Economics by Labs: the Tragedy of the Commons
All food must go to the lab for testing.
It’s an internet joke that makes me smile every time I see it. It shows up on cards, tea towels, and, of course, handkerchiefs meant to be worn by dogs.
I must admit, I am biased. I grew up with a labrador: Nic. He was a great partner in crime. But one of the first things my parents taught me about Nic was, in fact, that NO FOOD goes to him for testing. When I was old enough, one of the first chores was carefully measuring and giving Nic’s his meals. My parents carefully explained why that job was important.
“Labradors are not self-feeders. They will eat and eat and eat until they make themselves sick. We don’t want Nic to get sick.”
I grew up with a labrador: Nic. He was a great partner in crime growing up.
As I grew older, I did some more research. It turns out Labradors have a mutation in a specific gene (the POMC gene) that disrupts appetite regulation. This mutation renders them unable to recognize they are full, even after they just ate. For this reason, any vet will tell you to give a labrador careful portions, like my parents taught me.
Humans and GLP-1’s
Just like certain dogs are genetically programed to always think they’re hungry, we’re learning that for many people, appetite regulation is less about willpower and more about biology. It’s a shift that’s reshaping how we think about health and human behavior.
Ozempic, Wygovey, and a host of other medications are part of a family of drugs called “GLP-1 receptor agonists.” As Wikipedia explains: “They mimic the actions of the endogenous incretin hormone GLP-1, which is released by the gut after eating.”
(Article from the Mayo Clinic here for those who would be interested in reading more.)
These drugs have changed the conversation around overeating. If part of our evolution was about surviving food scarcity by overeating during times of plenty, the ability for humans to create a consistent and abundant food supply has been one of the major accomplishments of science, agriculture, and, of course, economics. But our genetics haven’t caught up. The result is what was once an asset can now feel like a liability. Unlike our ancestors, we now have pharmaceutical tools that can help.
The assumptions we make about human nature, incentives, and tools we can use to make a better future goes straight to the heart of economics. Let’s look Garrett Hardin’s famous theory: The Tragedy of the Commons.
Is the Tragedy of the Commons Human Nature?
What I find interesting about Garrett Hardin, an ecologist, is that he was making a statement about human nature in his essay “Tragedy of the Commons”. The headline: it is human nature is to systematically overconsume. Specifically, absent rules or limits, Hardin’s hypothesis was that individuals will overuse shared resources again and again, even if it leads to ecological ruin.
“Each man is locked into a system that compels him to increase his herd without limit – in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in the commons brings ruin to all.”
Tragic Examples
Hardin used an example common in the 1860s of cattle farmers grazing on shared land. This was borrowed from William Forster Lloyd in his pamphlet "Two Lectures on the Checks to Population". I’m going to add examples that I find easier to understand, specifically logging and fishing.
Examples of Common Resources
In all 3 examples individuals (cattle herders, loggers, fisheries) are incentivized to overconsume, or to use more and more of the shared resource, especially more than their competition. This is a lot like staring across the table at your sibling while you’re stuffing your face with Lucky Charms (read more about that in Economics by Lucky Charms). This competition becomes a kind of game: who can chew up the most grass, who can log the forest the fastest, or who can pull the most fish out of the sea.
But overconsumption is unsustainable. This game only lasts as long as nature can support it: only so much grass grows in a year, forests take years if not decades to regrow, and fish take time to make new fish.
Some economists, like Ronald Coase, might argue that the problem is clear property rights. Give a certain plot of land to each cattle rancher and a certain amount of forest to each logger. Let the individual actors argue out the rest. Done and dusted.
This could work for resources that are rooted to the earth, like grass and trees. But one hole in Coase's theory is eloquently put in a story my dad read to me when I was young: Danny Champion of the World, by Roald Dahl. In short, you can’t carve up diverse ecological resources easily. Danny’s father uses an example of a fishing stream.
Father: Once a trout or a salmon has swum out of your stretch of the river into somebody else’s, you can’t very well say, ‘Hey, that’s mine. I want it back,’ can you?
Danny: Of course not, but I didn’t know it was like that with pheasants.
Father: It’s the same with all game. Hare, deer, partridge, grouse. You name it.
- Danny, the Champion of the World By Roald Dahl (get it from your library or a PDF here)
Math, Monopolies, Mackerel & Mismanagement: Maximum Sustainable Yield
The best explanation of the mathematical theory behind the tragedy of the commons comes from Scotland. I’ll highlight the high points, feel free to dive into how they manage fishing here.
The grey curve is productivity. It shows the relationship between how much time we humans spend fishing and the amount of fish caught.
Maximum Sustainable Yield (MSY at the top of the curve) - is our tipping point. To the left of that point is sustainable fishing, the the right means we’re over-harvesting fish.
As you move from far left (almost no fishing) to the far right (overfishing) two things happen.
At first: the more we fish the more we get, until we hit that tipping point.
Once we cross the tipping point the opposite is true. The more we fish the less we get.
Even worse, if we overfish year over year not only will fisheries have to spend more and more time at sea, but there is less and less fish to repopulate. Eventually: ecological and economic collapse.
Two economic observations
Imagine all the fishable seas were owned by a monopoly. How much fish would we catch? The answer is the first yellow dot, Maximum Economic Yield. Monopolies under-produce. This not only keeps their costs down (time spent fishing), but it maximizes the price per fish.
A good analogy here is De Beers and diamonds. De Beers could produce a lot more diamonds, but they don’t. Underproduction keeps prices high and resources intact. With fish, the effect is the same: fewer trips, higher margins, and a surprisingly sustainable outcome.
Therefore, if your only concern is sustainable fishing, monopoly isn’t a bad solution. Humanity catches fish at a rate well below the tipping point, and fish reproduce sustainably.
Yield without Regulation: This third dot illustrates the tragedy of the commons. Introduce competition between fisheries and, yes, prices for fish will come down for consumers. However, year over year, humanity overfishes, bleeding the sea dry. This is a bit simplified, but it’s what Hardin argues is our inevitable fate as humans.
Note: A lot of the credit of putting mathematics behind Hardin’s work is attributable to William Forster Lloyd.
Conclusion: Is overconsuming human nature?
We were a family of walkers growing up: partially because of the dogs (Nic, then Star, then Chaos and now Taz and Scotch), partially because we lived in neighborhoods with great parks and safe streets, and partially, I think, because it was in our nature.
Growing up, our family went on many walks together and I noticed something my parents did.
If they ran into trash along our path, empty bottles, fast food bags, or advertisements blowing in the wind. They would silently pick it up and carry it to the nearest trash can. Even if it was a bit dangerous to pick up, like a broken beer bottle.
There was no instruction, nor complaints that I remember, nor any display of superior morality that seems so common these days.
It felt like an extension of what I’d been taught about caring for labradors as a child. These creatures, and nature, have been placed in our care. In spiritual terms: this is our garden, we tend to it.
The fact that there was no instruction, no loud complaints about trashy neighbors, or highfalutin speeches made the act all the more powerful. It gave me some hope that, like my propensity to over consume Lucky Charms, I might have some of these good instincts built into me as well, maybe even in humanity. Even today as I go for walks, or take the kids in the park I pick up litter as I go.
If you’re a little disheartened by the tragedy of the commons, or the philosophy that we’re doomed to overconsume until ruin, hopefully a little reflection on the behaviors of those you love or the non-incentivized kindness of strangers can give you some hope.
And fear not, if you like your hope in the form of economic theory, it is coming. Hope’s light is carried by the first woman to win the Nobel Prize for economics. She finds that the tragedy of the commons is just one way humans choose to do things. Maybe, there is a good reason to hope after all.
Her work will be the subject of next week’s post. In the meantime, all food may need to go to the lab for testing, just make sure the portions are right sized.
I’ll end with a cute picture of my golden retriever trying to convince my daughter that all food needs to go to him.
Quint will be featured in our next installment. He reminds you sign up to get an email.