““Picture a pasture open to all.”

For at least a generation, the very idea of the commons has been marginalized and dismissed as a misguided way to manage resources: the so-called tragedy of the commons. In a short but influential essay published in Science in 1968, ecologist Garrett Hardin gave the story a fresh formulation and a memorable tagline.

“The tragedy of the commons develops in this way,” wrote Hardin, proposing to his readers that they envision an open pasture:

It is to be expected that each herdsman will try to keep as many cattle as possible in the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy. As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, “What is the utility to me of adding one more animal to my herd?”

The rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another…. But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd with- out limit—in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

The tragedy of the commons is one of those basic concepts that is drilled into the minds of every undergraduate, at least in economics courses. The idea is considered a basic principle of economics—a cautionary lesson about the impossibility of collective action. Once the class has been escorted through a ritual shudder, the professor whisks them along to the main attraction, the virtues of private property and free markets. Here, finally, economists reveal, we may surmount the dismal tragedy of a commons. The catechism is hammered home: individual freedom to own and trade private property in open markets is the only way to produce enduring personal satisfaction and social prosperity.

Hardin explains the logic this way: we can overcome the tragedy of the commons through a system of “mutual coercion, mutually agreed upon by the majority of the people affected.” For him, the best approach is “the institution of private property coupled with legal inheritance.” He concedes that this is not a perfectly just alternative, but he asserts that Darwinian natural selection is ultimately the best available option, saying, “those who are biologically more fit to be the custodians of property and power should legally inherit more.” We put up with this imperfect legal order, he adds, “because we are not convinced, at the moment, that anyone has invented a better system. The alternative of the commons is too horrifying to contemplate. Injustice is preferable to total ruin.”

Such musings by a libertarian-minded scientist have been catnip to conservative ideologues and economists (who are so often one and the same). They see Hardin’s essay as a gospel parable that affirms some core principles of neoliberal economic ideology. It affirms the importance of “free markets” and justifies the property rights of the wealthy. It bolsters a commitment to individual rights and private property as the cornerstone of economic thought and policy. People will supposedly have the motivation to take responsibility for resources if they are guaranteed private ownership and access to free markets. Tragic outcomes—“total ruin”—can thereby be avoided. The failure of the commons, in this telling, is conflated with government itself, if only to suggest that one of the few recognized vehicles for advancing collective interests, government, will also succumb to the “tragedy” paradigm. (That is the gist of Public Choice theory, which applies standard economic logic to problems in political science.)

Over the past several decades, the tragedy of the commons has taken root as an economic truism. The Hardin essay has become a staple of undergraduate education in the US, taught not just in economics courses but in political science, sociology and other fields. It is no wonder that so many people consider the commons with such glib condescension. The commons = chaos, ruin and failure.

There is just one significant flaw in the tragedy parable. It does not accurately describe a commons. Hardin’s fictional scenario sets forth a system that has no boundaries around the pasture, no rules for managing it, no punishments for over-use and no distinct community of users. But that is not a commons. It is an open-access regime, or a free-for-all. A commons has boundaries, rules, social norms and sanctions against free riders. A commons requires that there be a community willing to act as a conscientious steward of a resource. Hardin was confusing a commons with “no-man’s-land”—and in the process, he smeared the commons as a failed paradigm for managing resources.

To be fair, Hardin was following a long line of polemicists who projected their unexamined commitments to market individualism onto the world. As we will see later, the theories of philosopher John Locke have been widely used to justify treating the New World as terra nullius—open, unowned land—even though it was populated by millions of Native Americans who managed their natural resources as beloved commons with unwritten but highly sophisticated rules.

Hardin’s essay was inspired by his reading of an 1832 talk by William Forster Lloyd, an English lecturer who, like Hardin, was worried about overpopulation in a period of intense enclosures of land. Lloyd’s talk is notable because it rehearses the same line of argument and makes the same fanciful error—that people are incapable of negotiating a solution to the “tragedy.” Instead of a shared pasture, Lloyd’s metaphor was a joint pool of money that could be accessed by every contributor. Lloyd asserted that each individual would quickly deplete more than his share of the pool while a private purse of money would be frugally managed.

I mention Lloyd’s essay to illustrate how ridiculous yet persistent the misconceptions about the “tragedy” dynamic truly are. Commons scholar Lewis Hyde dryly notes, “Just as Hardin proposes a herdsman whose reason is unable to encompass the common good, so Lloyd supposes persons who have no way to speak with each other or make joint decisions. Both writers inject laissez-faire individualism into an old agrarian village and then gravely announce that the commons is dead. From the point of view of such a village, Lloyd’s assumptions are as crazy as asking us to ‘suppose a man to have a purse to which his left and right hand may freely resort, each unaware of the other’.”

This absurdity, unfortunately, is the basis for a large literature of “prisoner’s dilemma” experiments that purport to show how “rational individuals” behave when confronted with “social dilemmas,” such as how to allocate a limited resource. Should the “prisoner” cooperate with other potential claimants and share the limited rewards? Or should he or she defect by grabbing as much for himself as possible?

Needless to say, the complications are endless. But the basic premise of such social science experiments is rigged at the outset. Certain assumptions about the selfishness, rational calculation of individuals and lack of context (test subjects have no shared social history or culture) are embedded into the very design of the “game.” Test subjects are not allowed to communicate with each other, or develop bonds of trust and shared knowledge. They are given only limited time and opportunity to learn to cooperate. They are isolated in a lab setting for a single experiment, and have no shared history or future together. Aghast at the pretzel logic of economic researchers, Lewis Hyde suggested that the “tragedy” thesis be called, instead, “The Tragedy of Unmanaged, Laissez-Faire, Common-Pool Resources with Easy Access for Noncommunicating, Self-Interested Individuals.”

The dirty little secret of many prisoner’s dilemma experiments is that they subtly presuppose a market culture of “rational” individuals. Most give little consideration to the real-life ways in which people come to cooperate and share in managing resources. That is changing now that more game theory experiments are incorporating the ideas of behavioral economics, complexity theory and evolutionary sciences into their design.

Yet the fact remains that a great deal of economic theory and policy presume a rather crude, archaic model of human being. Despite its obvious unreality, Homo economicus, the fictional abstract individual who actively maximizes his personal “utility function” through rational calculation, continues to hold sway as the idealized model of human agency in the cultural entity we call the “economy.” Two introductory economics textbooks widely used in the US, by Samuelson and Nordhaus (2004) and Stiglitz and Walsh (2006), consider cooperative behaviors to be so inconsequential that they do not even mention the commons. If economists show any inclination to discuss the commons, you can be sure that the word “tragedy” will be lurking very nearby.

Paradoxically enough, the heedless quest for selfish gain— “rationally” pursued, of course, yet indifferent toward the collective good—is a better description of the conventional market economy than a commons. In the run-up to the 2008 financial crisis, such a mindset propelled the wizards of Wall Street to maximize private gains without regard for the systemic risks or local impacts. The real tragedy precipitated by “rational” individualism is not the tragedy of the commons, but the tragedy of the market.

Get Evonomics in your inbox

Happily, contemporary scholarship has done much to rescue the commons from the memory hole to which it has been consigned by mainstream economics. The late American political scientist Elinor Ostrom of Indiana University deserves special credit for her role in expanding the frame of analysis of economic activity. In the 1970s, the economics profession plunged into a kind of religious fundamentalism. It celebrated highly abstract, quantitative models of the economy based on rational individualism, private property rights and free markets. A child of the Depression, Ostrom had always been interested in cooperative institutions working outside of markets. As a young political scientist in the 1960s, she began to question some of the core assumptions of economics, especially the idea that people are unable to cooperate in stable, sustainable ways. Sometimes working with political scientist Vincent Ostrom, her husband, she initiated a new kind of cross-disciplinary study of institutional systems that manage “common-pool resources,” or CPRs.

CPRs are collective resources over which no one has private property rights or exclusive control, such as fisheries, grazing lands and groundwater. All of these resources are highly vulnerable to over-exploitation because it is difficult to stop people from using them. We might call it the “tragedy of open access.”

What distinguished Ostrom’s scholarship from that of so many academic economists was her painstaking empirical fieldwork. She visited communal landholders in Ethiopia, rubber tappers in the Amazon and fishers in the Philippines. She investigated how they negotiated cooperative schemes, and how they blended their social systems with local ecosystems. As economist Nancy Folbre of the University of Massachusetts, Amherst, explained, “She would go and actually talk to Indonesian fishermen or Maine lobstermen, and ask, ‘How did you come to establish this limit on the fish catch? How did you deal with the fact that people might try to get around it?’”

From such empirical findings, Ostrom tried to figure out what makes for a successful commons. How does a community overcome its collective-action problem? The recurring challenge facing a group of principals in an interdependent situation, she wrote, is figuring out how to “organize and govern themselves to obtain continuing joint benefits when all face temptations to free-ride, shirk, or otherwise act opportunistically. Parallel questions have to do with the combinations of variables that will (1) increase the initial likelihood of self-organization; (2) enhance the capabilities of individuals to continue self-organized efforts over time; or (3) exceed the capacity of self-organization to solve CPR [common-pool resource] problems without eternal assistance of some form.”

Ostrom’s answer was Governing the Commons, a landmark 1990 book that set forth some of the basic “design principles” of effective, durable commons. These principles have been adapted and elaborated by later scholars, but her analysis remains the default framework for evaluating natural resource commons. The focus of Ostrom’s work, and of the legions of academics who now study commons, has been how communities of resource users develop social norms—and sometimes formal legal rules—that enable them to use finite resources sustainably over the long term. Standard economics, after all, declares that we are selfish individuals whose wants are unlimited. The idea that we can depend on people’s altruism and cooperation, economists object, is naive and unrealistic. The idea that commons can set and enforce limits on usage also seems improbable because it rejects the idea of humans having unbounded appetites.

Ostrom nonetheless showed how, in hundreds of instances, commoners do in fact meet their needs and interests in collective, cooperative ways. The villagers of Törbel, Switzerland, have managed their high alpine forests, meadows and irrigation waters since 1224. Spaniards have shared irrigation waters through huerta social institutions for centuries while, more recently, diverse water authorities in Los Angeles learned how to coordinate their management of scarce groundwater supplies. Many commons have flourished for hundreds of years, even in periods of drought or crisis. Their success can be traced to a community’s ability to develop its own flexible, evolving rules for stewardship, oversight of access and usage, and effective punishments for rule-breakers.

Ostrom found that commons must have clearly defined boundaries so that commoners can know who has authorized rights to use a resource. Outsiders who do not contribute to the commons obviously have no rights to access or use the common-pool resource. She discovered that the rules for appropriating a resource must take account of local conditions and must include limits on what can be taken and how. For example, wild berries can only be harvested during a given period of time, or wood from the forest can only be taken from the ground and must be used for household use only, not sold at markets.

Commoners must be able to create or influence the rules that govern a commons, Ostrom noted. “If external governmental officials presume that only they have the authority to set the rules,” she discovered, “then it will be very difficult for local appropriators to sustain a rule-governed CPR over the long run.” Commoners must be willing to monitor how their resources are used (or abused) and must devise a system of sanctions to punish anyone who violates the rules, preferably through a gradation of increasingly serious sanctions. When disputes arise, commoners must have easy access to conflict-resolution mechanisms.

Finally, Ostrom declared that commons that are part of a larger system of governance must be “organized in multiple layers of nested enterprises.” She called this “polycentric governance,” meaning that the authority to appropriate a resource, monitor and enforce its use, resolve conflicts and perform other governance activities must be shared across different levels— from local to regional to national to international.”

Source: The Only Woman to Win the Nobel Prize in Economics Also Debunked Mainstream Economics – Evonomics