June 19, 2016

The Tragedy of Commons- Answer to All Major Problems

Every country wants to build a nuclear arsenal while threatening world peace is in the interests of no country.(I did not say North Korea). Everyone installs an air conditioner to fight the high temperatures while ACs release CFCs (chloro fluoro carbons) which in turn increase temperature by contributing to global warming. No one wants parks, public places to be littered but we all litter, urinate in public places. These contradictions seem extremely surprising to me, and I became curious. Some browsing and reading helped me find the explanations to these contradictions.  
The answer lies in one of the most  interesting and lesser known theories of rogue economics. It is called the tragedy of commons. 

What is the Tragedy of Commons? 

Forster Lloyd
Tragedy of commons says that in a situation where multiple individuals act individually, they will deplete a shared resource, even when it is no one's interest. In 1832, the Commons in England started depleting due to overgrazing by nomads who fed their cattle. They were Commons, a shared property. It was in no one's interest that the grass in the Commons were ruined as logically, each nomad would want to sustain the grass in the Commons for future grazing. But the commons were being ruined.

This was explained by Lloyd, a political economist from Oxford. He said that adding a cattle to a herd would yield the whole profit to the nomad but the loss of pasture would be 'commonized' among all herdsmen. Lloyd, hence explained that, since the profit earned by the nomad by adding a cattle to his herd was much more than the nomad's share of the common loss of pasture. Therefore, a nomad was incentivized to add a cattle to his herd even when destroying the pasture wasn't in his interests. This was the birth of the Theory of Tragedy of Commons. 
To me it seems magic as it satisfactorily explains all problems in the World. Let's take for instance the depleting population of fishes. Earth's fish populations are owned by no one, so they are indeed a shared resource. Multiple fishermen compete for this resource. Each fisherman would catch as many fishes as possible to maximize profit but it is also in the fisherman's interests to leave enough fishes in the water so that they can repopulate and there are fishes left to be caught in the future. So logically, each fisherman must catch only a sustainable amount of fishes. But unfortunately there persists a lack of trust. A fisherman, acting responsibly, limits the amounts of fishes he catches, he would probably suffer a great deal of loss in the market, if others do not. So, just because each fisherman feels that the other would catch more fishes than their sustainable share, every fisherman tries to catch as many fishes as possible, depleting the fish population. Lack of trust is the problem here. 

Building Trust to Overcome the Tragedy of Commons- Successes and Failures

Let us take another example. the race of building a nuclear arsenal. The US built its nuclear arsenals. In response and due to the lack of trust, Russia built a mightier nuclear arsenal. This set into effect a a race of building nuclear arsenals. More countries build there nuclear arsenals, threatening world peace which is no one's interest. Every time a nuclear arsenal is developed, it poses a risk on the whole world (Earth- a shared resource). But we try and overcome these problems by building trust like for example the nuclear non proliferation treaty was signed to resist the proliferation of nuclear weapons by evolving trust. But the time when even a single Party breached the trust, the proliferation of nuclear weapons resumed.
However, it is worth listing some successes too. The US and Russia signed a START Treaty to reduce their nuclear weapons. They evolved trust and have successfully reduced their respective arsenals to less than half. Market associations, associations like UNGC for sustainability also work successfully by evolving trust and overcoming the tragedy of commons. 

I spent my vacations in a small town called Mandsaur in Madhya Pradesh  where one of my relatives runs a medical shop on the road of the district  hospital. There is a very stiff competition due to the concentration of medical stores in the region. The shopkeepers used to work day and night, 7 days a week to earn money. To tackle this problem, they formed a association and decided that only one shopkeeper will open his/her shop on a Sunday. Chance-by-chance each shopkeeper gets a chance to open his/her shop on Sunday. The consumer was assured that they get medicines while the shopkeepers were assured that they could enjoy there Sundays as every shopkeeper would have to work on only one Sunday. They built trust and it worked.
The objective of this post was not to appeal for a drive against global warming or nuclear proliferation but just wanted to share the fascination of this concept of tragedy of commons with you all. If you think this helps  in solving the aforementioned problems, well, that is completely coincidental.
Thanks for reading!

All feedback, suggestions, opinions are welcomed at  abhimanyusethia12@gmail.com !
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