Glossary · Economic ideas

Tragedy of the commons

The tragedy of the commons is what happens when a shared resource is open to all: each user takes a little more, and together they use it up.

Also called: commons problem, common-pool resource, common resources, overfishing

In plain words

Ten families graze cows on a shared village meadow. Each family thinks: one more cow means more milk for us, and the grass it eats is shared by everyone. Every family thinks the same, the meadow is eaten bare, and all the cows go hungry. That is the tragedy of the commons.

Nobody here is foolish or wicked: each choice makes sense on its own. The trouble is that the gain from one more cow goes to its owner, while the cost is split among all. Many sensible choices add up to a bad result.

The pattern repeats wherever something valuable is open to all: fish in the sea, water pumped from under the ground, clean air, the shared fridge at work.

Each herder gains a whole cow and pays only a share of the damage, so all of them keep adding cows.

Example

The collapse of the Grand Banks cod

For centuries the waters off Newfoundland, in Canada, were among the richest fishing grounds on Earth.

From the 1950s, big factory trawlers from many countries joined the local boats, each catching as much as it could before the others did.
Each fleet kept the whole gain of every extra ton it caught; the damage to the stock was shared by all.
The catch peaked in the late 1960s and then fell. By the early 1990s the cod were nearly gone.
In 1992 Canada banned cod fishing there. Tens of thousands of people lost their jobs, and decades later the stock had still not fully recovered.

A fish left in the sea benefits every fisher; a fish caught benefits one. That gap emptied the sea.

One level deeper

The ecologist Garrett Hardin made the phrase famous in a 1968 essay in the journal Science; the grazing example goes back to William Forster Lloyd in 1833. In economists’ terms, a common resource is rival (what one takes, others can’t) but not excludable (no one can be kept out).

There are three usual fixes: give the resource an owner who has a reason to look after it, set rules and limits (fishing quotas, hunting seasons, water permits), or let the users organize themselves. Elinor Ostrom won the 2009 Nobel prize in economics for showing how communities, from Swiss mountain pastures to Japanese village forests, have managed commons well for centuries.

It is a close cousin of the prisoner’s dilemma: each player does what is best for themselves, and all end up worse off. It is also a kind of externality: every user imposes a cost on the others.

Why it matters

It explains overfishing, groundwater running dry, traffic jams and much of the difficulty of dealing with climate change.

It shows why good intentions are not enough: the incentives have to change, through ownership, rules or agreements.

It is a reminder that something free to use is not free: someone pays later.

A common mistake

Myth: Shared resources are always doomed.

In fact: Ostrom found many commons that were managed well for centuries by communities with clear membership, rules they made themselves, monitoring and fair penalties. The tragedy is likely, not certain.

Questions people ask

What is an example of the tragedy of the commons?

Overfishing (the Grand Banks cod off Canada collapsed by 1992), overgrazing, groundwater pumped faster than it refills, and traffic jams on roads that are free to use.

Who came up with the tragedy of the commons?

William Forster Lloyd described it in 1833; the ecologist Garrett Hardin named it and made it famous in 1968.

How do you solve the tragedy of the commons?

By making users bear the cost of what they take: private or community ownership, quotas, fees, or rules agreed and enforced by the users themselves.

About the numbers

This page explains a term. It is not investment advice.