Government as the Ultimate Cause of the Tragedy of the Commons

By: Patrick Barron

A good definition of the Tragedy of the Commons is that “Resources that are un-owned and/or un-ownable will be plundered to extinction”. Consider the fish in the seas, especially those that migrate such as whales or may be found beyond any nation’s territorial waters. No one owns them and it may be impossible to own them. Therefore, fishermen are incentivized to take them before other fishermen take them. Overfishing results. Catches shrink. The size of the fish shrink. Treaties among fishing nations may mitigate the problem, as long as all sign the treaty and poachers are controlled.

In nineteenth century America it has been estimated that hunters killed forty million buffalo and trappers took two hundred million beaver. The buffalo were hunted almost to extinction, and some scientists claim that the water shortage and erosion problems of the American West are a result of the over-trapping of beaver, nature’s premier water conservationist.

Privately-Owned Resources are Capitalized, Ending their Plunder

A solution to the problem lies in private ownership of the resource. Private owners manage natural resources to maintain their capital value. Scientists and economists have pointed out that the annual and apparently never-ending forest fires of the American West are partly due to the fact that they occur on government owned land. But government ownership is not the same as private ownership. Government has little incentive to protect the trees in order to harvest them over long periods of time. Governments’ main objective seems to be simply fighting forest fires once they have begun, a policy that doesn’t seem to have worked very well. Radical environmentalists would not tolerate selling the land and forests to private companies. A pity, because that is exactly what would stop their destruction.

Notice that the main problem that results from the tragedy of the commons is that of resource depletion. It is true that the first to grab the resource benefits, but this is a one-time grab. Privately owned forests, fisheries, oil wells, copper mines, fertile farm land, etc. will yield their bounty to perpetuity; whereas, a plunderer leaves nothing for the future. In other words, plunderers eat the seed corn.

This describes the state of government today. Through its money printing monopoly, government has the ability to plunder resources without limit, leaving nothing for future growth. Austrian economists call this high time preference, as opposed to low time preference. Those with high time preference prefer the satisfaction of short term wants at the expense of long term wants. The ant vs. the grasshopper fable is the perfect illustration of the principle. The ant works hard to save for the future, while the grasshopper plays in the summer sun. But the ant has food and shelter through the coming winter, while the grasshopper freezes and starves. Politicians have high time preference, because they occupy their positions of power for a limited time. They have constituents and supporters to placate. They want action and they want it now. They want free fill-in-the blank.

The Soviet Union was the poster child of this syndrome. Prior to the Russian revolution of 1917, Russia was a highly industrialized nation that was a worthy competitor in world markets. After the revolution, it embarked on a one-time grab of all the nation’s resources as it attempted to impose a completely socialist, state directed economic model. Within a few years the Russian people were starving. Only Western aid, the sale of its vast natural resources, and the plunder of Eastern European nations after the Second World War allowed the Soviet Union to survive as long as it did. When asked if the US would help restore the Russian economy after the fall of communism, President George H. W. Bush insightfully said that there was not enough capital in the entire world to do that.

The Solution Is Private Money, but the Temptation for Plunder Is too Great

Under a gold standard government cannot spend more than it taxes and borrows honestly in the bond market. Gold is a finite medium of exchange, perfectly suited for trading finite goods and services. But government can manufacture fiat money in unlimited amounts. So we have finite resources exchanged by fiat money with no limit. The temptation for government to use this power to accomplish its high preference goals is too great for the politician/grasshoppers to ignore. Thus, all economies are being plundered by the ultimate expression of the tragedy of the commons–fiat money in the hands of profligate governments. There seems to be nothing that can prevent the disaster, since every citizen benefits is some way from government spending and no one is willing to give up his handout. In fact, the demand for more handouts keeps increasing.

Conclusion: Consumer Spending Consumes Capital

In conclusion, we may say that the real tragedy of the commons is not that the plundered resources are claimed by a minority, but that the resources can never be capitalized to provide benefits into perpetuity. Government may plunder an economy only once. Western economies have a lot of accumulated capital resources, so it may seem that multi-trillion dollar budgets and deficits are sustainable. But they are not. What Keynesians call a post-covid boom, due primarily to pent up consumer spending fueled by helicopter money, probably is capital decumulation. We are eating our seed corn. Fun, fun, fun…while it lasts.

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