1 Tragedy of the Commons

2 We have some resources in the world that are not owned by any private entity. Examples include the ocean and the fish within, government owned lands in the western part of the US, and the air that we breathe. The main idea of the Tragedy of the Commons is that resources that are not privately owned get overused. Here we will see a somewhat made up example to try to highlight the point. Our example will be that there is a town that has an open grass field that no one owns. 5 people in the town each have $100 that could be used in various ways. Say one person has skills with woodworking and could thus buy wood for $100 and we will say she could sell the finished items for $113. Another person could buy jars and pick apples and then jar up the apples and sell them for $113. So each of the 5 people could turn the $100 into $113 by producing various things.

3 As an alternative each of the five people could buy a cow and let it graze in the grass field that no one owns. Now, one of the things that influences how much a cow can be sold for is how much weight that is put on the cow. Eating grass would be a way to put the weight on. Here is a crucial part of the story. If only one cow is in the field then it has all the grass for itself. But, if there are two cows in the field, the presence of the second cow means the first cow can not each as much grass and thus not gain as much weight as it would if it were the only cow in the field. Similarly a third cow in the field would mean the first and the second ones in the field would put on even less weight. A similar story holds if a 4 th or 5 th cow was added to the field. Next we study the dollar value of what the cows could be sold for in the various settings. Each cow will be acquired for $100 before grazing.

4 Numberpricetotalaverage marginal of cowsperincomeincomeincome grazingcowfrom cowsfrom cowsfrom cows /1 = – 0 = =3838/2 = – 26 = 12 As you can see here if there are no cows grazing then the income from cows is zero. If there is one cow grazing it can get large enough to be sold for 126 and so the 100 that was used to buy the cow was made into 126 for an income of 26. Thus the average income is 26 and the marginal income from the first cow is 26.

5 The 2 nd cow If a second cow is purchased by another resident and let into the field that no one owns then each of the two cows will be sold for 119 per cow. Thus, the total income from cows will be 38, the average income from cows will be 19 and the marginal income from cows will be 12. Here is the problem. The second guy to bring a cow in sees that his income will be 19, but his presence makes the first guys income fall from 26 to 19 because the first guys cow has to now compete for grass to chow. Thus, in society only $12 is added to income from the second cow. The second guy gets 19, but his presence reduces the first guys income from 26 to 19, or by minus 7 = 12.

6 So, the world is worse off because the second guy had the ability to make $13 worth of output somewhere else but he sees his benefit of 19 from the cow, while society only gets an increase of 12. The net loss in society is $1. Not a big deal in the example, but the example is designed to highlight the point that when no one owns a resource the resource will be overused. If someone owned the land there would be an incentive to only let in one cow in this example. The owner of the land could charge an entry fee that would make the potential cow owners consider their use of the resource. The owner has the incentive to take into consideration the impact additional cattlemen have on the initial cattlemen.

7 Think about the path being worn in the grass alongside Gardner Hall. That grass cost money to be put in (although probably less then paving from the start) and if it is worn out it will cost more, either in terms of campus looking crappy and less people will want to go here (and thus tuition will likely have to be higher), or it will have to be repaired. If only one person walked through the grass it would likely be no big deal. That person, by the way, benefits from cutting through because they get to their destination quicker. As more people walk through they also benefit. But at some point their benefit means others have to pay, so the net benefit actually becomes negative. When I see this behavior by students I then think that maybe the fishers of the sea will also take out too many fish. That would be a tragedy!