The Tragedy of the Commons in California
In 1968, Garrett Hardin wrote an article concerning “the tragedy of the commons.” This is the idea that a group of people will spoil a commonly shared resource. The classic example uses a group of farmers that share grazing land for their animals. Initially they may use the land sustainably. The farmers move their herds such that each section of land will have a period to recover. However, eventually one discovers that he will make more money if he purchases another animal. He either does not consider the impact on the land, or places more importance on personal gain. Then his neighbors will buy more animals. Then he will buy more. With all the extra use, the land is not able to recover, and all of it is soiled. The central idea is that each farmer will personally gain by expanding his herd, but the cost is shared among the whole group.
The tragedy of the commons can be studied using game theory. It is a type of game with a (pure) Nash equilibrium in the bottom right corner (not conserve-not conserve). If a farmer expects his neighbors to keep their herds the same size, then his best move is to expand his own herd. With more animals he will benefit more from the land. In the other case, if a farmer expects his neighbor to buy more animals, or sees that he has already done so, then his best move is to buy more as well. If the land is going to be exploited, then why let his neighbor take all that is left? The minute that one farmer sees the benefit of buying another animal, all of them will do so, and the land will be destroyed.
In a sense, this phenomenon is apparent in California today. This June, water use in California was down 27% compared to last year, beating the 25% reduction goal. Most of the water agencies met or surpassed the goal. In a few they missed it, but only by a few percentage points. But 16 of the 405 agencies missed the goal by 15% or more. Over all, the state chose to conserve the water resource. Public pressure encouraged them to do what was best for everyone. However, some regions may have taken the other choice. Seeing that their neighbors were cutting back, some people chose not to conserve. It appears as if they took the immediate personal gain instead (Note: It is possible that there is more at work here than my argument suggests).
The situation in California is different from that of the farmers. Outside influences appear to have created another (pure) Nash equilibrium where both sides choose to conserve. This was the dominant result across the state, which helped it meet the reduction goal. With the threat of penalties in the future, more individuals may choose to conserve, and help California avoid the tragedy of the commons.
http://www.econlib.org/library/Enc/TragedyoftheCommons.html
http://www.nytimes.com/2015/07/31/us/water-use-in-california-down-27-in-june-beating-goal.html?_r=1