This is the third installment of my series on explaining problems in international development through game theory. In this post I will explain my favorite concept from the world of economics, ‘The Tragedy of the Commons’, and how it relates to the very tricky subject of property rights in a post-conflict situation. I will also cover the difference between a sequential move game and a simultaneous move game.
As before, I am warning anyone new to the cmuinliberia2010 blog that this post represents some of the driest and most academic writing here and that if you want to read something ‘fun’ (or in the Victorian English ‘droll’) I suggest scrolling down past this post immediately.
Now then, The Tragedy of the Commons is about sheep and common grazing land. The commons is an area of grass that several sheep owning families all claim equal ownership over, it’s common land. All of the families have sheep and all of the families use the commons to feed their sheep.
Let’s imagine things are in equilibrium. All of the families are poor but happy (or not miserable anyway) and are kind of like serfs tied to their land. Nobody tries to sell more sheep than their neighbor. Nobody works harder than they have to because there’s no point, any extra profit would go to the landlord anyway. Suddenly, however, the serfs are all freed from their contracts to the landlord and now may reap the benefits of their labor by making money. The profit motive arises. But, even though the concepts of private ownership and profit motive have been introduced into this system the old system of common land persists. Now the system is in disequilibrium, the eloquent Tragedy of the Commons explains why.
(Paraphrasing) Each family has the ability to purchase more sheep, grow more sheep, and make more money. But the land has its limits; if every family starts grazing more sheep at the same time the land will become over-used. So the individual has a choice, to graze more sheep or to maintain the status quo of no new sheep. If the land is over-grazed there won’t be enough food for any of the sheep, the sheep die, all of the sheep herding families will become destitute. From freedom to destitution in two easy steps.
Or to put it into a decision matrix:
Clearly anyone can see that disaster awaits if everyone grazes more sheep. Because the danger is simple to see, theoretically we could avoid it in a sequential move game. But this is not a sequential move game, this is a simultaneous move game, and that makes a big difference. Let’s say the land can handle 10 sheep. 10 sheep = good, 11 sheep = death (to simplify things a bit I am replacing the gray area of destitution and ecological decay with death). In a sequential move game, when the move to graze the 10th sheep happens the next player would have a simple choice between the status quo of no new sheep or death. Remain at 10 sheep versus death.
Or to put it into a decision tree:
In a sequential move game the choice is simple. Once the land has reached capacity no one would start grazing new sheep (in theory). But that’s not the situation we are in. We are in a simultaneous move game where everyone decides at the same time what to do (think rock-paper-scissors) and has to trust each other not to over-graze the land, dooming the whole community. Ask yourself, how much do you trust your neighbors? Would you trust your neighbors not to endanger your life in exchange for wealth? I’m not just being cheeky; some of us really like our neighbors.
What the Tragedy of the Commons is telling us is that under certain circumstances people acting on their own best interests will ruin their own environment. If ‘everyone’ owns the land then it’s really the same as no one owning the land. When no one owns the land then no one protects the land, but everyone still has an incentive to use the land as heavily as they can. Ergo … death, decay, destitution.
So how do we escape the Tragedy of the Commons? That’s a question that truly depends on context. Some people suggest moving to a pure private ownership model because if someone owns the land then at least that person will have a reason to protect the land. Some people suggest abolishing the concept of private property altogether. Some people suggest a middle-ground between public and private such as a land co-operative or a profit sharing corporation or a rotational ownership system etc.
To me, however, trying to ‘solve’ the Tragedy of the Commons is silly. You apply insight from The Tragedy of the Commons to more realistic policy concerns; you don’t solve it. The real insight is that the policy combination of common goods with no ownership and no protection coupled with private ownership and profit motive leads to decay. To ‘solve’ a problem you need context. SO, here’s my problem, property rights in a post-conflict society.
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Property rights in a post-conflict society are difficult to handle. Who is to say who really owns a piece of land? If you apply the historical concept - where ownership is based on who was living there first, how far back in time do you go? And what happens if someone else shows up 20 years later with proof of having owned the land earlier still? If they now own the land but you still own the house, what happens? How can you create stability in ownership by the historical concept when there’s always more of the past? Another tactic could be to auction the land, but that obviously favors the elite over those whose only possession was their land. A robust system of legal arbitration would be nice, but that seems like a luxury when your nation is rebuilding itself. Also, a rush to use a court system before it is transparent and accountable could lead to corruption very quickly.
When people build houses on public land during a war, what can you do? There is no law. Either everyone owns the land equally or no one owns it. Either way there are no police to enforce property rights or remove squatters. And then when the war ends, who owns the land? Who owns the land? From a technical standpoint the old government is dissolved as the peace process replaces it with the new government. How can the new government lay claim to public land from a dissolved former state? And where do the people go if you take their land? This isn’t just a technocratic problem of ownership; people’s lives are involved.
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Well, if we go back to the concept of simultaneous moves versus sequential moves I think it may help. If we simultaneously grant ownership to everyone for the land they have now, right as the conflict ends, then people who stole property (land-grabbed etc.) during the conflict would prosper. If we simultaneously try to arbitrate all of the land disputes in the entire nation, thousands if not millions of court cases depending on the nation, even a vibrant and transparent court system wouldn’t work for that many cases. A simultaneous move to collectivize all of the land and abolish public property would be backsliding on reform and lead to a more severe Tragedy of the Commons scenario where no one owns anything, thus no one protects anything, and the entire system is doomed to decay. Frankly, a simultaneous move solution doesn’t seem possible.
But what about a sequential move? What about one house? Just one house. We could set up an entire court to handle the ownership arbitration of one house, and invite the press to see how the system works. It would be a long and messy process, it needs to be a long and messy process so the public can see it and understand it. Establishing the ownership of one house creates the boundary line for one plot of land, but also partially creates the property lines for their neighbors. The sequence moves forward and we arbitrate the ownership of the next house, then the next house, and so on.
The concept between public and private ownership is still on the table too. If a community decides that a co-op land agreement makes the most sense, the sequential court system provides an arena to handle that. I am not advocating public over private ownership or private over public ownership. I am advocating for a sequential court system when it comes to post-conflict property rights.
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