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 fishes of the seas, especially
those that migrate such as whales or may be found beyond any nation's territory
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. Over
fishing 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. 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 gold, 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 time 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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