The tragedy of the commons
The term “tragedy of the commons” was coined by Garrett Hardin in 1968. With this expression Hardin put the spotlight on the fact that whenever a finite resource such as a pasture is open to two or more rational actors who can benefit from it, e.g. through grazing, the latter have an incentive to behave in such a way as to lead to overutilization and ultimate rapid exhaustion of the resource. Hardin was pessimistic about the possibility of avoiding resource depletion, given that any rational actor, “each pursuing his own best interest”, would benefit from overusing the resource, while imposing negative externalities (e.g. widespread costs to everyone but him) over the whole community of potential users of the resource.
In the decades following the publication of Hardin’s article, the literature on “common-pool resources”, as they came to be called, has expanded greatly. Common-pool resources have been formally defined as resources that can yield only a finite flow of benefits over time (i.e. are exhaustible) and from whose utilization potential users can be excluded only at a considerable cost. Many scholars have contributed to the mathematical formalization of the tragedy of the commons, while sociologists and anthropologists have attempted to test it under different experimental or quasi-experimental conditions.
The main question scholars have sought to answer is whether one can devise institutions that might avoid the tragic overuse of common-pool resources. Such institutions could, for example, provide rules that specify who are the authorized users of the resource, or codify the rights and duties of authorized users. The problem with institution building is that such institutions would be a public good, meaning that their benefits would accrue to all users whether or not they contribute to their production, and would therefore be exposed to a free-riding problem. This way, the problem of avoiding overutilization of common-pool resources becomes logically recursive: no institutions limiting overuse could ever survive, because any rational actor would have an incentive to defect, actually using even more of the very resource that other actors would have struggled to save, and ultimately bringing down the whole structure.
Given the theoretical impossibility of self-regulation, scholars have long advocated centralized regulation of common-pool resources. In practice, however, central regulation has frequently been revealed to be suboptimal, accelerating resource deterioration - sometimes because of corruption but often simply due to inefficiency, as the central regulator could not effectively monitor the effective implementation of its own regulations. Meanwhile, evidence accumulated of self-organizing communities that have been able to regulate access and use of common-pool resources consistently throughout history. Today, the consensus of the literature seems to go in the direction that “[l]ocally evolved institutional arrangements governed by stable communities and buffered from outside forces have sustained resources successfully for centuries” although “they often fail when rapid change occurs”.
In the past thirty years, therefore, it occurred to some that “a more productive approach” would be “to ask under what conditions it is correct” to expect the tragedy of the commons to materialize, and when, instead, it is correct to expect cooperation to succeed.
-  G. Hardin, “The Tragedy of the Commons”, Science, v. 162, 1968, pp. 1243-1248
-  Ibid., p. 1244.
-  For a review of the literature on the topic, see S.C. Hackett, Environmental and Natural Resources Economics: Theory, Policy, and the Sustainable Society, M.E. Sharpe, Armonk, 1998. See also E. Ostrom, Understanding Institutional Diversity, Princeton University Press, Princeton, 2005.
-  M. Olson, The Logic of Collective Action: Public Goods and the Theory of Groups, Harvard University Press,Cambridge, 1965.
-  E. Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge UniversityPress, New York, 1990, p. 12.
-  Ibid,, pp. 58-103.
-  T. Dietz et al., “The struggle to govern the commons", Science, v. 302, 2003, p. 1907.
-  E. Ostrom, “Tragedy of the commons" definition, in The New Palgrave Dictionary of Economics Online, 2008.