Economics: The tragedy of the commons, lawyers as economists and other realities

by: Stephen Marsh

May 5, 2011

Put this post together with the other essays and you will have all the basics to understand libertarian marxism, utopias and the economics of approaching Zion.

But first:

  • The tragedy of the commons
  • Governments as a negotiation proxy
  • You get what you pay for

The tragedy of the commons is short hand for an historical event, a rule, and a wider implication.

The historical event came about in England when people started raising flocks of sheep on the common (or public or free access) pastures.  Soon everyone was exploiting the commons and they were ruined.

The rule derived from the event was that any open access/free to access resource that can be exploited for gain will be overused.  Anyone who conserves just leaves more for the overusers to get, and what you don’t get now, someone else will grab.  Fishing grounds get overfished if you can sell the extra, open fields are overgrazed, Great Auks, Passenger Pigeons and Buffalo get slaughtered.

The principal is that any activity where an individual gets the benefit and society pays the price will get overused by some individuals at the expense of society.  There will be abuse unless there is regulation.

Government as a negotiation proxy.  The “lawyers as economists” is an inside joke.  Governments are often a proxy for a large group of their citizens in negotiating with individuals who are exploiting the commons, especially with “externalities” (an externality is when one person gets the benefit, the cost is exported — think of pollution, or someone smoking indoors, or a guy dumping his sewer straight into the stream the next guy drinks out of). A number of legal theorists have posited that governments are necessary, people will group together to negotiate in such circumstances.

People do group together to set rules and negotiate.  The way they do it is called government, something that seems obvious to economists ;)

Much opposition to government is legitimate.  But most public opposition is funded by people who (a) want to get around safeguards requiring that they provide complete information to a market or (b) people who want to exploit a commons either by strip mining it faster than anyone else or using it to dump their negative externalities.

You get what you pay for.  You get more of what you pay for too.  You get people with incentive to make what you are paying for what they are selling.

Ok, that is a way of expressing the rule that people maximize self interest — and depending on how you frame things, you will get maximizations.

You may think you are paying to support women without husbands, but you will get women without husbands if you focus welfare in that way.  You may think you are supporting peanuts, but you will get West Texas peanut farms that only farm subsidy payments.  You may think you are giving executives incentives, but you may find that you are only twisting your company around to justify their bonuses.

The way this twists around is the bane of many social systems, centralized economies (measure productivity by pounds of nails produced, the Soviet factory turns out few nails the size of rail road spikes.  Measure it by the number of nails, you get finishing nails as stout as needles).

Any utopia has to accommodate the economic forces in the essays I’ve shared.  Since Zion is a utopia, you might wonder how it deals with the economic issues, or how it seems to (and why so many utopias flounder).

Next time.

Economics:  The tragedy of the commons, lawyers as economists and other realities

15 Responses to Economics: The tragedy of the commons, lawyers as economists and other realities

  1. Dan on May 5, 2011 at 6:45 AM

    your tragedy of commons part seems to imply that humans are rabid dogs who cannot maintain a public good without tearing it to shreds.

    What of open source things, such as open source software?

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  2. Jon on May 5, 2011 at 7:00 AM

    The principal is that any activity where an individual gets the benefit and society pays the price will get overused by some individuals at the expense of society. There will be abuse unless there is regulation.

    Should read will be overused unless there is a free market that respects that property of others. The government continually fails this test.

    Much opposition to government is legitimate. But most public opposition is funded by people who (a) want to get around safeguards requiring that they provide complete information to a market or (b) people who want to exploit a commons either by strip mining it faster than anyone else or using it to dump their negative externalities.

    Government is good, it’s the state that is bad. When people use unrighteous authority over others it is called the state. The abuse of the commons backed by the rulers is statism. In a free society there is no statism.

    Since Zion is a utopia, you might wonder how it deals with the economic issues, or how it seems to (and why so many utopias flounder).

    It’s the free market. The free market requires a righteous people that respect one another’s properties.

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  3. Jon on May 5, 2011 at 7:12 AM

    Regulation naturally leads to state backed monopolies, as one example here shows:

    A yearlong sting operation, including aliases, a 5 a.m. surprise inspection and surreptitious purchases from an Amish farm in Pennsylvania, culminated in the federal government announcing this week that it has gone to court to stop Rainbow Acres Farm from selling its contraband to willing customers in the Washington area.

    http://www.washingtontimes.com/news/2011/apr/28/feds-sting-amish-farmer-selling-raw-milk-locally/

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  4. MatthewChapman on May 5, 2011 at 7:39 AM

    Dan – I think a better example is email: a small number of users exploit a common resource with a huge amount of spam.

    In response, email filters need to be created, a kind of virtual police force, to prevent spam from overwhelming an otherwise useful system.

    Clearly, some people are making money from spam, while others bear the additional cost of creating the filters to keep the system functional.

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  5. Dan on May 5, 2011 at 8:15 AM

    Matthew,

    I don’t think that a common good, or better said an unowned resource, shouldn’t be ‘protected’ from the few who would exploit it at the expense of the rest, but I don’t think email is a good example. An email is provided by someone, not an unowned resource. I can’t create my own email system. There’s actually a cost involved in it. But I can create my own open source software that I can freely give out, such as Lotus Symphony or Open Office. While both of those are made by larger groups/companies, their design is such that anyone can actually create them from their own computer and give it out without ownership claim.

    What I think is ironic is that in a socialist system the cost of maintaining a common good is actually borne by everyone, whereas in a capitalistic system, the cost of maintaining a common good is borne by only a few.

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  6. Mark D. on May 5, 2011 at 8:25 AM

    The principal is that any activity where an individual gets the benefit and society pays the price will get overused by some individuals at the expense of society. There will be abuse unless there is regulation.

    Sounds like the patent system.

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  7. Ryan on May 5, 2011 at 11:10 AM

    I for one am sick of all the economic discussions here on W&T. Seriously, a couple months back it was the polygyny/polygamy rut and now it’s a much deeper economy rut…

    Some people clearly love bloviating about the topic (Jon, Dan, etc) and they might be a good market for your ideas, but I think it’s time to move on…

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  8. PaulM on May 5, 2011 at 1:48 PM

    Dan:

    Your open-source code analogy is inapt because it cannot be depleted and therefore irrelevant to the tragedy of the commons.

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  9. Dan on May 5, 2011 at 2:14 PM

    ah yes, true indeed. Then neither can your email analogy, because it too cannot be depleted and therefore irrelevant. :)

    Maybe air is a better example. :)

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  10. Stephen M (Ethesis) on May 5, 2011 at 4:51 PM

    Spam is like air polution.

    Open-source has positive externalities — the more people use it, the better it gets. Spam, on the other hand, exports a cost to others. I hope that explains the difference.

    Ryann — I’ll be moving on to approaching Zion. Probably without an economics discussion in part one.

    Sorry you see my three posts as a rut, is there a topic you would prefer?

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  11. Chino Blanco on May 6, 2011 at 2:22 AM

    fwiw, I’ve been enjoying reading this series.

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  12. Stephen Marsh on May 6, 2011 at 5:17 PM

    Thanks Chino.

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  13. Benjamin Hansen on May 10, 2011 at 8:30 AM

    There is no tragedy of the commons if individuals are appropriately altruistic. Public good problems arise because we don’t consider about the effects of our actions on other individuals utility.

    Paul Samuelson came up with conditions for the appropriate level of public good provision. As long as my altruistic utility function incorporates the utility of others the same way the social welfare function does (such as the sum, product, etc), then there is no need for the government to intervene. In Zion, if we are of one heart and mind, we likely have appropriate levels of altruism to provide public goods without government.

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  14. Sister Wives are Socialist | Wheat and Tares on November 14, 2011 at 1:00 PM

    […] resources, they have had to become a bit communal.  I’ve enjoyed Stephen M’s posts (part 1, part 2, part 3, part 4, and part 5—I hope I got them all) on the economics of utopias.  In the Browns […]

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  15. Mormon Heretic » Sister Wives are Socialist on November 14, 2011 at 1:42 PM

    […] resources, they have had to become a bit communal. I’ve enjoyed Stephen M’s posts (part 1, part 2, part 3, part 4, and part 5—I hope I got them all) on the economics of utopias. In the Browns […]

    Like this comment? Thumb up 0

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