Friday, January 6, 2012

Tragedy of the Commons: We're All Innately Economists

The idea behind the tragedy of the commons is simple: common resources will be abused because the people using them lack of sense of ownership. Library books are not treated with the same care as personal books are; people fishing do so abundantly because it comes at minimal cost to them; and finally, although nobody would put a factory near their house because of its air pollution, large corporations don't think twice about doing so.
The flaw in the human thought, though, is that these consequences are peripheral. While some people may understand that these habits are taxed in one way or another; the principle of incentives prevents many from taking action. For example, lets say we live in a place, "town Y" where fishing is prominent. Further, lets say each person in the town is taxed x dollars for what is called the "fish tax". While many of us understand that if we fished less, amount X would be reduced, we would feel robbed if we reduced the amount we fish. Many of us believe that if we are being taxed, we should take full advantage.
In fact, I believe (and real life examples have shown) that taxes can actually encourage the habit it was trying to discourage. Before, the people of town Y weren't paying for a service. Now, they're paying for the service, so they feel that they must utilize it.
Unfortunately, our innately competitive nature to gain the most "bang for the buck" ultimately creates a dangerous outcome.
The tragedy of the commons is a great example of incentives, and this theory has been proven numerous times. The first paragraph of the following article effectively reenforces this concept. Below is the link.

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