Tragedy of the commons
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The scale up of the basic ideas about how individuals operate into institutions draws on simple models, empirical models and metaphors. One metaphor in particular uses a common grazing area described by Garret Hardin in 1968, the “Tragedy of the commons” (Hardin, 1968). Liberalization laments collective action failures on shared resources as inevitable tragedy in the absence of an authority to enforce property rights.
[through] the extension and protection of property rights societies avoid the “tragedy of the commons,” the phenomenon that leads to the degradation and exploitation of property that is held communally and for which no one is accountable. - Miller, Heritage Foundation, 2020 Economic Freedom Index Report
This tragedy is used to set up a dichotomy of choices between either central planning or division into lots of private property. In the essay Hardin describes the general “free rider problem” for managing collective resources using the specific example of a commons - a collective grazing area. If anyone can graze on the field then according to Hardin, the collective resources are doomed to over-grazing as each individual acting in their self-interest would take more than a sustainable share for themselves and leave a smaller amount for the collective. Over time eventually everyone is worse off and the resources are exhausted (Hardin, 1968).
Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit - in a world that is limited. Ruin is the destination towards which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. - Garret Hardin, 1968 Tragedy of the Commons
Payoff matrix for a simple Prisoners Dilemma game.
Player 2 Defect
Player 2 Cooperate
Player 1 : Defect
(-6,-6)
(-10,0)
Player 1 : Cooperate
(0,-10)
(-1,-1)
Hardin wasn’t the first to communicate this idea and versions of it can be traced as early as Aristotle (Ostrom, 1990). Hardin’s tragedy is a special class of collective decision frames called “Prisoners dilemma” in the branch of economics called “game theory” (Ostrom, 1990). Game theory deals with multiple agent decisions where one player’s decision is contingent on how other agents will behave.
The prisoners are faced with a similar dilemma as Hardin’s herders in that they receive the best payout when they both cooperate, but receive a loss if the other player defects and a gain if they defect. If there is no enforcement authority and under certain conditions of the relative payoffs, each player has a dominant strategy to defect. The best solution overall for everyone - “Pareto optimal” is not the best solution for each acting in their own self-interest. For each individual they have the most to gain if they free ride and defect while others cooperate.
The simple metaphor is compelling to some who may sympathize with the tragedy as the situation may resonate with similar personal experiences in their own life in their neighbourhood or the canteen in the workplace. If the conclusions were a universal truth it would imply the human species to have a severe adaptive disadvantage to other social species which have evolved better cooperation behaviors and this is the “tragic” conclusion Hardin makes explicit in the essay.
In such games the belief about how others influence each agent's decision whether to cooperate or defect. According to Hardin self-interest is taken as a given so he concludes that the only remedy for such a situation is through two types of enclosure strategies - either to enclose a single manager (the state model) or to divide up the commons into private rights (the market model). Hardin’s tragedy is a progressive message that the natural state of the world is not self-correcting and needs government intervention for enclosure and establishment of enforcement institutions. This metaphor is characteristic of how the ideology connects the axioms about human motivation and behavior to institutional design.
While Hardin was an advocate for property rights, he kept his analysis general and left open the possibility for two possible remedies to the collective resource - the alternative being a central authority. To conclude that division into individual private properties was a better alternative to electing a central authority, the liberalization theory draws from the work of Richard Arrow, James Buchannan and Dennis Mueller on voting systems.