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
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
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.
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