The Tragedy of the Commons

Forbes’ article The Tragedy Of The Commons by Nobel Laureate Daniel McFadden starts out with the simple but articulate explanation of “the tragedy of the commons” that I’ve long looked for, then moves to a sold analysis of how this situation plays out with online content and services, but cops out in the end by not offering a long-term solution.

For those of you not familiar with the Tragedy of the Commons, I take the liberty of copying McFadden’s explanation:

Immigrants to New England in the 17th century formed villages in which they had privately owned homesteads and gardens, but they also set aside community-owned pastures, called commons, where all of the villagers’ livestock could graze. Settlers had an incentive to avoid overuse of their private lands, so they would remain productive in the future. However, this self-interested stewardship of private lands did not extend to the commons. As a result, the commons were overgrazed and degenerated to the point that they were no longer able to support the villagers’ cattle. This failure of private incentives to provide adequate maintenance of public resources is known to economists as “the tragedy of the commons.”

McFadden goes on to discuss various options for how content and service providers are going to get paid enough to induce them to put quality content online. The arguments against the four alternatives he lays out (ads, paid via ISP, paid via monopoly, paid via PBS style organization) are solid. But just when you expect an “aha moment” he copes out with this:

The solutions that resolve the problem of the digital commons are likely to be ingenious ways to collect money from consumers with little noticeable pain, and these should facilitate the operation of the Internet as a market for goods and services. Just don’t expect it to be free.

So, is this a fifth model — user pays via micropayments — that he has not fully analyzed, or is it a hope that someone will come up with a way of making the first four models work? An insightful analysis of the value of micropayment models is much needed to round this out.

And of course, it goes without saying that my access to his article was made possible by the fine people at IBM who had banners all over the pages I read.