A professor of psychology at the University of Maryland, in the United States, has been running an experiment on some of his students. Each term, at the end of their final paper, he attaches a variant of the following quiz:
“Select whether you want 2 points or 6 points added onto your final grade. But there’s a small catch: if more than 10 percent of the class selects 6 points, then no one gets any points. All selections are anonymous.”
It may seem like a simple problem but it is rather complex. Every student has an incentive to choose the maximum number of six extra points. However, if every student opts for the six extra points then no one gets any points. The optimal way to guarantee that everyone gets some extra points is for everyone to opt for the two extra points option. But then if everybody else, except say student Q, opts for two points then student Q can get away with opting for six points. If everyone believes that everyone else will opt for two points, then it is in their best interest to believe they are the “Student Q” who can get away with opting for six points. Remember the results are anonymous. But then if everyone believes that they are student Q and opt for six points then no one gets any points. In the ten years in which the professor has been administering this quiz, only one class has succeeded in getting any extra points.
The problem above is an example of when people’s individual short-term interests go against the interests of the group. This may seem like a hypothetical exercise but it is based on a very real phenomenon, commonly referred to as the tragedy of commons. The examples are numerous.
In the 1400s in Easter island, palms became extinct due to over-harvesting. Each islander had no incentive to limit their harvesting, because if they did, another islander would simply harvest in their stead. In essence, they could not figure out how to act in the common interest. The disappearance of palms meant that the island became increasingly uninhabitable, and by 1700s there was no semblance of an organized society there.
More recent examples abound. In international fishing, two thirds of fish are apparently over-exploited and endangered. Fish in international waters is common property and every country has incentives to catch as much fish as possible. But if every country acts that way, then the fish stocks will sooner or later be completely depleted, and every country loses.
There are examples closer to home too. The Guardian had a very interesting article on the wood markets in Makoko and their networks of suppliers which stretch all the way from Lagos to Rivers state. The part that struck me was the resulting deforestation from the trade. According to the article, Nigeria loses between 350,000 to 400,000 hectares of forest a year, probably partly due to the trade. Deforestation has a very direct impact on the wood markets and those who depend on them for their livelihood. If the forest disappears then the wood markets probably disappear too. You would think the wood merchants, knowing the threat to their livelihood, would cooperate to ensure that the deforestation slows. Unfortunately, the merchants face the same problem that the students in the psychology class faced.
There are two classic ways of dealing with this “tragedy of commons”. In some cases, privatization can be a solution. Take the deforestation problem for instance. If each wood merchant could only get wood from land that they owned, and not from a publicly owned forest, then they would have to think about the sustainability of the venture. In essence, they go out of business if they run out of trees but more importantly they gain solely if they invest in growing more trees. If the land is theirs, then they can prevent those who do not invest from reaping the rewards.
However, in many instances, privatization is not a feasible solution. Can we really justify handing over exclusive use of the forest to a bunch of merchants? Can we justify chopping up international waters into exclusive territorial boundaries? Can we privatize air quality to make sure only people with dirty generators breathe bad air? Can we privatize Lagos flooding or erratic rainfall?
Many of the “tragedy of commons” problems we face can only be solved via social cooperation, either through government action, social norms, or some other yet unknown cooperation method. In Nigeria we often think that we can go it alone as individuals. Build your own house, dig your own borehole, install your own electricity solutions, and so on. The reality, however, is that there are many challenges with which cooperation is necessary. We can try but we can’t avoid it.
Note: this is not a plea for government intervention in everything. “Tragedy of commons” problems exist but for most things, individual choices still lead to better outcomes. This is a plea for a government that is focussed on solving collective problems where individual actions result in worse outcomes. So, less tomato paste, rice, and fuel subsidy policies, and more environmental pollution and public goods policies.
Nonso Obikili is an economist currently roaming somewhere between Nigeria and South Africa. The opinions expressed in this article are the author’s and do not reflect the views of his employers.