In 1968 Garrett Harden published an article in the journal Science that pointed out that in a free market situation, independent parties, acting rationally, will deplete a shared, limited resource in their pursuit of their individual self interests. The example most usually given is that of a shared grazing land on which everyone runs as many sheep as possible to the point that the grass all dies and no one has any grazing land available. Each sheep owner gets any gain from an additional sheep grazing on the land and any damage to the land, whether permanent or temporary, is shared by everyone.
So that’s the situation in a free market with respect to shared, limited resources of all kinds. This fact of human nature is a powerful argument for socialism and a powerful argument for private property.
Socialism as a solution.
That sounds like a contradiction but in fact, both are true. That is, one can say that if the government owns everything, it will protect the commons because the commons belongs to the government. That is a good argument. But the government is not a person. (This truism is often forgotten or ignored in the way people deal with government.) Also, even when the government tries to control everything, the market still works within and on the various departments of government. Various departments or divisions of government will compete with each other for resources. (Anyone who has worked in a large bureaucracy for any length of time will have witnessed that.) Thus, the commons will still exist so far as the individuals functioning in the government are concerned. Anything which does not cost them or their department directly will be considered free even despite the cost to the nation, society or government. They will act just like those shepherds in our example. This has been observed in socialist nations around the world. Therefore, even though the argument is reasonable, in practice, the assumptions of the argument are not met. Therefore that argument is irrelevant.
Private property as a solution.
The other reasonable argument is for private property. That is, all property is owned by some non-governmental party such as a person, a family (couple), or a business. No property is owned by government. It would appear that this would solve the problem. After all, if the pasture land of the commons were broken up and apportioned to the various shepherds, each would take good care of his part and not overgraze it. That way everybody would benefit.
But there are lots of "commons" which one really cannot own. The air, for example, is not owned by anyone and cannot be. One can own tanks of compressed air, but not the free air as a whole around our planet. Thus, the air is a commons into which people dump garbage. Not having to take care of that garbage saves costs for the individual or business but it costs everyone in various ways. Therefore, having only private property with no community ownership also fails to protect our economy (or all the commons). The assumptions of this argument also are not met in practice. Therefore this argument is also irrelevant.
Various commons.
Shared resources are very common and are often not recognized as such. Let us explore, briefly, a few of those "commons."
The government can be seen as a commons. The government is shared by the citizens. We all use it (whether we like it or not) for various purposes. We receive various services and material goods (like roads) via government. But government is a limited resource. Try as we like, government cannot be all things to all people. So when one group gains something from the government, that means that there is less for other groups. For example, when one powerful interest group gains an advantage (such as a large subsidy) it is at the expense of everyone else (as the subsidy costs everyone in taxes or inflation). The more lobbyists and special interests "graze" on Congress and the Administration, the more damage is done via such things as inflation and a loss of respect for government and the law. But because Congress is a market in which one can generate huge profits for a small expenditure of money, the temptation to exercise influence there is quite sufficient to attract many businesses and powerful individuals.
The poor and working class members of the economy are also a commons. The rich and powerful exploit these groups for labor and for customers. No one owns these people, yet they do not have the power to protect their assets from those businesses and persons who have control of far more money. These powerful interests use advertising, fees, insurance, and even the law to gain money from the poor and working classes. They have considerable advantages over these poorer groups because they have experts in the products and contracts which the poorer folks accept. Thus we have credit cards, cheap junk, bad loans, fine print, and other means of gaining a rich harvest through what really amounts to fraud. Of course, the assets of the poorer people are limited and when they are exhausted, the whole economy begins to fail since they can no longer afford to buy. The rich have ruined the commons because they could not limit their exploitation. If one wealthy corporation had not taken their money, some other business would have done so.
The financial system is also a commons. The Fed makes money available by borrowing and the banks loan it out making huge profits (and increasing the money supply). But when they go too far (as they did over the last 10 years) they can destroy the "good thing" for everyone. (Or at least for those of us who are not bankers.)
So you see, a resource does not have to be something you can hold in your hand. It can be something as insubstantial as confidence in the government or in a bank. It can be something which cannot be owned.
But why are these commons over-exploited? What makes them fail? The answer is quite simple. The nature of our money both allows and causes commons to fail. A money transaction is between only two parties. In all the cases above, some party is getting money without having to pay for all the costs. These are cases in which our money lies to us. It says, that gallon of gasoline costs $2.50. But the real cost is far more than that. The real cost includes pollution in its production and in its consumption. Some of those costs are paid by a few individuals but most are paid in tax money. That’s because the energy industry has received from government subsidies and a lack of responsibility for damages their products cause to the environment. Those costs have been transferred to the community/nation. The two parties who transferred the $2.50 for that gallon of gasoline were not the only parties involved. But the money we use does not allow a third party to be involved. And because everyone affected by that transaction is not involved in that transaction we get these tragedies of various kinds.
As I write this, the Congress is considering legislation which will modify the health care system in the U.S. The patients constitute another commons. They are being "grazed" by a variety of "shepherds" in insurance, drug, and medical care industries. Because they have limited resources, their ability to pay will be exhausted if the health care system continues to take a larger and larger share of the production of goods and services in the U.S. At some point the health care commons will collapse. This will be another slow national catastrophe brought on by the nature of our money.
