Tragedy of the Commons

... In the theories of Elinor and Vincent Ostrom, the notion of democracy is of central importance as a means to overcome the tragedy of the commons.

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...Elinor Ostrom understood the “tragedy of the commons” as a collective action or social dilemma, which, in turn, can also be understood as a prisoner’s dilemma between two people (E. Ostrom 2008, 2-5). According to Ostrom, a social dilemma refers to diverse situations in which “individuals make independent choices in an interdependent situation” (E. Ostrom 1998, 3). Such dilemmas occur “whenever individuals in interdependent situations face choices in which the maximization of short-term self-interest yields outcomes leaving all participants worse off than feasible alternatives” (ibid., 1). As already seen in the analysis of Hardin’s model, these dilemmas would theoretically generate defect strategies that would ultimately lead to suboptimal outcomes (resource depletion, inequalities etc.) which are defined in economic literature on game theory as Pareto-inferior Nash-equilibria or, in more colloquial terminology, as a “tragedy”. In general terms, Ostrom argues that these models boil down to the “free rider problem”, which she defines as such: “Whenever one person cannot be excluded from the benefits that others provide, each person is motivated not to contribute to the joint effort, but to free-ride on [or take advantage of; LP] the efforts of others. If all participants choose to free- ride, the collective benefit will not be produced” (E. Ostrom 2008, 6).

The reason for the general fascination with these models is that their structures create a situation in which the best individual strategies ironically lead to a suboptimal joint outcome. For this reason, Elinor Ostrom writes, “The paradox that individually rational strategies lead to collectively irrational outcomes seems to challenge a fundamental faith that rational human beings can achieve rational results” (E. Ostrom 1986, 4). It must be noted that this insight is quite striking because it contradicts, first and foremost, the previously mentioned assumption in economics that individual subjective interests lead to positive social outcomes. This is the basic principle of the invisible hand that underlies belief in the self-regulation of the market.15 Furthermore, these dilemmas also suggest, more generally, that cooperation is impossible or, rather, irrational for supposedly rational agents within specific social arrangements. ...

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It is important to emphasize that both Elinor and Vincent do not understand the tragedy of the commons to be the result of a common pool resource itself or of a common property regime, but rather, they understand tragedy to be the consequence of specific institutional arrangements that enable people to act in a specific manner in relation to specific goods. In this sense, the unhindered individualistic freedom that Garrett Hardin describes in his model is not to be understood as a type of freedom in a state of nature, but rather as freedom that has been created through a public good of the legal framework (V. Ostrom 1993, 62, V. Ostrom 1999b, 62). More specifically, it is a legal framework that protects specific property and contract rights from arbitrary interference and that allows the unimpeded and unlimited accumulation of resources. ...

Democracy, Markets and the Commons. By Peters