Tragedy of the Commons

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Definition of 'Tragedy of the Commons'

The tragedy of the commons is a situation in which a shared resource is overused to the point of depletion because individual users do not have an incentive to conserve it. The term was coined by Garrett Hardin in his 1968 essay "The Tragedy of the Commons."

Hardin's example is a pasture shared by several herdsmen. Each herdsman has an incentive to add as many cows to his herd as possible, because the more cows he has, the more milk he will produce. However, if all the herdsmen do this, the pasture will eventually be overgrazed and will no longer be able to support the herds.

The tragedy of the commons can occur in any situation where a shared resource is not owned by anyone in particular. Examples include air pollution, water pollution, and deforestation. In each case, individuals have an incentive to use the resource as much as they can, even if it means harming the resource for everyone else.

The tragedy of the commons is a serious problem because it can lead to the depletion of valuable resources. In some cases, it can even lead to the collapse of entire ecosystems.

There are a number of ways to address the tragedy of the commons. One approach is to privatize the resource. This means that the resource is owned by a single individual or group, who has an incentive to conserve it. Another approach is to regulate the use of the resource. This can be done through laws, regulations, or taxes.

The tragedy of the commons is a complex problem, and there is no easy solution. However, by understanding the problem and its causes, we can take steps to address it and prevent the depletion of our shared resources.

In addition to the examples mentioned above, the tragedy of the commons can also occur in the financial world. For example, a bank may make too many loans to borrowers who are at high risk of default. This can lead to a financial crisis, in which the bank loses money and the economy suffers.

The tragedy of the commons is a reminder that we all have a responsibility to use shared resources wisely. When we fail to do so, we can all suffer the consequences.

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