Sunday, October 17, 2010

An Avoidable Tragedy

A post I read recently by Barry Belmont (sorry I have lost the url) referred to Garrett Hardin’s, ‘tragedy of the commons’, and said in part:

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another. . . . But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit–in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.”

I am amazed that this is often quoted today as another rock to throw at markets by politically-motivated campaigners of a certain hue. It’s not that they are bad; they just do not get it.

Yet in the presentation of the problem of open and free access to the commons, it contains the proper answer. The invention of property by our ‘savage’ ancestors started a process by which the common free forests, land, and all that came from them acquired prices for their use by those who claimed ownership of them. If they successfully held on to what they claimed, they changed the tragedy from reckless free use and destruction eventually to permissive use by market prices after millennia of tyrannical force by a few individuals.

Over-fishing of the world’s oceans comes from free access to them. What nobody owns tends to be wasted, despite a few individuals who restrain themselves. Where quotas are established, cheating becomes endemic.

It is the ownership of property that begins to remedy the drift to the tragedy. If there was another solution that worked – violent territorial claims were one remedy tried millennia ago, which had serious costs (still does) in warfare, dynastic quarrels provoking wars every bit as tragic as over-grazing, over-fishing and over-use, and endless jealousies of foreigners - then it would have been tried aeons ago.

When will they ever learn?

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Blogger michael webster said...

Unfortunately, though, too many economists see markets only through the lens of single price auctions.

8:42 pm  
Blogger Gavin Kennedy said...

Your right of course. The Walrasian auctioneer, like much else in economics, is a fable agreed upon. Prices are quite visible - they have to be if people are to make comparisons or agree to buy - as is effective demand - queues form, orders accumulate, they count their sales or absence thereof.

There is nothing invisible about markets.


4:15 pm  

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