Political: Tragedy of the Commons

(intro music) Hi! My name is Jonny Anomaly, and I teach at Duke University and UNC Chapel Hill. Today, I'm gonna talk about the Tragedy of the Commons. Let's start with an example. When Polynesians arrived in Hawaii over a thousand years ago, they encountered a flightless bird which archaeologists now call "moa-nalo," the Hawaiian words for "lost bird." Because the birds had no natural predators, they lost the capacity to fly and were easy prey for hungry Hawaiians. All Hawaiians would be better off preserving enough birds to replenish the natural stock of food, but since the birds were an unowned resource, each Hawaiian had a strong incentive to eat the bird into extinction, and that's exactly what they did. Commons tragedies occur when resources are either unowned or commonly owned, and when the benefits of use go to each person while the costs are shared by everyone in a group. To make the previous example precise, suppose there are twenty Hawaiians. Each Hawaiian gains five utility points from killing and eating a bird, while all Hawaiians as a group lose ten utility points every time another bird bites the dust. Since my fraction of the collective loss to twenty people is only half a utility point, but I gain five points, I get four and a half points, on net, by killing endangered bird that I would prefer to preserve. The most interesting thing about commons tragedies is that, like the prisoner's dilemmas, they show that it can be fully rational for each member of a group to act in a way that leaves everyone in the group worse off than they would be if they could cooperate. Notice that common strategies, like prisoner's dilemmas don't necessarily arise because of self-interest. I may hunt an endangered species so that I can feed my family and friends or donate the meat to some other cause that I consider worth promoting. So, how do we avoid commons strategies? The most common solution is property rights, which lead individual owners to internalize both the benefits and the costs of their use a scarce resource. John Locke and David Hume saw this is a crucial function of property rights. Property rights can be used to preserve scarce resources, like endangered species. But they can also be a tool for increasing social welfare by incentivizing the production of new and better resources. Since most productivity gains come from ideas for transforming existing resources into new products, intellectual property is an especially important form of private property rights. It is easy to see how ownership over external objects would induce owners to preserve and improve natural resources. But intellectual property, ownership over ideas, is a bit more subtle. While there's quite a bit a controversy about how efficient particular systems of intellectual property are, many economists believe that without allowing people to own ideas, they would have less incentive to conduct costly research and development campaigns to create new medicines, new kinds of computers, or new genres of music. All of these ideas create social value. But without the right to take exclusive ownership over the ideas, at least for a while inventors would not be able to recoup the time and money they spent coming up with them. Still, private property is not a panacea. Property rights are costly to enforce, and they may stymie innovation in certain domains. Consider the problem of patent trolls, people who make their living buying patents with no intention of using them. Patent trolls sue companies that use technologies which resemble the patents they've purchased. In many cases, companies find it cheaper to pay off the patent trolls than to wage a costly court battle against them. This leads to a misallocation of resources and rewards people who make money without producing any real value. Property rights have to be enforceable to work well. Enforcement is costly, since it requires monitoring violations, prosecuting violators, and settling disputes. Some countries are too poor to be able to monitor property rights effectively, and others are too corrupt. In these cases, Elinor Ostrom has shown that local commons tragedies, like overfishing a lake or overgrazing cows on a common pasture, can sometimes still be solved by communities. In place of formal property rights and court adjudication, members of small communities often rely on social norms that determine how property can be acquired, used, and traded. People who violate local property norms are ostracized, or excluded from enjoying important social benefits. In these cases, our concern for a good reputation and for the benefits of living in a community can solve commons tragedies, but only when monitoring social norms is cheap and group cohesion is strong. I'd like to end with a challenge for you. Think about a commons trategy witnessed in the last month, and try to figure out why it hasn't already been solved through social norms or through legal sanctions. Subtitles by the Amara.org community