WHAT: A scenario in which self-interest hurts the common good by depleting shared resources. The concept traces back to the Boston Common of the early 17th century, but its’ scientific roots go back to economist William Forster Lloyd. In 1833, Lloyd published a pamphlet which included a scenario in which grazing cattle would eventually over-use the common land herders shared to the detriment of all. The idea was reintroduced a century later by ecologist Garrett Hardin in his 1968 Science article by the same name.
WHY: Hardin explored the social and economic consequences of this scenario. He concluded that a selfish disregard for others would lead to hording resources and eventually their depletion. “In the context of avoiding over-exploitation of common resources, Hardin concluded by restating Hegel’s maxim (which was quoted by Engels), ‘freedom is the recognition of necessity’. He suggested that ‘freedom’ completes the tragedy of the commons. By recognizing resources as
commons in the first place, and by recognizing that, as such, they require management” (R1)
EXAMPLES: Environmental concerns include over population, over fishing, air and water pollution just to name a few. Economic concerns include property rights within fractional reserve banking (R2).
In crypto, a scenario exists where economic self-interest is leading to behavior that is a determent to the system as a whole. For example mining pools lead to consolidation which leads to centralization. Lower block rewards thins their ranks and leads to more of the same and higher fees. As mining difficulty and the growth of blocks increases mining tends to be a monopoly in all but name.
That is why governance (both external and internal) is important. Elinor Ostrom’s Governing the Commons demonstrates that communities can manage resources via prudent cooperation and regulation. She won the 2009 Nobel Prize in Economics for her work.
REFERENCES:
R1: https://en.wikipedia.org/wiki/Tragedy_of_the_commons
R2: https://mises.org/library/commons-and-tragedy-banking
Picture: https://dlpng.com/png/5513281