Tragedy of Commons: Root cause of Environmental Degradation

One of the human attitude that is responsible for the degradation of environment is the behavior towards the commonly owned utilities. When a person harnesses the common facilities e.g. common grasslands, water bodies, air, public facilities etc. the benefit is enjoyed by that single person or entity but the cost is borne by community as a whole. In effect, the person enjoys full benefit from the transaction but pays only a fraction of the cost (total cost/total persons in the community). This is a great bargain for the person and prompts it to use more and more of the resource that finally leads to the overutilization of the resource. Hardin (1968) put forth this idea in its seminal paper titled “Tragedy of Commons”. Hardin gives an example of herders sharing a common parcel of land, on which they are each entitled to let their cows graze. In Hardin's example, it is in each herder's interest to put the next (and succeeding) cows he acquires onto the land, even if the quality of the common is temporarily or permanently damaged for all as a result, through over grazing. The herder receives all of the benefits from an additional cow, while the damage to the common is shared by the entire group. In Hardin’s words:

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 toward which all men rush, each pursuing his own interest in a society that believes in the freedom of the commons.                                                                                                    

To explain the dynamics between the growth and environment we can replace common grazing field in Hardin’s parable with the common pool of air, water and ecosystems available for humanity. In fact, Earth as a whole can be seen as commons available for the utilization by humanity. Cattle grazers in the example are the corporations and other economic agents that utilize the resources available to maximize their benefit. There is an incentive to grow for them, as the corporations receive all the benefit from each additional factory, while the damage to the environment is shared by the entire group. This seems to be beneficial in short term for the corporations but it is unsustainable in the long term for everyone including the corporations.

Ethical Analysis
Tragedy of Commons renders itself to the scrutiny from the perspective of various traditional ethical theories as here we are dealing with the instrumental value of the nature and natural resources. In this case actions of the economic agents are unethical as in the long run they diminish the utility of the commons for the people. Act utilitarianism looks to single actions and bases the moral judgment on the amount of pain amount of pleasure this single action causes. If we apply act utilitarianism to this case, than growth seems to be ethical as setting up of more and more factories will lead to better employment opportunities and consequently better income levels and standard of living. However, the unrestricted growth is unsustainable and will lead to destruction of the natural resources. Though the economic agents have right to use the resources, resulting final outcome renders their actions unethical under rule utilitarianism. Rule utilitarianism looks at a class of action and asks whether the underlying principles of the action produce more pleasure than pain for society in the long learn.

Averting the Tragedy

From ethical point of view, tragedy of commons could be averted if the economic agents are far-sighted and “nobel” enough to care for the common long term good. In the classic example of herders, it means herders will voluntarily limit the number of cattle in their herds and hence avoid overgrazing. However, from economic viewpoint there are two main hurdles in this approach. First the herders are acting independently and rationally consulting their own self-interest and long term effect are not quite evident. Secondly, and this is the major roadblock, even when it is clear that it is not in anyone's long-term interest and the commons ground could be permanently damaged, there is little incentive for a single herder to abstain from the increasing the herd. Because if he does so, then he will forego the benefit of adding another cattle to its herd but still incur the cost of additional cattle added by another herders. Therefore as the game theory suggest, rational decision for the herder is to keep adding cattle to his herd. This approach of abstinence could be successful only when all the herders using the commons decide collectively not to overgraze the commons which is a utopian scenario. In practice, tragedy of commons could be averted by making arrangements that reduces the undue advantage gained by those exploiting the common environment. Usual practice is to impose some charges or penalties to those which utilize the common facilities. For example, polluting industries may be required to additional taxes or may be fined. This will increase the cost of exploiting the common resources which is air or water in this case. If properly implemented, such measures will make cost of adding of a new polluting factory deterring and growth will be restricted to sustainable level.

Nevertheless, before implementing any solution to the problem, it is prudent to identify who are the various stakeholders in this debate of Growth of organization. This is critical because any solutions will demand acceptance from the stakeholders and their participation in implementation.