This week, we explore a concept called the ‘Tragedy of the Commons’. It is a phenomenon first described by an economist in 1833 and explains how in an unregulated system where a common resource is shared, individual users act independently according to their own self-interest, thereby resulting in the depletion of those resources over time. This concept can be applied in many examples happening in our modern society today, such as in the shared economy.
Watch this video below that explains the concept through a thought experiment:
Applications of the concept
Originally, the tragedy of the commons was used to describe problems in environmental science, where resources such as atmosphere, oceans, rivers, or fish stocks are being depleted. In cases where personal benefit can be obtained in the usage of resources, while the cost is shared with the masses, it is believed that most rational beings would act according to self-interest, thus resulting in the over-use of these resources.
With the understanding of how such behavior may lead systems towards collapse, researchers have advocated different forms of intervention in these situations to ensure the sustainability of shared resources.
In today’s context, we can apply this concept to describe the problems faced in the sharing economy. Especially in China, where more than 70 bike sharing companies entered the market, thieving and vandalism were huge problems for these companies, as well as the government. People tend not to take responsibility to care for property that they do not own. Singapore’s bike sharing companies faced similar issues. In attempts to correct the behavior, regulators imposed penalties on users who do not end their trips at designated spots
Another case of governmental regulation stepping in is Airbnb. While the original idea was to connect homeowners with extra space to travellers looking for cheaper alternatives to hotels, it has evolved to see companies buying entire buildings to rent out properties through the platform. As more homeowners and companies turn to this platform to fetch greater profits, less housing would be made available for long-term residents. In some cities, such as Japan, the respective authorities have responded with different regulations to restrict this service.
Will the regulation of shared resources always lie in the hands of the authorities? Sometimes, the rules of the system (i.e. regulations) are implemented by institutions and bureaucrats who are distant from the actual situations and may not have the expertise or incentives to perform this role well. It is possible for non-government actors to intervene and design solutions as well. Nobel Prize winner economist Professor Elinor Ostrom had written on the ways that self-organised communities can achieve sustainable socio-ecological systems, with factors such as leadership, norms, importance of resource to users being taken into consideration.
Questions for further personal evaluation:
- How would other actors in the system organise themselves to prevent the tragedy of the commons, without governmental intervention?
- In what other contexts can you think of which this concept may apply?
- ‘rife’: widespread; full of
- ‘spawned’: released
- ‘nascent’: just coming into existence
Here are more related articles for further reading:
- The Hustle: Why the tragedy of the commons problem does not stop us from using and trusting the services in the shared economy
“Yet, we still seem to trust even an imperfect or inadequate sharing economy system more than certain traditional forms of commerce.
That’s because tech has changed our mechanisms for trust
Way back in pre-industrial times, when we wanted to trade a goat for 50 pounds of wheat, we based our trust in close-knit personal relationships.
After the Industrial Revolution, we got most of our goods from large corporations. Transactions became less personal, our trust eroded, and companies gained it back by creating strong brands and submitting to federal regulations.
Today, companies gain trust through technologies like digital ranking systems, which aim to recreate a model of capitalism that is highly(and, by certain measures, artificially) personal.”
Medium: Application of non-governmental solutions in the sharing of digital production through a software developer’s perspective.
“Ostrom believes that given the right conditions, actors can work together to sustainably manage the commons. That means not leaning on government, foundations, or businesses to solve the problem, but rather recognizing (and trusting!) the community’s ability to regulate itself, so long as individuals have high mutual trust and a low discount rate (i.e., long-term interest in the community). Managing at scale doesn’t mean stuffing more and more people into the same community, but acknowledging boundaries and working together to govern at multiple levels. (Ostrom calls this a “polycentric” approach.)
An important caveat to Ostrom’s work is that she’s not replacing existing game theory, but simply adding to the list of possible outcomes: one in which there is a successful resolution without external intervention. In the end, Ostrom refuses to create a model based on the conditions she identified, insisting only upon a “framework”, because she believes every situation is different and highly localized to the actors involved, and that in itself is one of her main points.”