The tragedy of the commons

What a common resource is. A common resource is a good that is rival in use, so that whatever one person takes is no longer there for others, but non-excludable, so that nobody can easily be stopped from taking it, or stopping people would cost too much.

The tragedy. Because no user can be kept out, a common resource ends up exploited beyond its efficient level of use. Every user is acting sensibly from her own point of view, yet the shared resource is run down, sometimes to the point of ruin, and the whole group is left worse off than if use had been held back. The word tragedy points to this gap between what makes sense for each user and what is good for all of them together.

Why sensible individual choices lead there.

• Each user decides how much to take by weighing her own gain against her own cost.
• Each unit she takes also leaves less for every other user. That loss falls on others, not on her, so she leaves it out of her calculation. Such a harm is a negative externality, and it is the source of the tragedy of the commons.
• Nobody has a reason to hold back and save the resource for the future, since whatever one user leaves can simply be taken by someone else.
• With every user ignoring the cost imposed on the rest, total use exceeds the efficient amount.

Example: sand from a shared riverbed. Our own example. Suppose ten building contractors in a district of Madhya Pradesh dig sand from the same stretch of riverbed, which no one owns and no one guards.

• A truckload one contractor removes cannot be removed by another (rival), and none of them can stop the others from digging (non-excludable).
• Each contractor digs as much as he can sell, because sand he leaves behind will only be dug by a rival. The cost of a lower, weaker riverbed falls on all ten, and on the villages along the bank, not on the one who digs.
• Within a few seasons the good sand is gone, the bed is too deep to work safely, and every contractor loses a supply that could have lasted for years. A single owner of the whole stretch would have dug at a slower pace, because the entire loss from over-digging would have been his own.

Ways out.

• Clear property rights. Giving a person or a body the right to exclude others makes the owner bear the full cost of over-use, so use comes down towards the efficient level. Here the stretch could be leased to one operator, or to a village cooperative that controls entry.
• Charging for use or auctioning the right to use. A fee or an auctioned licence makes each user pay for taking from the common stock.
• Planned sharing. A social planner could divide the total that may be taken fairly among users, so that all can keep enjoying the resource.

Conclusion. The tragedy of the commons is the over-use of a resource that is rival but non-excludable, because each user ignores the loss that her use imposes on everyone else. Defining property rights, pricing use, or sharing it by plan can bring use back towards the efficient level.