The Free Market and the Tragedy of the Commons

Last post I commented on how the theory of the free market demands that people act without compassion.

Now I want to discuss another failure of the free market. This is a failure that does not require the free market to operate in any way at odds with the descriptions given by free market theorists.

It is a failure that should concern people, however, because the tragedy of the commons affects all.

The basic formulation of the tragedy of the commons is in the same terms as the free market. Here's how it's described in Wikipedia:

The tragedy of the commons refers to a dilemma described in an influential article by that name written by Garrett Hardin and first published in the journal Science in 1968.[1] The article describes a situation in which multiple individuals, acting independently, and solely and rationally consulting their own self-interest, will ultimately destroy a shared limited resource even when it is clear that it is not in anyone's long-term interest for this to happen.[2]

To repeat: "Multiple individuals acting independently,...consulting their own self-interest." This is the basic formulation of free market behavior, and is what is touted by free market proponents as what will solve all our problems by increasing wealth.

The tragedy of the commons becomes much more significant when we realize that all our most important resources are ultimately limited. There may be vast reservoirs, but no matter how vast the reserve, exponential growth will rapidly exhaust the resources.

The air is a common resource. Water is a common resource. The free market will destroy these.

One way out, implicit in the formulation of the tragedy of the commons, is that we take shared resources and give them into possession of an individual entity. Of course this is a way of avoiding the tragedy of the commons that would appeal immensely to someone who has the resources to feel confident that they will be able to possess their own share.

We can see again how the loss of compassion will play a role in this free market dynamic: loss of compassion drives people to act in selfish interest rather than common interest, and thus the resource is destroyed. If compassion drove people, then the resource would not be exhausted.

Of course there are times when a limited resource is so limited that there is not enough for everybody. This is, of course, a difficult solution.

But, first of all, it is abundantly clear that individuals acting out of compassion and concern for the group welfare will sacrifice their own needs and desires for the greater good. We honor such people as wartime heroes or as peacetime saints. But they're scorned by free market theory (Adam Smith himself comments that people acting for the public good do little, showing his scorn). While self-sacrifice is not necessarily a palatable option, it is one that tends towards a communally sustainable path.

Secondly, it is worth remembering that, at least at the present, large problems of accumulation of wealth and resources exist. So at least for the moment, it is not as much an issue of overall scarcity, but rather localized or individualized scarcity. The commons are currently sufficient, provided a good distribution.

In any event, the next time someone says that the free market will solve our problems, keep in mind the tragedy of the commons.

Wouldn't it be great if people actually associated the tragedy of the commons with the free market, and with what they're voting for?