The tragedy of the commons: tosh

One of the most famous essays in the history of economic thought was not, at first glance, an economic essay at all. Garrett Hardin’s 1962 paper in Science, ‘The tragedy of the commons’, bestowed a name on the whole class of social phenomena in which many people are vying for a given resource (e.g., the common land on which they can all graze their cattle and sheep), but because there is no control over how much each one can use it, they all try to use it more and more, until eventually the resource collapses through overuse.

The standard interpretation of this paper is that, had someone owned the common land, those would not have happened. They would have husbanded their resources more thriftily, nurturing it so that it was not exhausted. In this way, converting the common land to private property would save the say. This is supposed to be a lesson for our various environmental conundrums: if only someone owned stuff, they'd take care of it properly and all our climate/resource/ecosystem problems would go away. Hurrah!

It is hard to say why this idea should have caught on. Certainly from an economic point of view it is not very plausible – especially in cases that impact our current environmental problems. Take the case of non-renewable resources such as oil or gas or mineral wealth. A country such as Saudi Arabia may wish to conserve its fields so that future generations may also benefit from them, but that is only a factor because the Saudi régime has responsibility for future generations. The same cannot be said for ExxonMobil, BP or Total. Their paramount interest is quite clear and usually (by environmental and social standards) very short term: profit-maximisation. If they leave the oil in the ground they will incur continuing costs (rent, interest, maintenance and operating costs) while being unable to extract a single penny from their investments. They also run the risk that their resources will be taken from them by future governments. It is even possible that future fears of carbon emissions could lead to oil being banned from vehicles, power stations and other uses for which emission control is difficult.

By and large, oil wells are costly and precarious investments. So what should be done about them? Unless there is a realistic expectation that future price spirals will raise prices high enough to justify the risks and the costs, the answer is surely to pump it out of the ground and sell it right now. From a capitalist perspective, there is after all no other point in conserving such resources. In the ground they are worth nothing, and no matter how carefully I husband them, oil will not grow again. The only question is when the right balance of risk, cost and price tells me to start pumping. Given that time is a factor in all three of these, the chances are that the correct answer will be ‘soon’. Or if not ‘soon’, then ‘right now’.

So there is little incentive for a capitalist corporation to conserve non-renewable resources, and if the ‘tragedy of the commons’ argument is deployed to ensure that such resources are properly managed from society’s point of view, it will almost certainly fail.

But renewable resources aren’t likely to fare much better, and for very similar reasons. It is true that a forest or a field of ripening wheat is a valuable resource made all the more valuable by the fact that, carefully conserved, it will generate a return indefinitely. If I over-exploit it – by clear-cutting jungle or exhausting soil by intensive monoculture cropping and massive inputs of artificial fertilisers – then I will eventually shrivel it up to the point where it ceases to be a valuable property. In that respect at least, privatising is seems to be at least a possible solution to the potential tragedy of the commons.

Unfortunately the situation is not quite so simple. As before it comes down to a balance of prices, costs and risks. What if the cost of the resource is extremely low? If, for example, it can be acquired from a friendly government for a very low price? For instance, until his government was understandably overthrown in March 2009, President Ravalomanana of Madagascar had an arrangement with the South Korean conglomerate Daewoo to lease 1.3 million hectares of farmland – an area a little less than half the size of Belgium - for nothing more than a somewhat nebulous promise concerning local employment. Rent? Nope. Guaranteed return? Nope. Or what if – as is often the case in developing countries - the local population is simply ousted from the land?

In such conditions, costs do not include a significant price for the land itself. In other circumstances, other combinations will lead to the same conclusion: that it does pay (commercially, if not for society as a whole) for a private owner to exploit a renewable resource to the point where its vitality is destroyed and it is left worthless. At that point the company moves on, to new land and rapid returns. And the people they leave behind, whose land they have destroyed? Who cares.

So again, if I hand over a non-renewable resource to private interests, will this help society avoid the tragedy of the commons? Probably not. Indeed, so great is the disparity in resources between agribusiness and individual commercial farmers that even if both took an equally predatory attitude to the land (which, in the history of farming, farmers have not always been reluctant to do ), the damage would be done far faster by the corporations.

Note also the one option this approach does not allow for: that all the people who share this common resource will simply get together and agree how it will be used. Which is odd, because that is exactly how the land – the very ‘commons’ from which Hardin starts out – was managed before the triumph of capitalism. Medieval and early modern rural communities used to agree on who could use the land and how much. They also used to rotate who farmed which land, so that everyone had a fair turn at the best land. This method for avoiding the tragedy of the commons continued in use until the local landlord decided they could make more for themselves if they threw the peasants and the small farmers off the land and replaced them with sheep or cash crops. This process, know to European history as ‘the Enclosures’ is notorious as one of the most brutal in our history.

In short, the tragedy of the commons was not solved by the introduction of private property rights to the common land – rather, it was caused by converting socially managed resources into private property.

Social alternatives to privatisation have been shown to work over and over again all around the world. Over and over again local populations have demonstrated that they are capable of managing local resources is highly productive yet sustainable ways, given only access to modern knowledge and small amounts of specialised support. And yet over and over again they have been ousted by local landlords and international businesses intent on seizing their land for their own selfish purposes. This pleases international economic bodies like the IMF, the World Trade Organisation and the many other bodies that cannot imagine a solution to the world’s problems that does not start from global markets. It also pleases national governments, whose all-important economic indicators are nicely bolstered by the increase in GDP and other pleasingly visible data. After all, non-market economic activity, however fundamental it may be to the real lives of real people, is not visible in the economic data, and so is obviously not real. The only people it does not please, in fact, are the families who are expelled from the land and end up in the slums of a Sao Paulo or a Mumbai, hundreds of miles form home and with zero prospect of sharing in any benefits from their land being stolen from them.

There have been many cases where local people have organised themselves to share resources in ways that are both economically and ecologically sound. They owe little to market rationality and less to the idea that the only solution to the ‘tragedy of the commons’ is for someone to own everything and for the rest of us to work for them.

So why does enthusiasm for Hardin’s paper – historically false and logically unconvincing even when it was written – persist to this day, to the point where it is routinely cited by environmental economists and enthusiasts for markets alike? Because, I suspect, it creates a pseudo-historical, pseudo-scientific justification for the status quo. Despite the fact that capitalism is so destructive to the environment, the correct answer, say both Hardin and economic orthodoxy, is more of the same. You cannot have too much property, too much competition, too much exploitation – otherwise people might start to ask not whether we should have more but whether we should have quite as much as we have now. And that would never do.

Future for sale

I bang on a lot about how market economics is completely unsuited to our current environmental predicament. Here are a couple of practical - and potentially catastrophic - examples.

Now that we are growing crops for fuel instead of food, we have accidentally created a new nexus that markets have been quick to exploit – to all our costs. Now that corn is sought as eagerly by petrol companies as by food companies, the price of cereals for biofuels must converge with its equivalent in oil. However, even if, say, the USA converted all its crops to biofuels, it this would still barely touch its total fuel consumption, so the prices of cereals must move towards oil rather than vice versa - and the process of oil is currently a lot higher. So this will cause world food prices to rise – just as we complete the seventh year out of eight when we have consumed more food than we have grown, and prices are going up anyway.

Or how about this. In India, the city of Chennai – 7 million strong - is running out of water. So local water companies are buying the water from the farmers who till the surrounding land, who are happy to sell it because it is worth a lot more than any crops they might be able to grow by irrigating mere food. So sometime not long from now, when the currently falling water table has passed beyond practical or economic reach, there will be no more water – and no food either.

Nor is a Third World peculiarity. Cities in the USA (including San Diego, Las Vegas, Los Angeles, Denver, El Paso and many more) are perpetrating the same lunacy. Their water purchases run into hundreds of millions of tons and will undermine what is now invaluable farm land over decades and decades. And their purpose? To buy an unsustainable present in which vast quantities of water are squandered and paying for it with a truly terminal future.

But what can we expect if it takes 14 tons of water to make a ton of steel but 1000 tons to grow a ton of wheat, and the steel is ‘worth’ (treacherous word!) two or three times more than the wheat anyway?

Both classic examples of market economics, in which the commodity goes to the highest bidder, regardless of the consequences. Such a system cannot even see the consequences or distinguish human misery from a packet of cornflakes. Yet trade agreement after trade agreement places such arrangements ever more firmly in the driving seat.

And of course, if we don’t sort out a non-market mechanism for managing water soon, much worse will follow.

Who will pay? Guess...

One of my recurring nightmares for the coming decades of environmental crisis and economic problems is that the essential solution will be what it has always been. We will make the poor pay. Of course we will – we always do, and it is built into the way we do things. It will be necessary to dress them up as villains or undeserving or perhaps just render them invisible by hiding them behind 'processes' and 'systems', or perhaps by the simple expedient of not looking that way. But in a world in which rich countries routinely promise a fraction of 1% of GNP to foreign aid and yet feel no shame when they cannot even manage that, how will that be a problem?

On the other hand, to the extent that we continue to pay them any attention, it will be largely in order to exploit their suffering. To take one of the ugliest examples of shameless exploitation, here is a summary of what is really happening in the world food system, and in particular the world of genetic modification, which has spent so man marketing dollars on trying to persuade us that GM is the great hope for the Third World in the face of coming age of droughts, plagues of insects and hunger:

This is the main reason nearly all transgenic crops are now planted in just six countries – the United States, Argentina, Brazil, Canada, China and South Africa – and almost none in the least developed countries, who cannot afford such inputs. It is also why, according to the FAO, just four crops (corn, canola, cotton and soybeans) and just two traits (herbicide tolerance and pest resistance) now account for 99% of transgenic crops planted worldwide. By contrast, the FAO says, because most transgenic research and development is being carried out by private companies there have been ‘no serious investments’ in creating transgenic varieties of crops such as sorghum, millet, pigeon pea, chickpea and groundnut, which are far less commercially viable than soybeans or corn but are the five most important crops for poor farmers in semi-arid tropical regions like sub-Saharan Africa and India… While many anti-transgenic activists continue to get worked up over patent production as the main threat to poor farmers, the larger risk is that the transgenic industry will simply bypass the developing world altogether. Genetically modified cops, complained Louise Fresco, the former head of FAO’s agricultural division, were created ‘to reduce inputs and labour costs in large-scale production systems, not to feed the developing world or increase food quality.’ Not only is transgenic research missing poor countries’ crops, Fresco continued, but it is largely avoiding the traits needed by the developing world, especially drought and salt tolerance and resistance to tropical diseases… This reality runs counter to the oft-stated forecasts that a gene revolution will restore food security in places like
Africa and southern Asia and has fostered the view among critics that the industry is simply using problems like hunger to gain political support for transgenic technologies it can’t afford to offer to the hungry.

(From pp. 262-263 of Paul Roberts’ excellent The End of Food. Read this book.)

But this in turn only reflects the category error (as those of who once shared a flat with an undergraduate philosophy student like to put it) of most debate about whether or how the problems of peak oil, declining soil quality, climate chaos, water shortages and all the rest can be solved by business. Business simply is not in the business of solving such problems. Business is in only one business and it only makes one product. Business is solely and exclusively in the business of making money, and its sole product is profit. Insofar as it can be forced through tax, regulation and the marketing constraint of its customers occasionally refusing to deal with vicious, evil corporations, business can make a useful contribution to society. All its other contributions are either negative or unintentional.

So if the above quote expresses how agribusiness operates, it is not because these businesses are run by bad or foolish people; it is because that that is the only way a capitalist enterprise can operate. Although a great deal of ‘corporate social responsibility’ is little more than PR, and a lot more simply what they are obliged to do by law - in good times there is a degree of Good Works. But even the corporate good guys cannot resist the demands of shareholders, especially when the going gets tough.

So we should never trust businesses to do anything but pursue their own interests. Never never never. Unless, that is, someone can show me a single case of a large business doing something completely altruistic that cost it real money (of its own terms) without them making anything out of it – no indirect or indirect benefit, in fact not even any public claim for recognition that they were responsible. Just the ordinary, decent sort of thing you might expect any morally responsible individual to do. Only with billions of dollars.