The tragedy of the commons occurs when individuals acting in their own interest cause widespread harm. It can take the form of overuse of common resources, or of air- or water pollution. For example, if everyone can draw as much water as they want from an aquifer, it may eventually run dry. Or if farmers in Minnesota and Iowa use too much fertilizer on their fields, the “dead zone” in the Gulf of Mexico keeps growing. In either case, what’s in the interest of the individual harms many others. The individuals who benefit may never feel the consequences. And even if they do, they may not connect their actions with the consequences.
A fundamental idea of free-market capitalism is Adam Smith’s “invisible hand,” by which individuals’ pursuit of wealth creates wealth for others. Smith counted on the greed and selfishness of business people to make everyone better off. Gordon Gekko’s famous “Greed is Good” speech in the 1987 film Wall Street stated the case for greed. The idea was that basing executive compensation on company performance would yield higher corporate profits.
By contrast, the tragedy of the commons cautions us not to allow greed and selfishness without limit. To avoid tragedies of the commons, we need to connect actions and consequences. We’ve discussed how government interventions such as environmental regulations and zoning laws can slow climate change or mitigate its effects. We’ve also discussed how lack of regulation can result in deadly power outages or wildfires. However, thoughtful free-market measures can be highly effective.
Reversing the tragedy of the commons
Åland, an archipelago in the Baltic Sea, is my ancestral home. It’s an autonomous territory of Finland, but the people are mostly ethnic Swedes.
As in other Nordic countries, the ancient tradition of allemansrätten allows everyone to hike, gather mushrooms and berries, and camp on private land. There are limits on hunting, and on campfires. And you can’t camp too close to someone’s house. But so long as you don’t do any harm, you’re free to roam on other people’s land.
At one time, Åland’s coastal waters had been open for everyone to fish. However, fish stocks dwindled—a classic example of the tragedy of the commons. So the government instituted private ownership of fishing rights. That is, local people could buy and sell tracts of coastal water for the exclusive right to fish there. As on land, everyone is free to travel through someone else’s tract so long as they don’t do any harm.
Fishing in Åland
On my first visit to Åland in 1989, I noted that my grandfather’s half brother, Torsten, lived by hunting and gathering. Torsten and his son had bid on a tract that wasn’t productive when everyone fished there, but they saw its potential. They set to work, buying fish fingerlings and feeding them in pens. Once the fish were large enough, they were released to swim in the Baltic. At spawning time, they returned to their home waters, where Torsten waited with his nets.
Over the years, Torsten and his son learned how to manage their fish stocks. Some fish species eat the same foods, so if they released more of one species they’d see fewer of the others. They also knew when each species would return and how to lay out the nets for them.
In the evenings he’d call his customers, local restaurants and hotels, to take their orders. He took me with him one morning to fill that day’s orders. Our fishing trip took about 90 minutes from the time we left the boathouse until we returned. In that time we caught 40 fish, mostly gädda, a kind of pike that lives in the Baltic’s brackish waters. Torsten’s customers would accept only live fish, so we gave the few that died in the nets to some friends of his. He brought the live fish to his customers and put the extras in a pen in the boathouse for later.
According to Torsten, owning tracts of water is better than owning land. Making a living from land requires work, whether harvesting timber or growing wheat. But fishing is fun.