What Is the Tragedy of the Commons in Economics?

What Is the Tragedy of the Commons?

A common resource or "commons" is any resource, such as water or land, that provides users with tangible benefits but which nobody has an exclusive claim. The tragedy of the commons is an economic problem where the individual consumes a resource at the expense of society.

If an individual acts in their best interest, it can result in harmful over-consumption to the detriment of all. This phenomenon may result in under-investment and total depletion of a shared resource.

Economic Theory

The tragedy of the commons is an economic theory claiming that individuals tend to exploit shared resources so that demand outweighs supply, and it becomes unavailable for the whole.

In 1968 evolutionary biologist Garrett Hardin published "The Tragedy of the Commons" in the peer-reviewed journal Science, which addressed the growing concern of overpopulation. Hardin used an example of sheep grazing land, taken from the early English economist William Forster Lloyd.

Grazing lands that are held as private property are prudently used by the landholder to preserve the land and the health of the herd. Common grazing lands become over-saturated with livestock because the food the animals consume is shared among all sheepherders. Hardin equated his point to humans who over-consume the commonly accessible scarce resource, making it harder to find.

Supply and Demand

The tragedy of the commons occurs when an economic good is rivalrous in consumption, non-excludable, scarce, and a common-pool resource. Each consumer consumes as much as they can as fast as they can before others deplete the good, and no one has the incentive to reinvest in maintaining or reproducing the good.

• Rival good: A rival good is one that only one person can consume and cannot be shared. All consumers are rivals competing for that unit, and each person’s consumption subtracts from the total supply of the good.
• Non-excludable: A good is non-excludable when individual consumers are unable to prevent others from also consuming it.
• Scarce: The good must be scarce since a non-scarce good cannot be rivalrous in consumption.
• Common-pool resource: A common-pool resource functions as a hybrid between a public and private good because it is shared and available to everyone but also scarce, with a finite supply. 

Preventing the Tragedy of the Commons

Institutional and technological factors play a role in the rivalry and excludability of a good. Societies have developed methods of dividing and enforcing exclusive rights to economic goods and natural resources or punishing those who over-consume common resources.

Regulatory Solutions

Top-down government regulation or direct control of a common-pool resource can reduce over-consumption, and government investment in the conservation and renewal of the resource can help prevent its depletion. Government regulation can limit how many cattle may graze on government lands or issue fish catch quotas.

Assigning private property rights over resources to individuals can convert a common-pool resource into a private good. Technologically it may mean developing a way to identify, measure, and mark units or parcels of the common pool resource into private holdings, such as branding cattle.

William Forster Lloyd argued for this around the time of the English Parliament’s Enclosure Acts, which stripped traditional common property arrangements to grazing lands and fields and divided the land into private holdings.

Collective Solutions

Economists led by Nobelist Elinor Ostrom touted customary arrangements among rural villagers and aristocratic lords, including common access to most grazing and farmlands and managing their use and conservation. Practices such as crop rotation, seasonal grazing, and enforceable sanctions against overuse and abuse of the resource meant collective action arrangements readily overcame the tragedy of the commons.

Collective action is used where technical or natural physical challenges prevent the division of a common-pool resource into small private parcels by instead relying on measures to address the good’s rivalry in consumption by regulating consumption.

The Bottom Line

The tragedy of the commons occurs when individuals overconsume a resource at the expense of society. When a common resource, such as water or land, is rivalrous in consumption, non-excludable, scarce, and a common-pool resource, the tragedy of the commons occurs. A common resource is any resource that provides users with tangible benefits but to which nobody has a claim.