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Financial Freedom Is Merely Organized Common Sense
The Tragedy of The Commons
Garrett Hardin, an American ecologist, introduced the idea of “The Tragedy of the Commons” in the late 1960’s. It was not an entirely new idea, even Adam Smith, seemed to know about it, but Hardin’s description of it is more complete and thoughtful.
“Tragedy of the Commons” is not a commentary on the Canadian political system, although on some days it could be. An easy mistake to make. Rather like a friend’s wife who bought him a copy of Hemingway’s novel “Over the River and Into the Trees” because she thought it was about golf.
Hardin’s thesis related to the environment not to economics directly and he wanted to direct attention to the concern, “the damage that innocent actions by individuals can inflict on the environment” It has been extended to many situations found in economics where the variables behave in similar ways.
If things are owned collectively and people may use them to meet their own needs, as they see their needs, then the common thing will eventually be destroyed. The reason is that an individual, acting rationally, and in their own best interest, has no significant disincentive to avoid abusing the common resource.
His argument can be applied to many situations. In older days, it was common pasture. It worked until someone put more sheep in the pasture than the pasture could support. Similarly common woodlands, fisheries and more recently the public purse.
The problem is that some people are more selfish than others and acquiring what they want may involve others getting less than they would prefer. You will need to leave out the question of deserve to have a rational conversation.
People can be selfish with less effort than they can be altruistic. If governments create the idea of entitlement they attract a larger crop of selfish people. The non-selfish are then the fuel for the project. When the fuel runs out the project stops.
How far away from reaching this end are government programs now?
I have previously written about “Incentive Traps” and that is what the tragedy of the commons is about. In an incentive trap, each individual has a rational incentive to do something that optimizes their situation but at the same time, guarantees the complete destruction of the resource.
The question is only what to do about it, if anything.
More recently, some have argued that the problem is not one that defies solution. It is interesting though, that many of the solutions do not work if they are mandated. Most involve the local participants coming to some workable arrangement amongst themselves.
In the polarized political landscape we find today, that ability may be no longer workable. Plus it assumes that government could leave things alone. Also an unlikely outcome.
We can easily see the problem and we can easily see how it arises. Can we expect our leaders to develop methods that minimize its consequences?
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Contact: don@moneyfyi.com | Follow Twitter @DonShaughnessy
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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