Creating the Commons: A Tragedy in No Acts

Two articles in The New York Times today got me thinking about the tragedy of the commons. This is not new thinking, but it’s not widespread enough, in my opinion. And, I hope this expresses it in a somewhat new way.

One of the articles talks about the ongoing failure of pharmaceutical companies to develop new antibiotics to replace the increasingly ineffective drugs in our collective arsenal. The second describes a newly developed T-cell treatment for leukemia that really has to be described as a miracle treatment (at least in some cases).

Both made me realize what’s wrong with the standard Tragedy of the Commons thought-experiment, at least as it is commonly deployed by less-thoughtful libertarians.

In its standard form: many sheep farmers share a common pasture. Each has every incentive to add more sheep, so inevitably, the commons is consumed and destroyed.

The standard (at least libertarian) solution is to privatize the commons — split it up among the farmers and give them each property rights on their share. They’ll each have incentive to use and maintain the land judiciously.

But like most (all?) economic thought experiments, this one rests on an assumption: that the amount of land — the quantity of commons — is fixed.

And that ignores a crucial reality of the larger economic world: we — individually and collectively — are constantly creating the commons. If there are no roads on which the farmers can get their wool to market, they have no incentive to produce that wool. (And no: they “didn’t build” those roads.) Some complement of common goods is necessary for the private incentives to emerge and be maximized.

This points to the other tragedy: none of those individual farmers has the incentive to build roads — to create the commons — unless they’re guaranteed to profit (at least semi-)exclusively from those roads. So the commons doesn’t get built.

I think everyone would agree that we’d all be better off (more well-being, more “prosperity”) if anyone could produce and sell the (nonexistent) new antibiotics, and offer the T-cell therapy — if those things were part of the “commons” the way Newton’s Laws, the germ theory of disease, and word-processing are. But: The antibiotics article explains in simple supply/demand/profit terms why the institutions called “drug companies” don’t have an incentive to create new, tightly targeted antibiotics (so the people who work for them don’t either). The T-cell article explains why their current business model doesn’t work when developing cures that can’t be produced in mass quantities in factories — so, no incentive.

So not only are these things not part of the commons, they aren’t even created (or not as prolifically as we would like). The market doesn’t provide the proper incentives.

Libertarians seem to be woefully blind to this tragedy.

My friend Steve is constantly saying “it’s about incentives, not motives.”* But this ignores the fact that we can agree collectively on virtuous motives and goals that make us all better off. (And we do so — really have no choice but to do so — and have for millenia.) We can collectively create, empower, and fund institutions in which people are individually incentivized to adopt those motives, and seek those goals. (And we do so, and we have for millenia.) Few people will spend decades of their lives creating new life-saving therapies absent institutions that pay them to do so. (Financial incentives matter!) And we’ve already seen that the private market doesn’t “naturally” or necessarily result in the creation of such institutions. If it did, we’d have new antibiotics coming online in spades. We don’t. There is, however, a wide variety of Gangnam Style t-shirts available.

The two NYT articles point to several ways (which I will leave to your delectation) in which we overcome this inherent, inevitable market failure and collectively fund things like new antibiotics and T-cell therapies. Some of the impetus comes from private charities. Some from government funding. Both are driven by “motives” — to develope life-saving cures — not individual financial incentives. (Though the institutions do provide financial incentives to individuals to adopt the goals that those motives imply.) Both often seek to harness and realign market incentives to implement their motives and achieve their goals.

Yes, in many cases government “picks [potential] winners.” Think: NIH funding grants. (And one hopes that entities such as the NIH do some “central planning” before throwing grants around.)

Returning to the thrust of this post: you might say that those new discoveries end up being offered by private entities, for a price — and individuals are free to choose among the available offerings. They’re not part of “the commons.” But that ignores another reality: the set of available choices is itself part of the commons. Absent the original government funding, many valuable choices would not be available. (Like, for instance, the option of shipping your goods to market via the interstate highway system.)

This reality is revealed if you read the literature on utility, choices, and preferences. While much of that literature concentrates on preferences among available choices and the ordinal utility ranking of those preferences,** those who have thought carefully on the subject (mainstream economists, by the way) have pointed out that different sets of choices themselves have different amounts of utility. We decide collectively what choices will be available, even if our decision is not to decide — to leave the decision to “the market.” But that’s all a subject for another post.

Steven Pinker and E. O. Wilson — two of the most profound and scientifically-based thinkers we’ve got on the subject of human nature and the human condition — bring this point home. Pinker has said on numerous occasions that three primary things set humans apart from other animals: tool use, language, and non-kin altruism. Those are the things that got us not only to the top of the food chain, but to a position of complete speci-al hegemony.

Wilson takes it further (see: The Social Conquest of Earth). Group selection based on collective altruism, or “eusociality” — our singular ability to agree on future collective plans, and implement those plans even in opposition to apparent short-term individual incentives — is the very thing that’s gotten us where we are.

Together — by acting on motives instead of just individual (financial) incentives — over the millenia we’ve created a very, very big commons that we all “profit” from in multitudinous ways. If we’re smart, we can continue to build it, rather than watching it waste away through our short-sighted individual (in)actions.

* By this he generally seems to mean financial incentives (though he’s not consistent on this), which — when’s that is his meaning — completely ignores a huge panoply of incredibly powerful human incentives, many of them coalescing around various valences of “pride.”

** The bulk of this discussion, in my opinion, constitutes a centuries-long self-serving circle-jerk by economists (yes, the intellectually masturbatory and show-off motives are significant), with a primary but largely unconscious goal of defending, preserving, and increasing the wealth of incumbent wealth holders like themselves.

Cross-posted at Asymptosis.

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