The Tragedy of the Commons

Or: the challenge of common-pool resources

Or: why the sum total of individual “rational” choices

can lead to perverse (and socially sub-optimal)
outcomes

Credits: cow images from http://www.woodyjackson.com/

Imagine a field of grass shared by 6 farmers, each with one
cow…
A few facts: Each cow currently produces 20 liters of milk per day The carrying
capacity of the commons is 8 cows. For each cow above 8, the milk production
declines by 2 liters (due to overgrazing, there is less grass for each cow: less
grass, less milk!).

20 liters 20 liters

20 liters
20 liters

20 liters 20 liters

Total daily milk production for the commons: 120 liters

Do the farmers sit back and stay at 6 cows? Not if they are individual profit
maximizers (here simplified as milk production maximizers)

20 liters 20 liters

20 liters
20 liters

20 liters 20 liters

Total daily milk production for the commons: 120 liters (6 cows)
Do the farmers sit back and stay at 6 cows? Not if they are individual profit
maximizers (here simplified as milk production maximizers)

“I’ll get another cow”

40 liters 20 liters

20 liters
20 liters

20 liters 20 liters

Total daily milk production for the commons: 140 liters (7 cows)
We are now at the carrying capacity -- do they stop? No.

“Then I’ll get another cow too”

40 liters 40 liters

20 liters
20 liters

20 liters 20 liters

Total daily milk production for the commons: 160 liters (8 cows)
They are now at the maximum total milk production. But do they stop? No…

36 liters 36 liters
“I’ll get another cow”

18 liters
36 liters

18 liters 18 liters

Total daily milk production for the commons: 162 liters (9 cows)
 32 liters 32 liters

16 liters
32 liters

16 liters 32 liters
“My cow is now less productive, but 2
will improve my situation”

Total daily milk production for the commons: 160 liters (10 cows)
 28 liters 28 liters

14 liters
28 liters

“I’ll get another cow”

28 liters 28 liters

Total daily milk production for the commons: 154 liters (11 cows)
“Well, everyone else is getting one,
24 liters 24 liters
so me too!”

24 liters
24 liters

24 liters 24 liters

Total daily milk production for the commons: 144 liters (12 cows)
“Well, I can still increase milk production
if I get a third cow”

30 liters 20 liters

20 liters
20 liters

20 liters 20 liters

Total daily milk production for the commons: 130 liters (10 cows)
This could go on for a while in a vicious
downward cycle…

And I am getting very hungry!

 Farme Farme Farme Farme Farme Farme Total Cows Milk/Cow/ Total Milk Gain (or Loss) in Gain (or Loss) to Net Gain or loss to
r1 r2 r3 r4 r5 r6 Day Production Total Milk Individual Farmer the other five
Production due to who adds one cow farmers when that
adding one cow sixth farmer adds a
cow

0 0 0 0 0 0 0 20 0 0

1 0 0 0 0 0 1 20 20 20 20 0
Current situation

1 1 0 0 0 0 2 20 40 40 20 0

1 1 1 0 0 0 3 20 60 20 20 0

1 1 1 1 0 0 4 20 80 20 20 0

1 1 1 1 1 0 5 20 100 20 20 0

1 1 1 1 1 1 6 20 120 20 20 0
Social maximum

2 1 1 1 1 1 7 20 140 20 20 0

2 2 1 1 1 1 8 20 160 20 20 0

2 2 2 1 1 1 9 18 162 2 16 -14

2 2 2 2 1 1 10 16 160 -2 14 -16

2 2 2 2 2 1 11 14 154 -6 12 -18

2 2 2 2 2 2 12 12 144 -10 10 -20

Outcome based on ind. Max.

3 2 2 2 2 2 13 10 130 -14 6 -20

3 3 2 2 2 2 14 8 112 -18 4 -22

3 3 3 2 2 2 15 6 90 -22 2 -24

3 3 3 3 2 2 16 4 64 -26 0 -26

3 3 3 3 3 2 17 2 34 -30 -2 -28

3 3 3 3 3 3 18 0 0 -34 -4 -30

4 3 3 3 3 3 19 -2 -38 -38 -8 -30

4 4 3 3 3 3 20 -4 -80 -42 -10 -32

Viewed graphically
200

Maximum total production for

commons: 162 liters/day

150
Total Milk Production per
Day for all the cows
combined

100

50

0
0 2 4 6 8 10 12 14 16 18 20

Current level

-50
Gain (or Loss) to Yet individual farmers will
Individual Farmer for continue to add cows until
adding one cow there are 15 cows on the
commons
-100
Total Cows
Viewed graphically
200

Maximum total production for

commons: 162 liters/day

150
Total Milk Production per
Day for all the cows
combined loss in
100 output

50
GAP

0
0 2 4 6 8 10 12 14 16 18 20

Socially Result of
-50
Gain (or Loss) to Optimal individual
Individual Farmer for
adding one cow behavior
-100
Total Cows
And solutions?
A. Cooperative agreement between farmers (profit sharing of
additional 2 cows)
B. Consolidation: one firm runs the entire set of farms (and thus
becomes a single profit center)
C. Government regulation: sets an upper limit on cows on
commons, or force redistribution
D. Government ownership of milk production
E. Build fences -- that is, transform the common pool resource
into a private resource (but that would likely reduce carrying
capacity of field)
F. --------------
Extensions of the Commons Model -- adding principles of
“complex systems”

A. Diversity (not all farmers -- or cows -- are the same. This could
include unequal access to power and resources)
B. Non-randomness (alliances and conflicts are not random)
C. Learning and adaptation (farmers learn from past experiences
with adding cows)
D. Dynamic (the system is not static, but instead changes over
time)
E. Emergence (properties and patterns emerge over time that are
not easily predictable from the starting conditions)
SOCIAL THEORY and COWS
A CHRISTIAN: You have two cows. You keep one and give one to your
neighbor.
A SOCIALIST: You have two cows. The government takes one and gives it to
your neighbor.
A REPUBLICAN: You have two cows. Your neighbor has none. So what?
A DEMOCRAT: You have two cows. Your neighbor has none. You feel guilty for
being successful. You vote people into office who tax your cows, forcing you
to sell one to raise money to pay the tax. The people you voted for then take the tax money and buy
a cow and give it to your neighbor. You feel righteous.
A COMMUNIST: You have two cows. The government seizes both and provides you
with milk.
A FASCIST: You have two cows. The government seizes both and sells you the
milk. You join the underground and start a campaign of sabotage.
DEMOCRACY, AMERICAN STYLE: You have two cows. The government taxes you to
the point you have to sell both to support a man in a foreign country who
has only one cow, which was a gift from your government.
CAPITALISM, AMERICAN STYLE: You have two cows. You sell one, buy a bull and
build a herd of cows.
BUREAUCRACY, AMERICAN STYLE: You have two cows. The government takes them
both, shoots one, milks the other, pays you for the milk, then pour the milk down the drain.
AN AMERICAN CORPORATION: You have two cows. You sell one, and force the
other to produce the milk of four cows. You are surprised when the cow drops dead.
A FRENCH CORPORATION: You have two cows. You go on strike because you want
three cows.
A JAPANESE CORPORATION: You have two cows. You redesign them so they are an
eleventh the size of an ordinary cow and produce twenty times the milk.
A GERMAN CORPORATION: You have two cows. You reengineer them so they live
for 100 years, eat once a month and milk themselves.
AN ITALIAN CORPORATION: You have two cows but you don't know where they
are. You break for lunch.
A RUSSIAN CORPORATION: You have two cows. You count them and learn you have
five cows. You count them again and learn you have 42 cows. You count them again and
learn you have 12 cows. You stop counting cows and open another bottle of vodka.
A SOUTH AFRICAN CORPORATION: You have two cows with Mad Cow Disease, but
the President of the country denies the illness exists!
A SWISS CORPORATION: You have 5000 cows, none of which belongs to you. You
charge for storing them for others.
A BRAZILIAN CORPORATION: You have two cows. You enter into a partnership
with an American corporation. Soon you have 1000 cows and the American corporation declares
bankruptcy.
And now, the "ENRON STYLE": You have two cows. You borrow 80% of the
forward value of the two cows from your bank, then buy another cow with 5%
down and the rest financed by the seller on a note callable if your market
cap goes below $20B at a rate 2 times prime. You now sell three cows to
your publicly listed company, using Letters of Credit opened by your
brother-in-law at a 2nd bank, then execute a debt/equity swap with an
associated general offer so that you get four cows back, with a tax
exemption for five cows. The milk rights of six cows are transferred via an
intermediary to a Cayman Island company secretly owned by the majority
shareholder, who sells the rights to seven cows back to your listed
company. The annual report says the company owns eight cows, with an option
on one more and this transaction process is upheld by your independent
auditor. The Balance Sheet provided with the press release that announces
that Enron, as a major owner of cows, will begin trading cows via the
Internet site

www.COW.com (cows on web). You find out that you never owned the
original two cows, file for bankruptcy protection and your
key executives start committing suicide rather than testify before
Congressional committees.
 Conclusions
• Sometimes individual maximizing activity leads to a socially
optimal outcome, but sometimes it doesn’t, especially when there
are public goods, externalities, common-pool resources,
asymmetrical information, risk and uncertainty, etc. (many of
these we label under the concept of “market failures”)
• Just as the private sector can suffer from market failures, so too
can the public sector suffer from “non-market failures”.
• Collective action is one strategy to address shortcomings of
aggregate individual action
• Collective action might mean government intervention, but it
might alternatively be strategic alliances, partnerships, coalitions,
cooperative agreements, etc.
 The readings for the week:

• Klosterman -- a general overview of arguments

• Foglesong -- the “property contradiction”
• Gordon and Richardson -- a Hayek-like view of the virtues of
markets and the limits of planning
• Pennington, Mark. "A Hayekian Liberal Critique of Collaborative
Planning,"
• Harvey -- “Planning the Ideology of Planning”

Last slide
Metodologi
1. Fenomena/konteks
2. Konsep/teori—relevansi thd konteks
3. Fakta (konseptual)—ditentukan konsep poin 2
4. Faktor2 (sifat sda, sifat komunitas, pelaksanaan regulasi)—menentukan
penjelasan fenomena
5. Masalah2 hipotetik; dukungan riset2
6. Persepsi/diskursus actor (structural, politis)
7. Implikasi bagi terjadinya masalah; outcome yg dihasilkan
KOMBINASI STRUKTURAL-POLITIK: ADOPSI
PENGETAHUAN
• 8 Faktor yg
menentukan
sikap penentu
kebijakan