Capitalism and the Tragedy of the Commons

Capitalism's most dangerous flaw is that it has no inherent method for dealing with the tragedy of the commons.

The tragedy of the commons is the doctrine which insists that we will always add one too many sheep to the village commons, destroying it. In other words, we will always opt for an immediate benefit at the expense of less tangible values such as the availability of a resource to future generations. When you look around you, it is immediately obvious, if your eyes are open, that the tragedy of the commons is an accurate description of human nature; such disaparate human creations and institutions as Times Square, Usenet and Love Canal all represent tragedies of the commons.

Most of capitalism's cheerleaders simply never mention the tragedy of the commons, or deny that such a thing exists. The all wise invisible hand of the marketplace, some claim, is as competent to keep us out of future trouble as it is to grant us future benefit.

But you must truly have blinders on to believe this, as the visible effects of human behavior prove it is not so. To pick an example particularly important to me: I have been diving the coral reefs of Pennekamp State Park in Key Largo, Florida for almost twenty years. In that period of time, the glorious coral heads have given way to spottier, smaller stretches of discolored coral, and fish that were common (such as grouper) are now never seen at all. The degradation of the reefs is painfully visible in two decades of my lifetime and the cause is patently obvious. Each fisherman takes more fish than he should, each dive boat takes too many divers on too many trips, and the shipping companies run too many large ships, including oil tankers, over and eventually into the reefs.

Its all capitalism: the dive operators, the shipping companies, the commercial fishermen. Free market capitalism dictates that they will ultimately destroy the Pennekamp reefs. In an even more stunning example of the same phenomenon, the citizens of the Philippines dynamite their coral reefs so that you can buy brightly colored coral fragments in souvenir shops.

It would be easy and convenient to say that the tragedy of the commons is a modern phenomenon, that humans were not capable of doing too much damage until their population exceeded certain numbers or their technological tools became powerful beyond a certain point. However, this threshold was crossed in human prehistory when it is likely that certain other species, such as the wooly mammoth, were hunted to extinction.

Free market capitalism teaches us how to better our lives, and those of other people, by reaching out and taking, and by doing so more efficiently and productively. Capitalism is very bad at teaching us when to refrain from taking. That part of ourselves which steps forward to suggest that "thou shalt not"--named the "superego" by Freud--simply does not form part of the free market system. Just as the ego and the id in the Freudian paradigm must refer to something outside themselves for the restraint that so often means survival, humans must look outside the capitalist system for the self-restraint that will avoid the destruction of every commons used by us. Our history also illustrates that the destruction of the commons will not be stopped by shame, moral admonitions, or cultural mores anywhere near so effectively as it will be by the will of the people expressed as a protective mandate; in other words, by government.

Hayek, the philosopher of free markets, admits this when he says, in discussing the importance of government to a free market system:

To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition.

In fact, Hayek is dealing directly with the tragedy of the commons when he says a page later that free market pricing fails when "the damage caused to others by certain uses of property cannot be effectively charged to the owner of that property." He continues:

Nor can certain harmful effects of deforestation, of some methods of farming, or of the smoke and noise of factories be confined to the owner of the property in question or to those who are willing to submit to the danger for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism.

Hayek was not a libertarian; he believed in striking the right balance between government and markets. Capitalism may contribute a large part of human welfare and progress, but it cannot do so without some external constraints.