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Hi! My name is Jonny Anomaly, and I teach at Duke University and UNC Chapel Hill.
Today, I'm gonna talk about the Tragedy of the Commons.
Let's start with an example.
When Polynesians arrived in Hawaii
over a thousand years ago, they encountered a flightless bird which
archaeologists now call "moa-nalo,"
the Hawaiian words for "lost bird."
Because the birds had no natural predators, they lost the capacity to fly
and were easy prey for hungry Hawaiians.
All Hawaiians would be better off
preserving enough birds to replenish the natural stock of food,
but since the birds were an unowned resource, each Hawaiian had a strong
incentive to eat the bird into extinction,
and that's exactly what they did.
Commons tragedies occur when resources are either unowned or commonly owned,
and when the benefits of use go to each person
while the costs are shared by everyone in a group.
To make the previous example precise,
suppose there are twenty Hawaiians.
Each Hawaiian gains five utility points from killing and eating a bird,
while all Hawaiians as a group lose ten utility points
every time another bird bites the dust.
Since my fraction of the collective loss to twenty people
is only half a utility point, but I gain five points,
I get four and a half points, on net, by killing endangered bird
that I would prefer to preserve.
The most interesting thing about commons
tragedies is that, like the prisoner's dilemmas,
they show that it can be fully rational for each member of a group
to act in a way that leaves everyone in
the group worse off than they would be if they could cooperate.
Notice that common strategies, like prisoner's dilemmas
don't necessarily arise because of self-interest.
I may hunt an endangered species
so that I can feed my family and friends or donate the meat to some other cause
that I consider worth promoting.
So, how do we avoid commons strategies?
The most common solution is property rights, which lead individual owners
to internalize both the benefits and the costs
of their use a scarce resource.
John Locke and David Hume saw this is a
crucial function of property rights.
Property rights can be used to preserve scarce resources, like endangered species.
But they can also be a tool for increasing social welfare
by incentivizing the production of new and better resources.
Since most productivity gains come from ideas for transforming existing
resources into new products,
intellectual property is an especially
important form of private property rights.
It is easy to see how ownership over external objects would induce
owners to preserve and improve natural resources.
But intellectual property, ownership over ideas, is a bit more subtle.
While there's quite a bit a controversy
about how efficient particular systems of intellectual property are,
many economists believe that without allowing people to own ideas,
they would have less incentive to conduct costly research and development campaigns
to create new medicines, new kinds of computers, or new genres of music.
All of these ideas create social value.
But without the right to take exclusive
ownership over the ideas, at least for a while
inventors would not be able to recoup the time and money
they spent coming up with them.
Still, private property is not a panacea.
Property rights are costly to enforce, and they may stymie innovation in certain domains.
Consider the problem of patent trolls, people who make their living buying patents
with no intention of using them.
Patent trolls sue companies that use
technologies which resemble the patents they've purchased.
In many cases, companies find it cheaper to pay off the patent trolls than to
wage a costly court battle against them.
This leads to a misallocation of resources and rewards people who make money
without producing any real value.
Property rights have to be enforceable to work well.
Enforcement is costly, since it requires monitoring violations, prosecuting
violators, and settling disputes.
Some countries are too poor to be able
to monitor property rights effectively, and others are too corrupt.
In these cases, Elinor Ostrom has shown
that local commons tragedies, like overfishing a lake or overgrazing
cows on a common pasture, can sometimes still be solved by communities.
In place of formal property rights and court adjudication,
members of small communities often rely on social norms that determine how
property can be acquired, used, and traded.
People who violate local property norms are ostracized, or excluded from
enjoying important social benefits.
In these cases, our concern for a good reputation
and for the benefits of living in a
community can solve commons tragedies,
but only when monitoring social norms is cheap
and group cohesion is strong.
I'd like to end with a challenge for you.
Think about a commons trategy
witnessed in the last month, and try to figure out why it hasn't already been
solved through social norms or through legal sanctions.
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