The concept of the tragedy of the commons
What is the tragedy of the commons? What does it have to do with modern-day problems of traffic or road congestion?
Imagine a common ground for pasture. It is called the commons because anyone can come and use it, on the theory that all own the commons, which also means that nobody owns it in the sense of having the right to prevent another from using it. In short, the commons is not private property.
When nobody owns the pasture land, farmers can bring in their cows without paying anybody for the right to graze their cattle. Each farmer believes there is enough grass to go around, and in fact there is no problem if the land is big enough.
The problem is that when a good is free, it attracts use. More and more farmers come in. Eventually, there comes a point when the commons ground is no longer large enough. The grass gets depleted, the cows starve, and the farmers end up pointing fingers at each other. This ending is known as the “tragedy of the commons.”
The farmers can solve the problem only by realizing a basic lesson of economics: there is no free lunch. There is an opportunity cost every time one cow eats the grass. There is less grass for the next cow, but this cost is not taken into account by the farmer who thinks the grass is free.
What happens if we “privatize” the commons by establishing property rights to land? If you own the land, you realize that putting in one more cow in your own land affects your other cows, and you will naturally seek your maximum profit. The most efficient ranchers will buy more land or rent it from others, while the less efficient ranchers will drop out. What happens is that when farmers can own and buy/sell land, they automatically avoid the tragedy of the commons. Their cows no longer starve!
The tragedy applied to road traffic
Another tragedy of the commons is road congestion in many small cities like Dumaguete. It seems that the problem is concentrated in pedicab traffic (although car traffic also contributes). The story is essentially the same if you replace the farmers with pedicab drivers, and the commons grounds with the local road network.
Because roads are viewed as a free common resource, everyone is free to buy and deploy a pedicab thinking he can make good money at it. It works if there aren’t too many pedicabs, but eventually, as in the case of a commons pasture, there are too many pedicabs that overuse the road and generate too much traffic.
How do you solve the traffic tragedy? The standard solution is to impose a user fee that would limit the number of road users, in the same way that privatizing the pasture land would limit the overgrazing and result in fat cows.
What is wrong with the privatization or user fee solution?
One, those already on the commons (farmers or pedicab drivers) may feel they have “acquired rights” that cannot now be arbitrarily taken away.
Two, pedicab drivers may not be convinced that if there were fewer of them, their total income would be higher, so that in theory, those who drop out can be compensated from the higher earnings of those who stay. It seems difficult to imagine how one could compensate for the “lost” income of an individual pedicab driver.
There seems to be no easy ways to overcome objections to user fees. Most experts suggest that a tedious process of dialogue and negotiation is necessary if there is a “political” dimension to the problem.
A franchise buyback solution
There is, however, a “market test” solution that could be suggested, and that is for the city to “buy back” some franchises as a means of decongesting the road network.
The solution is based on the fact that there is a market value to a franchise or license to operate a pedicab. Assume that in the beginning the city gave it away, for free. At first, only a few will “buy” a license, but in the end we have too many licenses because the price set for “selling” the license is zero.
How might the city estimate the market value of a pedicab franchise? The market value rule is well settled: it is the price at which a pedicab operator, not forced to buy or sell his franchise, would willingly buy or sell it. Such a price could be determined by a public bidding.
Suppose that at the present level of “tragedy”, the value of a franchise is P20,000. In other words, a pedicab driver will agree to go out of the business if you pay him P20,000; another pedicab driver will also agree to buy the franchise for the same price. Any one who complains that the city is driving poor drivers out of business can no longer make such a complaint: after all, he who complains can always sell his franchise, at the market price. And he who stays is happy.
It will look like the city “lost” money, because it will have to appropriate funds to buy back some of the franchises. However, the community as a whole would be ahead because the traffic problem would be solved.
Note that we could make a mistake by buying too many franchises, in which case the market price of the franchise would be too high and there would be too few pedicabs, too little traffic, and now the complainants would be the public who want to ride pedicabs! The mistake can be fixed by this time selling more franchises.
An expert has formulated a not-so-well-known law of traffic. Downs’ Law says that if you have a traffic problem, and you solve it by expanding the size of the road, the traffic problem will return. By now, we realize that Downs’ Law is a straightforward application of the lesson from the tragedy of the commons. If you have a tragedy with a small pasture, and you enlarge that pasture, you simply invite a larger tragedy in the near future.
The alternatives for most city planners are to some extent fairly simple. Cities could widen roads, which is very expensive. Alternatively, they could recognize the tragedy of the commons aspect and impose user fees. In cities without pedicabs, the user fees take the form of parking fees, or where feasible, road use fees (as in Singapore).
The buyback scheme is a form of user fee. If we had thought about it in the first place, we would have set for public bidding the franchises for pedicabs. Having given it away already, we could bite the bullet and buy some franchises back and introduce some sanity to the rush hour traffic.
Finally, car traffic is also a problem, and as noted, in cities without pedicab traffic, the tragedy of traffic is solved by imposing parking fees (Hong Kong, Singapore, Boston, New York). The parking fee can be “privatized” if the city bans parking on congested streets, in which case, there would be an incentive for private landowners to set up parking lot businesses. The city could also operate parking lots. If the goal is to discourage car traffic to some extent, then the city could simply sell annual parking stickers. A car without a sticker would be subject to a fine or fee each time it parks on a public road or street. A parking fee is also equitable: after all, a car also takes up valuable road space.
It is also possible to imagine that receipts from parking stickers can finance part of the pedicab franchise buyback scheme.
Downs, Anthony, 1992. Stuck in Traffic: Coping with Peak-hour Traffic Congestion. Washington, D.C.: Brookings Institution.
Hardin, Garrett, 1968. “The Tragedy of the Commons,” Science, pp. 1243-1248.