Real World Tragedy of the Commons
Chapter 24 introduces us to a concept called “The Tragedy of the Commons”. This concept is essentially the idea that when individuals act independently and rationally according to each’s own self-interest, these actions are contrary to the best interests of the group as a whole by depleting some common resource. The textbook explains to us that when there is a common resource being used for some utility, there is a socially optimal level of usage that maximizes that utility. Below is a graph that depicts this idea:
As can be seen, it would be most optimal (maximum payoff) for half of the population to use this common resource. After this certain point, there are negative marginal returns for each person that uses this common resource.
There is an article from The Economist that reports on a real world issue that deals with the concept of “The Tragedy of the Commons”. The article talks about the high seas which is the part of the oceans that lies beyond coastal states’ 200-mile exclusive economic zones. These areas are considered to be a commons. According to this article, “the state of the high seas is deteriorating. Arctic ice now melts away in summer. Dead zones are spreading. Two-thirds of the fish stocks in the high seas are over-expoited.” In this case, over-exploiting the fish stocks in the high seas might not result in negative marginal returns for the fisherman, but it does cause a negative externality to the planet as a whole. Basically, this is causing a depletion in the amount of oxygen produced by the oceans and could affect life in the future.
The author proposes a solution of, “balancing the short-term interests of individuals against the long-term interests of all users.” This is essentially the same as finding a perfect equilibrium that maximizes social payout. In order to do so, they must establish regulations or organizations that limit the amount of fishing that can be done in the high seas. We can relate the concept of “The Tragedy of the Commons” to this real world example because the solution is through the management of the usage of some common resource (in this case, the high seas).
Sources:
http://www.cs.cornell.edu/home/kleinber/networks-book/networks-book-ch24.pdf
http://www.economist.com/news/leaders/21596942-new-management-needed-planets-most-important-common-resource-tragedy-high