When is the Tragedy of the Commons Not a Tragedy?

Abstract

Economists tend to rely upon tried and true examples to make their theoretical points. Since H. Scott Gordon’s 1954 article entitled “The Economic Theory of a Common Property Resource: The Fishery,” the overexploitation of an open-access resource has been a usual presentation in any discussion that deals with aligning incentives with appropriate outcomes.

However, just as Ronald H. Coase (1974) showed that a lighthouse is not the best example of a public good, and Steven Cheung’s discovery (1973) that bees, in most cases, do not provide an unpriced externality, we also need to rethink how we present the over-exploitation of open-access resources. In particular economists should be careful not to ignore an important element in our tool kit, opportunity costs, when we discuss over-exploitation. This means that the rapid depletion of a resource may or may not represent a tragedy of the commons, depending on what happens to other resources or values that are involved in the maintenance of the resource in question.

In this article I take up the issue of the depletion of the bison in nineteenth century America. Because bison were a way of converting grass to meat one has to include the opportunity cost of the grass in any calculations of the wastefulness of killing bison. If an alternative way of using grass existed, and it did in the form of domesticated cattle, then depletion of the bison was not necessarily wasteful. Open access can also lead to dissipation of rents through the excessive use of resources in harvesting. But it does not appear that there was a substantial waste of resources in the harvesting activity itself. Finally, if there is a lag between the presence of a less efficient method of harvesting grass (bison) and a more efficient converter of grass to meat that can also represent resource waste. Data is presented on the lag between the elimination of the large bison herds and the introduction of cattle.

Of course there is still the question of the amenity (non-consumptive) value of bison. That issue is also dealt with in the last part of the article.

Keywords: Tragedy of the Commons, Bison