Tragedy of the commons

Over at Slate Star Codex the recent long, rambling, fascinating post Meditations on Moloch offers us this:

The fish farming story from my Non-Libertarian FAQ 2.0:

As a thought experiment, let’s consider aquaculture (fish farming) in a lake. Imagine a lake with a thousand identical fish farms owned by a thousand competing companies. Each fish farm earns a profit of ^$1000/month. For a while, all is well. But each fish farm produces waste, which fouls the water in the lake. Let’s say each fish farm produces enough pollution to lower productivity in the lake by ^$1/month.

A thousand fish farms produce enough waste to lower productivity by ^$1000/month, meaning none of the fish farms are making any money. Capitalism to the rescue: someone invents a complex filtering system that removes waste products. It costs ^$300/month to operate. All fish farms voluntarily install it, the pollution ends, and the fish farms are now making a profit of ^$700/month — still a respectable sum.

But one farmer (let’s call him Steve) gets tired of spending the money to operate his filter. Now one fish farm worth of waste is polluting the lake, lowering productivity by ^$1. Steve earns ^$999 profit, and everyone else earns ^$699 profit.

Everyone else sees Steve is much more profitable than they are, because he’s not spending the maintenance costs on his filter. They disconnect their filters too.

Once four hundred people disconnect their filters, Steve is earning ^$600/month — less than he would be if he and everyone else had kept their filters on! And the poor virtuous filter users are only making ^$300. Steve goes around to everyone, saying “Wait! We all need to make a voluntary pact to use filters! Otherwise, everyone’s productivity goes down.”

Everyone agrees with him, and they all sign the Filter Pact, except one person who is sort of a jerk. Let’s call him Mike. Now everyone is back using filters again, except Mike. Mike earns ^$999/month, and everyone else earns ^$699/month. Slowly, people start thinking they too should be getting big bucks like Mike, and disconnect their filter for ^$300 extra profit…

A self-interested person never has any incentive to use a filter. A self-interested person has some incentive to sign a pact to make everyone use a filter, but in many cases has a stronger incentive to wait for everyone else to sign such a pact but opt out himself. This can lead to an undesirable equilibrium in which no one will sign such a pact.

The more I think about it, the more I feel like this is the core of my objection to libertarianism, and that Non-Libertarian FAQ 3.0 will just be this one example copy-pasted two hundred times. From a god’s-eye-view, we can say that polluting the lake leads to bad consequences. From within the system, no individual can prevent the lake from being polluted, and buying a filter might not be such a good idea.

Both the Non-Libertarian FAQ and Meditations on Moloch are worth your time. But this little bit seems particularly handy to keep handy.

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Update: Adding another example, Richard Mayhew's Vaccines and Free Riders at Balloon Juice.

... it looks like anti-vaccination will be yet another litmus test used to determine who today is a True Conservative™ and who is a squish. Why? I think it might have something to do with how vaccines solve collective action problems and how the right does not like to recognize that these problems exist as a class.

....

We have seen that the conservatives in America have two reactions to the concept of collective action problems. The first is that responsibility is for suckers. There is an embracing of free riding and running down the collective commons as that is the individually rational thing to do, and St. Rand in her Commentaries preached that only individual interest matters. Fuck society.

The second is a bit more sophisticated argument that if we as a society value a positive externality, then there has to be some set of welfare raising side payments and agreements that can be made between people who want high vaccination rates and effective herd immunity and those who want to opt-out. It is coercive and therefore unjust to mandate vaccination without a really good reason (where hurt fee fees are not a good reason). Fuck Coase.