His use, however, also leaves less for everyone else. This loss to the others is a negative externality, and he does not count it in his decision.
• Because no one can be excluded, a user who holds back gains little: what he leaves can be taken by someone else.
• With every user behaving in this way, total use exceeds the efficient level. Each decision makes sense for the person making it, yet all the users end up worse off than if use had been restrained.

Example: sand on a river bed. Our own example. Truck owners along a stretch of river are free to lift sand from its open bed. Each owner earns the full profit on a load he lifts, while the damage from a lower bed, weaker banks and falling wells nearby is spread over everyone along the river. So each lifts as much as he can sell. After some years the bed is badly depleted, and all the users, including the truck owners, have lost what they relied on.

Solutions.

• Property rights. Clearly defining who holds the right to the resource gives that holder the authority to exclude others, and the market can then reach an efficient result.
• Auctioning or charging for use. Selling the right to use the resource, or letting its holder charge for it, makes users pay for what they take.
• A planner sharing out use. An authority can divide the total among users in an equitable way, so that all can go on enjoying the resource.

Conclusion. The tragedy of the commons arises when a resource is rival but non-excludable, since each user ignores the cost of his use to the others. It is overcome by limiting access or by making users bear that cost.