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The idea of resource depletion has been a common theme throughout much of history, especially in the last century. Look at Amazon deforestation, groundwater supplies, coffee plants, fishing grounds, and even fashion.
They're all part of a concept known as the tragedy of the commons. Here, we'll discuss the tragedy and its history and offer a few examples to consider when assembling or adjusting your portfolio.
The tragedy of the commons is a phrase that describes instances when an individual or business prioritizes a public resource to the detriment of others. The concept was introduced by William Forster Lloyd, an economics writer who presented it in an 1833 lecture.
Lloyd cited the example of land -- "commons" -- shared by cattle owners. If one owner allows cows to graze as much as they want, the land would eventually be barren and benefit no one. However, the term wasn't widespread until it was used in a 1968 Science magazine paper by Garrett Hardin, a U.S. ecologist specializing in population issues (including voicing unfortunate support for eugenics).
Hardin wrote the paper at a time when overpopulation was considered a very real and imminent problem; the Science article was published the same year as The Population Bomb, a book written by a Stanford biologist who argued that overpopulation would lead to mass famine, disease, and war, resulting in the deaths of hundreds of millions of people in the 1970s.
A mass die-off failed to materialize, but Hardin's phrase has survived and remains in use, especially in discussions involving the cause of climate change. These days, the tragedy of the commons applies to everything from deforestation in the Amazon to traffic congestion. It's also a topic of discussion among economists.
Elinor Ostrom, a 2009 Nobel Laureate in economics, argued that Hardin's scenario was flawed by failing to consider the possibility that people or businesses can cooperate to ensure common goods are preserved and that common goods are generally shared on terms set by a community.
There are endless examples of the tragedy of the commons in the modern economy. Here are a few recent ones:
In a world of finite resources and populated by humans, the tragedy of the commons may well be unavoidable. Whether we like it or not, we live in a society where individuals rely on resources to survive, thrive, and prosper.
Hardin argued in his 1968 paper that "the population problem has no technical solution; it requires a fundamental extension in morality." Absent a change in human nature, governments will be required to step in where individuals, businesses, and organizations threaten to overuse or deplete common goods.
At its heart, the tragedy of the commons is a failure of the market, caused by the inability to share public resources. Since there's no incentive to use public resources for the benefit of everyone, the costs of overuse and depletion aren't included in the prices of the resources. When public resources are threatened, governments generally intervene in one of three ways:
