The "Commons" paradox goes away when a person is directly rewarded (rather than indirectly as a member of the group) or punished by their actions. The strategy would be to delete or minimize the "group" component in the cost/benefit equation. That this is not always possible is recognized.
A simple example that would solve the classic "Tragedy of the Commons" would be to parcel the common pasture up into smaller privately owned parcels. Often -- as in this case -- privatizing will result in a loss of economic efficiency. If you doubt that, consider the scenario in which we all build our own roads!
The essay, "The Meaning of Privatization" by Paul Starr provides a detailed discussion on the concept of privatization.
The concept of privatization is a major component of libertarian philosophy. While I concur that we should privatize to the extent that is possible and practical, I do not agree that all public goods can be privatized. Therefore the problem remains. It does not seem practical to privatize the oceans, the radio spectrum, all roads, major waterways, and guaranteed rights/freedom, for a few examples. Consider the levees on the Mississippi river: how do you privatize the benefits from the control of flooding?
Another problem with privatization is the little discussed problem of enforcement of contracts. It is the nature of humans that there will be disputes over property and usage. Do we settle the problems as they did in the old West with guns and violence? One problem with that approach is that the strongest force -- not necessarily the rightful party -- will win out. Since a strong force has a tendency to just get stronger as it amasses more resources, there is a good possibility that we could end up with a loss of all freedoms and property to a dictatorship.
For an opinion on how contracts might be enforced and violations punished, see the essay on "The Economics of Non-State Legal Systems", by Bryan Caplan included on his page of Preliminary Dissertation papers.
As discussed above, we have few problems with the freerider aspect of the VP when everyone in the group knows each other. Further details on the effect of making the groups smaller are discussed by Glance and Huberman; "Dynamics of social dilemmas". Scientific American. March, 1994 (See their page on Dynamics for some of their simulation results)
The concept is simple: we know that certain forms of cooperation between the individuals would result in benefits for everyone. We also know that, left to voluntary actions, we will defect, losing these many benefits and worse. A rational approach to solving this problem would be to agree to mutual coercion -- some form of government. Of course this is just an idealistic theory and possibly a rationalization in that governments are rarely, if ever, formed this way. Even if it were formed on the basis of mutual agreement, since the government has the power to coerce, it will quickly and inevibly give itself far more powers than the original agreement allowed -- as can be seen by examining the U. S. government. Russell Hardin has more to say about this and other related issues in his essay, "Rationally Justifying Political Coercion", Journal of Philosophical Research, Vol. XV, 1989-90.
Most activist groups use the government to enforce cooperation when it is obvious that voluntary cooperation will not do the job. An extensive discussion of how the government becomes the tool of activists for causes that the group would not support is given in the book, Hardin, Russell, Collective Action, Johns Hopkins University Press, Baltimore, 1982.
Environmental groups know that there is little chance of successful environmental voluntary action by the population due to the VP phenomenon. So they have the government enforce their beliefs.
Those that would provide culture to the masses know that the masses would not support this by any voluntary sacrifice. So they use the force of law to give the masses what they "need".
Religions have been quite effective in inducing people into cooperating and acting in the group's best interests. However, religion's technique of increasing the reward and/or punishment by promising an afterlife is not easy for many to accept. The force of religion as a means of invoking cooperation seems to be declining as the population has become more educated and "world-wise".
The news media and the educational establishment has been quite effective in seducing members of society into "doing the right thing". The enormous guilt that many people feel if they don't throw their aluminum can in the recyclable bin is a testimony of the power of propaganda.
The disadvantage is that propaganda can be misdirected. Examples are too numerous to mention in this limited space!
But the problem is not just with invoking government. No the second-order dilemmas are a general problem resulting from any effort to solve the primary dilemma -- as Dr. Ostrom suggests. Consider a straightforward voluntary group effort to solve the freerider problem (page 78 of Pathologies of Rational Choice Theory). Let us say the group says, "We don't need government -- we will take care of the defectors ourselves! That will cure the freerider problem." Sure. Now imagine you are part of this group and you notice this big ugly character doing a considerable amount of free-riding while consuming more than his share of the public goods. What do you do? Well you have basically two choices. Rat on him or not. The consequences of ratting are that you may get the hell beat out of you which, translated to Rational Choice terms, means your personal loss is greater than the reward you will get from being a member of the group. Or you could just let it slide.
The classic social dilemma! So, in an attempt to solve the primary social dilemma, we just created another one -- and we didn't have any help from a government.
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