Economics and incentives
Tragedy of the commons
When many people share a resource nobody owns, each gains the whole benefit of using more and bears only a share of the damage, so the resource is overused.
Garrett Hardin, "The Tragedy of the Commons", Science, 13 December 1968. Elinor Ostrom's Governing the Commons (1990), which won the 2009 economics Nobel, showed the outcome is far from inevitable.
Hardin's parable is a pasture open to all. Each herdsman asks what he gains by adding one more animal. The gain is nearly plus one, because he keeps all the proceeds from the sale. The loss from overgrazing is only a fraction of minus one, because every herdsman shares it. So each rational herdsman adds another animal, and another, until the pasture is ruined. "Freedom in a commons brings ruin to all." Hardin applied the same arithmetic to pollution, to fisheries and, most controversially, to population, and concluded that the only remedy was "mutual coercion, mutually agreed upon by the majority of the people affected".
The mechanism is a many-player version of the prisoner's dilemma: private benefit, shared cost, and no price on the shared thing. Where the conditions really hold, open access and no way for users to bind one another, the prediction fits the record. Open-ocean fisheries, aquifers pumped by many wells and the atmosphere as a dump for carbon all show the pattern. The standard fixes follow from the arithmetic: give someone ownership, cap total use with quotas or permits, or tax the use so the shared cost becomes a private one.
Ostrom's correction is that Hardin assumed users could not talk to each other or make rules. She studied user-managed fish stocks, pastures, woods, lakes and groundwater basins and found, in the words of the 2009 Nobel press release, that outcomes are "more often than not, better than predicted by standard theories", because users build their own monitoring and sanctions. The tragedy belongs to open-access resources, not to every commons. Hardin's framing has also been criticised on its history (early pastures were regulated by local institutions, as Susan Cox showed) and its politics: Matto Mildenberger, in Scientific American in 2019, recalls Hardin's calls to let the children of improvident parents starve and to reject the Universal Declaration of Human Rights. Keep the arithmetic; drop the fatalism.
Example
On 2 July 1992 Canada's fisheries minister John Crosbie announced a two-year moratorium on northern cod fishing off Newfoundland, by which point the spawning stock had fallen to about 1 percent of its estimated peak. The catch had peaked at 810,000 tons in 1968 as trawlers from many countries worked the Grand Banks, and the harvestable biomass is estimated to have dropped 82 percent between 1962 and 1977. Officials kept overestimating the stock and setting quotas to economic rather than ecological need. Nearly 30,000 people in Newfoundland and Labrador lost their jobs, the largest layoff in Canadian history, and the ban was later extended with no end date.
Where it applies
Shared engineering resources behave like commons: a staging cluster, a continuous integration (CI) queue, a monorepo's build time, an on-call rota, a team channel's attention. Each team gains fully from using more and pays a fraction of the slowdown. Ostrom's remedy applies better than a central decree: clear boundaries, rules the users set, cheap monitoring and graduated sanctions.
Think about it
What shared resource in your organisation is quietly degrading because everyone benefits from using it and nobody pays for maintaining it?
Applied it to something real? Log it.
Test yourselfHardin said a shared pasture ends in ruin. What did Ostrom's cases show, and what does that change about the model?
User-managed fisheries, pastures and water basins often did better than theory predicted, because users made and enforced their own rules. The tragedy applies to open access, not to every shared resource.
Related models
- Incentives drive behaviourPeople do more of what a system rewards and less of what it punishes, so to predict behaviour, look at what gets paid for.
- Second-order thinkingKeep asking "and then what?" until you have looked at the consequences of the consequences.
- Moral hazardWhen someone else will bear the cost of your risks, you take more of them.
- Unintended consequencesPurposeful actions produce outcomes nobody planned, because the people and systems acted on respond in ways the plan never modelled.
- Feedback loopsA system's output feeds back into its input: balancing loops hold a level steady, reinforcing loops make change grow on itself.
Sources and further reading
- Garrett Hardin, The Tragedy of the Commons, Science 162(3859) (1968), full text at the Garrett Hardin Society
- Royal Swedish Academy of Sciences, press release for the 2009 Sveriges Riksbank Prize in Economic Sciences (Ostrom and Williamson), 12 October 2009
- The Canadian Encyclopedia, Cod Moratorium of 1992