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The Tragedy of the Commons: Four Decades Later

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Written by: Martin Froněk

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1. Introduction

It has been more than four decades since the publication of Garett Hardin's celebrated article entitled The Tragedy of the Commons.[1] Since its publication, substantial theoretical, as well as empirical research has been carried out on the subject. Some authors have argued that Hardin injected the field with a semantic confusion, in that he failed to clearly distinguish between two situations, open access to a natural resource and the real "commons" (i.e. some kind of communal property).[2] This article, therefore, seeks to describe these different regimes of operating natural resources and to evaluate them with regard to their sustainability and social consequences. In section two, there are a number of general remarks on Hardin's original article. Section three introduces the concepts of open access, common property, and private property. It shows the conditions under which these regimes are likely to emerge and points to some empirical evidence. Section four provides a conclusion.

2. How Much Credit Should Go to Garret Hardin?

It is now being recognized that Hardin's 1968 article was far from being the first serious analysis of the problem described in the Tragedy of the Commons ("TOC"), i.e. different regimes of governing natural resources. Aristotle, Hobbes, Mises and Gordon, to name a few, preceded Hardin.[3] Nor did the article deal with the problem with enough clarity and depth since doubts arose as to whether he was talking about open access regimes or communal property regimes. He was concerned with many issues in the article, not only the specific problem of TOC. Yet, it must be admitted, it was Hardin's endeavor that initiated a huge amount of research that continues to today and which contributes to our better understanding of the physical world around us and man's ability to cope with the fundamental problem of how to organize resources so that societies prosper and civilizations flourish.

Hardin begins his article by asserting that there are certain problems that mankind faces, such as overpopulation or pollution, which cannot be solved by technical means - problems to which no technical solutions exist and that only changes in our moral standpoint and behavior can bring to an end. That is why, for example, he calls for "coercing laws or taxing devices"[4] to deal with the problem of pollution because "air and waters cannot readily be fenced". Such a claim is understandable considering the time it was made in. However, this article will try to show that solutions even to initially insoluble situations could be found thanks to changes in technologies and entrepreneurial discovery.[5] This is not to say that all environmental problems will now disappear but rather to show that theory and empirical evidence can make us more optimistic than Hardin was in his time (and as others are even today) about the TOC.

3. Three Regimes of Governing Scarce Resources

3.1 Open Access as a Source of Social Conflict

Imagine a remote island inhabited solely by Robinson Crusoe. On the island, Robinson faces scarcity of time and resources that surround him. This is an intrapersonal scarcity - e.g. he can either eat an orange, or make orange juice from it, but he cannot do both at once. No social conflict may arise here. Now let Friday enter the scene. With Friday, a possibility of conflict over the use of a scarce resource arrives at the island which we can call an interpersonal scarcity. To go on with our example, Friday would like to have orange juice for breakfast, but Robinson dreams about polishing the orange off during the sunset. The possibility of the conflict will still be present unless Friday and Robinson are in agreement[6] on what to do with the scarce goods. The last condition[7] for a possible conflict to arise is free access to the goods in question. If one of them gets control over the goods and can defend his claim on it, property rights are defined, open access disappears and the possibility of social conflict too.[8]

In other words, when we encounter open access to a scarce resource, we can expect problems to arise. What exactly do we mean by open (free) access? Louis De Alessi explains:

"Under open access, everyone in the community (village, nation, world) has the right to use a resource and capture its fruits on a first-come first-served basis; individuals lack exclusive, transferable rights to use of the resource."[9]

In reality, under such conditions the actions of people involved may have serious undesirable consequences, such as the over consumption and finally a complete depletion of the resource. Let us have a brief look at the mechanism of TOC, using another hypothetical example. Picture a bay with a rich supply of salmon. Everyone can access the bay and exploit the salmon. As long as the supply of salmon is so "great relative to the demand that there is no net gain from conserving or improving it",[10] there is no problem. However, as the resource becomes scarce, new entrants face a different structure of incentives. An individual fisherman tries to exploit as much as possible and does it as quickly as possible since if he does not do it immediately, others will and he may then be too late. In the words of Eggertsson, if we look at the demand side:

"undesirable results of open access include perverse timing and excessive withdrawal of resource units. … Actors have an incentive to enter a race to be first to appropriate resource units while they are abundant. … The now-or-never motive drives actors to deplete nonrenewable resources without due attention to optimal time preference and patterns of demand." [11]
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What we are dealing with here is a textbook example of a collective Prisoner´s Dilemma, to use the language of game theory.[12] It is a case where an individually rational decision of each actor makes the whole group worse-off in the end. This can be demonstrated by the two-by-two matrix.

C stands for "Cooperate", and in our example, it means "not to exploit the resource"; D stands for "Defect", and in our example, it means "exploit the resource". The group as a whole would be better off if everyone cooperated. However, in an open access regime, each person is tempted to defect, as "defection" promises higher rewards. One thinks like this: if I cooperate but others do not, I will be too late and will end up with nothing, but if I defect and others do not, there is a prospect of a high reward. If one thinks the other will defect, he had better defect, or he will get nothing. If the others will not defect, it is even more tempting to defect. Everyone thinks this way and the group ends up in a trap.[13] If we look at the supply side under an open access regime, no one has the incentive to maintain and invest in the fishery since he cannot effectively exclude others from collecting the benefits. Thus, effects on both the demand and supply side go the same direction, and therein lies the tragedy.

3.2 Communal Property: What Is It and When Does It Pay Off to Have It?

If one imagines a scale where open access lies at one extreme and individual private property at the other, then communal property (the real meaning of the word "commons") can be found somewhere between these two extremes. Under open access, there is no regulation of the entry of newcomers or of the internal governance of the resource. One of the ways to escape the trap of open access as discussed above is to join with other people and prevent outsiders from enjoying the resource. After this is accomplished, the problem of rules governing the insiders arises and has to be solved, unless the people involved want to return to the initial open access state. To sum up, communal property is characterized by the following: 1) the exclusion of outsiders; 2) internal rules over the insiders; and 3) users who are usually not entitled to transfer their share to other persons. When a resource is large and its boundaries not easy to delimit or observe (e.g. a fishery on an open sea or large pastures), it is usually doomed to stay in open access. However, as the relative scarcity of the goods increases, some costs of excluding others may be worthwhile.

It may pay off for local users to exclude their distant neighbors and create a large scale, communal property. As Eggertsson put it, "for instance, it is usually cheaper to use labor and fencing materials to enclose a large field in its entirety than to divide  the land into many private plots."[14] In general, communal property:

"is a practical solution when a resource is sufficiently valuable to justify the costs of organizing the group but not the costs of defining, establishing, enforcing, and exchanging individual property rights."[15]

The motivation of people to establish communal property rights may be either an increase in scarcity of the goods (increase in demand) or a decrease in the cost of establishing it, usually a change in technology. The classical example of a shift from an open access to communal property (and back) was given by Harold Demsetz in his article in 1967.[16]

Demsetz pointed to a study of the evolution of communal property in beavers, among North American Indians. For centuries, these people hunted beavers without limitation. Because hunting technologies were primitive, they could not have decreased the population of beavers substantially. An open access regime was the most efficient way to "govern" beavers (why bother to introduce any rules if all of the Indians can hunt from morning to night for years?). This all changed with the introduction of commercial fur trading organized by Europeans. Beavers became scarcer and so more hunting was taking place. Indians reacted by inventing territorial hunting arrangements, marking the animals, and creating a seasonal allotment system.[17] However, as the Indians were unable to prevent white trappers from poaching, the system regressed back to an open access regime as the costs of observing and securing the beavers were too high to justify the sustainability of any property rights regime.[18]

Such an evolution is a manifestation of the fact that open access and communal property regimes are very close neighbors on the  scale referred to at the beginning of this section. It is, therefore, common that:

"relatively small changes in value of a common property resource, or in the costs of excluding outsiders, can move the resource between the open access and common property categories".[19]

Examples of efficient operation of a communal property system have been shown by many authors. A brief summary of these examples of communal property in land, fisheries, and over elephants and shrimp can be found in the above quoted article by De Alessi, who provides a survey of the most important empirical studies in the field.

3.3 Individual Property Rights

As we can see, a communal property regime may, under certain conditions, convert to an open access regime. It can, however, convert to individual property rights as well, depending on the incentive structure faced by the people involved. The actual arrangements of the governing resource are situation-specific.[20] We cannot know in advance which regime will be efficient unless it is tried and proves its sustainability. A formula enters the decision-making process. If the expected value of the resource in question outweighs the costs of

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defining and enforcing private property rights, these will be established. This was the case in the example regarding beavers mentioned above. In other words, private property rights are produced like anything else. This is a task of property rights entrepreneurs, i.e. "people who discover innovative ways of establishing ownership"[21] and who thereby contribute to the elimination of TOC.

Let us illustrate the mechanism through well-known examples from the 19th century Great Plains in America and the so-called "Wild West". As there were initially few cattlemen in the Great Plains and the space for grazing seemed to be abundant, there was no point in establishing property rights in land or establishing a system for registering property rights over cattle. If a cattleman encountered his fellow citizen, he could simply move and find another suitable area for his herd. As the number of cattlemen rose (and hence the scarcity of land rose), the incentives for introducing some sort of property rights regime changed. To easily identify one's own cattle, cattlemen started to brand their animals with a unique mark. To support this system, they forced local authorities to adopt a practice of registering brands and inspection, which better defined their property rights.[22]

However, such entrepreneurial activity went on at other margins as well.[23] Cattlemen depended on the services of cowboys who defended the boundaries of their ranges. With the invention of barbed wire, defining and securing the rights of cattlemen became cheaper than ever. Cowboys could be substituted and larger areas could be put under control. This represents a change on the cost-side of the equation. Modern examples of how technology can make private property rights feasible and easily secured include tracking individual species with radio devices (whales), tracking the pollution from individual factories,[24] or satellite-monitoring of fisheries.[25]

Individual property rights differ from communal property rights in that the individual owner of the rights can not only exclude others, including their closest neighbors, from using the resource, but he can transfer his rights to other people whenever they value the resource more than he does himself. Note that this is not allowed under a communal property regime since it would undermine the homogeneity of the group and may thus increase the cost of enforcement of internal rules. For example, in a village where everyone knows each other, it could be very difficult to take too much of a resource and refuse to take care of it; whereas if there is a steady flow of newcomers, these people may not feel bound by local customs and norms and the whole system may collapse.[26]

The fact that individual owners are allowed to transfer property rights to whomever they wish forces them to care about the value of the stock in question. Their incentive, unlike the incentive under an open access system or sometimes even under a communal property regime, is to maintain the resource and increase the value of it. In other words, external effects are taken into account by the owners. The efficient use of the resource is secured, too. Privately held resources can always be sold to those who value them the most: "Transferability forces the owner to consider the value of alternative uses."[27] If a farmer uses water for irrigation and can also sell it to urban users, he will try to save more water by employing more efficient methods of irrigation. This will make him money and help the environment too. On the other hand, if he was not allowed to transfer rights over water to others, he would have less incentive to conserve the resource. [28]

The superiority of a private property rights regime over the alternatives, at least in terms of efficiency and enhancing productivity, is widely recognized. Those societies that define, secure, and enforce private property rights are usually more developed and wealthier than those which suppress these rights or do not allow them to come into being at all.[29] The importance of property rights for environmental issues has gained significant attention in recent decades too, but nevertheless the connection is still not widely recognized.

4. Conclusion

The primary aim of this article was to commemorate the 40th anniversary of the publication of a famous essay "The Tragedy of the Commons". The connection of this article to Hardin's one though, was a bit weak and intentionally so. It drew heavily on recent theoretical elaborations of the logic (mainly economic) that lies behind the tragedy of the commons (TOC). It showed the key differences between open access to natural resources, communal property in natural resources, and private property in natural resources. The fourth possible regime - government imposed solutions to TOC - was of no concern here, since it would require more space to deal with it. From the comparisons of these different regimes, it should be obvious that the TOC is a consequence of free access. Communal property and private property represent different degrees of solutions to it. Which of them prevails at a specific time and place depends mainly on the costs and benefits of defining, securing, and enforcing property rights. Historical as well as hypothetical examples were used to help readers understand the issue. Finally, a short comment was made on Hardin´s article. The author expressed his opinion that Hardin deserves credit for bringing TOC to scientific attention. On the other hand, for an actual understanding of the causes and possible solutions to it, we should thank the work of others - natural as well as social scientists, anthropologists, legal historians, and economists in particular.

Martin Froněk is a fifth-year student of law at the Charles University, Prague. He also works as a Resident Fellow Researcher at the Liberální Institut in Prague.

Footnotes

  1. Hardin, G. The Tragedy of the Commons. [1968] 162 Science, pp. 1243-1248.
  2. Ciriacy-Wantrup, S.V., R.C. Bishop. Common Property as a Concept in Natural Resources Policy. [1975] 15(4) Natural Resources Journal, pp. 713-727.
  3. Hardin was not the first author to recognize the problem of TOC. Aristotle and Hobbes are often cited as authors who understood the logic of the free-access regime. In the 20th century, it was economist Ludwig von Mises who, nearly 30 years before Hardin, depicted the economic consequences of free access in depth. This point is made by Šíma, J. Ekonomie a právo: úvod do logiky společenského jednání. Prague: Oeconomica, 2004, p. 61. Scott Gordon with his 1954 article on fisheries also deserves mentioning.
  4. Hardin, G., op. cit., note 1, p. 1245.
  5. For more general elaboration of this claim, see Simon, J. The Ultimate Resource 2. Princeton: Princeton University Press, Revised Edition, 1998.
  6. Or if one is reduced to the status of a slave of the other.
  7. The prior conditions being, in turn, 1) scarcity, 2) plurality of people, 3) diversity of preferences over the use of scarce resources.
  8. This example is a simplified version of the one provided in van Dun, F. Concepts of Order. In: Bouillon, H., Kliemt, H. (eds.). Ordered Anarchy. Jasay and His Surroundings. Aldershot: Ashgate, 2007, pp. 59-71.
  9. De Alessi, L. Gains from Private Property. Empirical Evidence. In: Anderson, T.L., McChesney, F. (eds.). Property Rights: Cooperation, Conflict, and Law. Princeton: Princeton University Press, 2003, p. 91.
  10. De Alessi, L., ibid, pg. 91.
  11. Eggertsson, T. Open Access vs. Common Property. In: Anderson, T.L., McChesney, F. (eds.). op. cit., p. 77.
  12. Dietz, T., Dolšak, N., Ostrom, E., Stern, P.C. The Drama of the Commons. In: Ostrom, E. et al. (eds.). The Drama of the Commons. Washington, DC: National Academy Press, 2002, p. 12.
  13. As game theorists would put it, the Nash Equilibrium is Pareto-inefficient. For details see e.g. Axelrod, R. The Evolution of Cooperation. Basic Books, 1984.
  14. Eggertsson, T., op. cit., note 11, p. 83.
  15. De Alessi, L., op. cit., note 9, p. 94.
  16. Demsetz, H. Towards a Theory of Property Rights. [1967] 57(2) The American Economic Review, pp. 347-359.
  17. Demsetz, H., ibid., p. 352.
  18. De Alessi, L., op. cit., note 9, p. 94.
  19. Eggertsson, T., op. cit., note 11, p. 83.
  20. Eggertsson, T., op. cit., note 11, p. 75.
  21. Anderson, T. L., Huggins, L. E. Property Rights: A Practical Guide to Freedom and Prosperity. Hoover Institution Press Publications, 2003, p. 35.
  22. Higgs, R. How the Western Cattlemen Created Property Rights. Freeman, Vol. 55, No. 2, March 2005, p. 36.
  23. For the general idea of thinking at the margin in law see Farnsworth, W. The Legal Analyst. A Toolkit for Thinking about Law. Chicago: The University of Chicago Press, 2007, chapter 3.
  24. Anderson, T.L., Huggins, L.E., op. cit., note 21, p. 39.
  25. Leal, D.R. Fencing the Fishery. A Primer on Ending the Race for Fish. Bozeman: Political Economy Research Centre, 2002, p. 54.
  26. Anderson, T.L., Huggins, L.E., op. cit., note 21, p.19.
  27. Leal, D.R., op. cit., note 25, p. 20.
  28. Leal, D.R., op. cit., note 25, p. 20.
  29. See e.g. North, D.C, Thomas, R.P. The Rise of the Western World: A New Economic History. Cambridge: Cambridge University Press, 1976; Rosenberg, N., Birdzel, L.E.jr. How the West Grew Rich: The Economic Transformation of the Industrial World. Basic Books, 1986; Pipes, R. Property and Freedom. New York: Vintage Books, 2000.