BP and the Tragedy of the Commons

The accident on the Deepwater Horizon and subsequent oil spill in the Gulf of Mexico is an unmitigated disaster, and there is plenty of blame to go around. BP, the Interior Department’s Minerals Management Service, now known as the Bureau of Ocean Energy Management, and Regulation and Enforcement are all culpable.  The knee jerk reaction to this disaster has been the usual one the problem was not enough government oversight, and we need greater regulation of off-shore drilling.  However, economist William Shughart points out the real issue is one of property rights, or lack of in this situation.  Shughart explains in two articles BP and the Tragedy of the Commons and Preventing Another Deepwater Disaster that more government regulation is not the answer, but a privatization of the industry that removes the problem of tragedy of the commons.


Biologist Garrett Hardin, coined the term tragedy of the commons, in 1968 he wrote.


The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.
As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?" This utility has one negative and one positive component. ... Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another.... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit--in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.