June 16, 2009

The Tragedy of The Commons

Commons graphic 1

Imagine four herdsmen who live around the edges of a finite pasture. Each owns a flock of three animals, but shares ownership of the pasture (the "commons") with the other three. As an owner, each herdsman enjoys 100% of the benefits of each animal (wool, fur, leather, milk, meat, manure, etc.). Since everybody owns the commons, each animal's costs (urine, grass consumption, foot traffic, etc.) is spread out equally between the four herdsmen.

In our example, the commons can only support 24 animals. If the animal population grows any larger, the grass will not grow back fast enough to sustain the flock. The commons will die out, the animals will starve, and the herdsmen will lose their livelihood.

Now these herdsmen are no fools, so they size up the situation in cost/benefit terms. As long as the benefit a herdsman gets from adding an animal to his flock is greater than the cost he bears, then it makes sense to add an animal to his flock. The smartest herdsman jumps on the opportunity.

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