The Tragedy of the Commons and the Myth of a Private Property Solution

Abstract

The central question of environmental law is how much? How pollution should we emit into air and water? How resource exploitation should we engage in? While for other how much questions our society tends to rely (at least in theory) on market, when it comes to environmental harms, tragedy of commons frequently causes market to fail - that is, to get how much question wrong. According to generally accepted wisdom, there are two potential solutions to tragedy of commons: 1) government regulation, or 2) privatization. When U.S. environmental movement began in 1970s, government regulation seemed obvious choice. But in recent years, intellectual fashions have changed, and has become preferred solution. The solution, however, is a myth that exists, if at all, only in a world of theory.Government regulation and can usefully be distinguished from each other based on who answers how much question. Under former, government answers how much question, and under latter, market answers it. The privatization to tragedy of commons really conflates two distinct solutions. The first - the private property - involves dividing commons up into private parcels of property in such a way that there are no remaining spillover effects or externalities between parcels. In this scenario, tragedy is solved because each individual owner bears full costs and benefits of her individual decisions (externalities are internalized.) The second solution - the market requires that transaction costs be eliminated or minimized so that spillover effects across property boundaries will be reduced to optimal levels through Coasian bargaining. None of regimes commonly cited as examples of solution to tragedy of commons actually are. In some instances, mistake is conceptual. Environmental trading markets and water markets are often mischaracterized as solutions when in fact they rely on government to answer how much question. In other instances, mistake occurs in application of theoretical concept to circumstances likely to exist in real world. Thus, proposed regimes involving land, oceans, and wildlife could conceivably meet conditions for private property or market solutions in a theoretical world, but dynamics of ecological degradation are such that it is impossible for those idealized conditions to be met, or even reasonably approximated, in real world.