6.4 Collective Action Problems: The Problem of Incentives

The Tragedy of the Commons⁶⁰

The world’s resources are finite. In southern Africa in the 20th century, overhunting nearly led to the extinction of the black rhino.⁶¹ Many types of fish—including tuna, cod, and halibut, among others—are being pulled out of the ocean at commercially unsustainable levels.⁶² The climate is changing because humans are in effect using up the atmosphere’s capacity to absorb greenhouse gases.⁶³

Whenever there is a resource that anyone within a group can tap, or exploit, that resource is a “commons.” Regarding fish and fishing, the oceans have been a commons. If anyone can withdraw water from a river, that river is a commons; likewise, if anyone can emit air pollution, the atmosphere is a commons.

Figure 6.12 Commercial fishing of tuna and other species can lead to a tragedy of the commons. (credit: “Tuna fish” by Motaz Altahir/Flickr, Public Domain)

In each of these cases, the same principle dominates. If anyone has access to the commons—whether that resource is the rhino grazing in Africa, the tuna swimming in the northern Atlantic, or the atmosphere—and that resource is scarce, then every individual has an incentive not only to take what they need but also to take as much as they want. Individuals have this incentive because they can sell this scarce resource (rhino horns, tuna fish) or because they benefit today without consideration of future consequences. If everyone took only what they needed, some renewable resources could become replenished. But if everyone has the incentive to take as much as they can, pretty soon those resources will be depleted. No one can access a resource that has been depleted. If everyone had shared, there may well have been enough to meet everyone’s long-term needs. In the paradox of the tragedy of the commons, those who seek to hoard resources ultimately have less even for themselves.

Bluefin tuna, highly valued for its use in sushi, carries a high price, and so commercial fisheries have strong incentives to catch as many of them as they can. Between the 1970s and the early 2000s, the Atlantic population of bluefins declined by an estimated 80 percent due to overfishing, and scientists warned that the species faced extinction unless the tragedy of the commons was averted.⁶⁴ Though tuna became extinct in the Black Sea, primarily due to overfishing and other environmental pressures, strictly enforced catch quotas helped avert the tragedy in the Atlantic.⁶⁵ Sadly, there are numerous other examples, such as overfishing in places like China and Chile, the depletion of freshwater resources in places like Australia and Saudi Arabia, and worsening traffic congestion in places like Los Angeles and Cairo, as roads are a scarce resource that can be overconsumed.

Global climate change is perhaps the most pressing example of the tragedy of the commons.⁶⁶ Tragedies of the commons could be prevented if everyone—especially those who take the most, whether individuals or countries—took less, but no single person or country has the incentive to do so.

The Free Rider Problem

At some point you have probably been asked to work on group assignments. You might have asked yourself how much effort you wanted to devote to this team activity. Whether you worked like crazy or did nothing at all, you would get the same grade as everyone else in the group (though of course doing nothing would mean you’d have no control over what that grade might be).

So what would you do? The selfish and strategic (or lazy) individual might well say: I’ll do as little as possible. This behavior—accepting a benefit without contributing to its achievement—is an example of the free rider problem. If every member of the group thinks the same way, no work will get done, and your group will receive a well-earned failing grade. Paradoxically, the group as a whole has incentives to work together to obtain their goal, but the individual members of the group do not.

In small groups, it is fairly easy to identify and control free riding through mutual peer pressure and the belief that failing to contribute might actually hurt the team’s grade. But in the political world most groups are much larger, and free riding is much more difficult to spot and manage.

The logic of free riding creates enormous barriers to political change and complicates efforts to resolve policy problems.⁶⁷ Political change is difficult to achieve, given its tendency to favor the status quo. It requires the willingness of political actors like individuals, groups, and parties to devote the time, effort, and other resources sufficient to effect change.

Again, climate change provides a useful example. It poses potentially existential threats to the global community. In the past few years, climate change has contributed to extraordinary bushfires in Australia; floods in Indonesia, India, and Europe; and heat waves in the Pacific Northwest and Siberia. These more frequent and intense droughts, storms, and heat waves; rising sea levels; and warming ocean temperatures are wreaking havoc on agriculture, public health, and social stability. Given these threats, it would seem that policy makers around the world would have sufficient incentive to work together to prevent worsening global climate change.

Yet, they have not, at least not in ways that have actually led countries to meet their climate change commitments. From the perspective of any individual country’s leaders, climate change is occurring whether or not their country makes any changes or sacrifices. As responding effectively requires changing the status quo, each country’s political leaders may decide to support change rhetorically but not in practice. The Paris Climate Accord of 2015, the agreement of 197 countries to limit global warming, called for countries to take actions to limit average global temperatures to a rise of 1.5 degrees Celsius.⁶⁸ Unfortunately, only a few countries, including Morocco, The Gambia, and possibly India, have taken the steps necessary to do their part. The United States, Russia, and many other countries are “barely trying.”⁶⁹ Facing an existential crisis, most countries have not stopped free riding. Still, there is reason for hope: free riding can be limited.

To suggest that climate change politics are only a matter of free riding would be an oversimplification. Each country has its own political dynamics, and its political leaders face internal pressures and international ambitions. Poorer countries have produced fewer greenhouse gases than richer countries—economic development has been closely linked to the use of the fossil fuels,⁷⁰ and so these countries argue that they have the right to continue the economic development linked to climate emissions. Richer countries pollute much more per person than poorer countries, and they often find it difficult to break a status quo that favors continued greenhouse gas emissions. True progress on combating climate change will continue to be challenging as long as each country has incentives to free ride on attempts to reduce global climate change.

The Prisoner’s Dilemma

Imagine this scenario. The police apprehend two individuals they suspect of committing an armed robbery. They have evidence that both suspects are guilty of carrying an unlawful weapon, and though they strongly suspect at least one of the two individuals has committed the more serious crime of armed robbery, they have no direct evidence to back up their suspicions.

The police separate the suspects so that they cannot communicate with each other, and then they tell each suspect: We know that one of you is guilty of the robbery, but we don’t know which one. We can prove you are guilty of the weapons charge, so if we can’t find out who is guilty of the robbery, then both of you are going to prison for one year on the weapons charge. However, if you inform on your accomplice (political scientists call this “defecting”; if you do not give away your accomplice, you are said to be “cooperating”—with your fellow suspect, not with the police), we’ll drop the weapons charge, you’ll be released, and your guilty accomplice will serve an eight-year sentence. If you blame each other, we still won’t know which of you actually committed the crime, so you both will be convicted of being an accessory to armed robbery, with a sentence of five years.⁷¹

Based on this scenario, both suspects would be better off if they remained silent: they would each receive a relatively minimal one-year sentence. You can see the other possible outcomes in Table 6.1.

No matter what Person B thinks Person A will do, Person B is better off accusing them. And Person A has the same incentives: no matter what Person B does, Person A has good reasons to accuse Person B. If both people remained silent, they would serve a total of two years in prison. If one accuses the other and the other remains silent, the total prison time would be eight years. If each accuses the other, they will spend a total of 10 years in prison. The “socially” best outcome—if that is defined as the outcome with the minimum total prison time—is for both of the accused to remain silent. However, as each individual has a strong incentive to claim the other is guilty, the predicted outcome is the worst outcome, with 10 total years of prison time. This is the prisoner’s dilemma: individuals, acting strategically in their own self-interest, have incentives that lead them to take actions that result in unnecessarily negative outcomes for both parties.

There are many real-life examples of prisoner’s dilemmas in politics. Two opposing political candidates may each prefer to run only positive campaign ads, but each fears the other will “go negative” to gain an advantage. Both candidates consequently run negative ads, which tarnish the reputations of each. When tensions rise between two countries over a border dispute, each country may feel pressure to strike first. The country that strikes first may gain an advantage over the country that does not.