An introduction to Rewards – The Tragedy of the Commons –
Why historical approaches don’t work – A new way

This book is about an extremely simple concept that brings a fresh approach to the problems of allocating and optimising the resources required by modern societies.

It’s a concept that is politically palatable, holds broad appeal for businesses and individuals alike and it is easy to implement.

It is flexible, measurable and will achieve success every time.

What’s more, it can be used to solve some of the world’s most pressing problems such as global warming, water sustainability and the need to develop an infrastructure capable of supporting the planet’s growing population.

So what is this concept?

Imagine if we rewarded people and businesses that reduce their greenhouse gas emitting energy consumption below a set level per head, or that reduce their consumption from previous levels. We’d probably see some small changes to power demand patterns with reductions in greenhouse gas emissions while green energy sources would gain fresh impetus.

What if we charged individuals and businesses more for any use of greenhouse gas emitting energy above that set level per head? The money raised from the extra charges could then be used as the rewards for those who consume less. This added financial impost suddenly makes excessive power use more punitive, resulting in a greater shift towards reduced consumption and the adoption of green power.

Then what if we stipulated that all rewards have to be spent on items or invested in projects that further reduce greenhouse gas emissions? These activities could range from purchasing energy saving devices for the home through to direct investment in the development of sustainable technologies.

We’d have a system that helps to change consumer behaviour by encouraging people to consume less. It discourages consumers from using more than their allocation because of higher prices. Plus it increases energy investment by requiring that the extra funds generated be spent on sustainability measures. If at first the system doesn’t deliver the required results, it can be tweaked and manipulated by lowering the per head energy allowance and raising the excess charge until the required greenhouse gas reductions are achieved.

The system described above is just one application of the concept we call “Rewards”. In the coming chapters we’ll take you through some of the many other ways in which Rewards can be applied to ease the allocation and optimisation of resources. We’ll also explain the whys and hows of Rewards – why traditional approaches to this issue have failed; why people will respond to Rewards, why Rewards will work, and how to set up a Rewards system. At the end of it all we hope to have given you a full understanding of the need for a new approach to raising funds and distributing resources in modern societies and to have armed you with information that will help you to develop and introduce Rewards projects in your own businesses, communities and governments.

But first, we need to explain a little more about how we came to consider Rewards and why we believe it is the right solution for our time.

The Tragedy of the Commons

For much of the past decade we have been concerned with some of the seemingly intractable issues facing our planet such as global warming, fresh water availability, deforestation, loss of air quality and overfishing of the seas. It seems clear that a large proportion of these problems revolve around the pressures a growing population is placing on this planet and more specifically, how we as humans manage the earth’s resources.

In fact, it all comes back to a dilemma that has been pondered since humans first began living together. Dubbed the tragedy of the commons” by Garrett Hardin, it is essentially a conflict over the allocation and optimisation of finite resources.

The classic parable used by Hardin and before him, by nineteenth century writer William Forster Lloyd, describes the problem by considering an English village common. Used by herders as pasture for their flock, the common has a fixed capacity to support x number of animals beyond which overgrazing occurs; the pasture becomes degraded and is unable to support the flock. The logical step for individual herders looking to maximise their personal benefit from the commons is to make sure that they increase the size of their flock before other herders take up the commons’ spare carrying capacity. However if each herder follows this path of self interest, too many animals are added to the commons resulting in overgrazing, thus ruining the opportunity for all.

Hardin concludes, “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 interest in a society that believes in the freedom of the commons.”

The question of the Tragedy of the Commons remains as relevant today as it was in the 1800s and it has become a matter of particular concern to governments around the world. It poses a problem that stymies the allocation and management of both natural and man-made resources. Consider these modern day examples.

Carbon emissions are causing major environmental problems. Even with full knowledge of the issue businesses are increasing their use of fossil fuels and many urban dwellers persist in purchasing large, fuel-hungry vehicles rather than opting for public transport. The quality of our atmosphere is a finite resource and it is being degraded due to individual and business desire for short term personal advantage.

Water provides another example. Over the past decade much of Australia has experienced severe drought resulting in the introduction of water restrictions in every capital city. Yet throughout this period total water use continued to exceed sustainable levels. Other examples can be seen in the depletion of ocean fish stocks through overfishing; and forestry, land clearing and agricultural practices that result in erosion and soil salinity.

Why historical approaches don’t work

These resources are all freely available yet finite in quantity. They all fall within the scope of government management and administration and to date this has largely occurred in one of two ways:

1. Regulating the use of the resource in question or

2. Creating and allocating “rights” to the resource.

One of the most common economic means of regulating a public good is through the imposition of taxes or levies. Examples include emission and effluent charges and user fees for waste disposal. However, such approaches tend to be viewed negatively and are open to criticisms as mere money-raising exercises. This is especially the case when the proceeds go straight into general revenue rather than being invested in ways to improve management of the resource. Another problem with regulation is that it does not help to create any lasting change in the way the resource is used. It doesn’t change people’s behaviour.

Regardless of what the regulations are or how they are imposed, this approach is ultimately one of coercion and coercion relies upon public cooperation or a government willing to face sustained rebellion. Without general acceptance of the basic values behind the regulation, or a common values system it cannot work.

The second approach, dividing up the commons into property rights, is the “selfish” alternative. It attempts to preserve the integrity of the commons by restricting access to the resource so that it isn’t entirely depleted. In addition it offers a limited group of individuals the opportunity for personal gain if they manage the resource correctly. It’s a method that is frequently used in relation to fishing – where limits are placed on the quantities or types of fish allowed to be caught; and in land clearing, where quotas are set specifying how much land may be cleared annually. It is also being adapted to non-traditional solutions through activities such as emissions trading.

A major problem in creating rights is the difficulty of defining those rights, especially in relation to a resource that is already freely available. The difficulty is compounded by the impossibility of the task. Because rights trading depends to a large extent on the accuracy of the measurement, its effectiveness will depend on how well it is done. In the case of a fishing trawler, how accurate is the tally of fish really going to be? Once the net has been cast is it possible to limit the catch to the exact quantity and type of species allotted to the trawler?

Similar to coercion, appealing to selfish interests works only if enough people share the same interest. Expecting people to cooperate based on financial gain works only if everyone is motivated by money. One of the defining characteristics of modern culture is that it is fragmented. People are no longer motivated by shared interests, instead choosing actions based on values. Asking people to adapt or change their behaviour to accommodate diametrically opposed values rarely works.

As long as we remain locked in to these two approaches – regulation or rights – we will continue to grapple with the management and allocation of resources, as neither way can be successful in the long term. The result is the decay of the common good and it is the natural outcome of a competitive mindset.

A new way

Rewards addresses the problem of the provision, allocation and protection of resources. It also removes the divide between private and public benefit by defining a system that makes cooperation in the best interests of all, at the same time as offering individual incentive and reward. Above all, it resolves the tragedy of the commons equitably and democratically.

So what is Rewards? Is it a philosophy, a political belief or an economic rationale? We consider it an apolitical system based on cooperative principles. Rather than using either a top-down or competitive approach, Rewards taps into the desire for a more democratic response to problem resolution, encouraging participants to take action to alleviate the problem. At the same time it provides an incentive for suppliers by creating a willing market for new and innovative products or services.

Cooperation has been gaining ground in the past decade, largely thanks to participatory technologies such as the Internet which have shown that in some instances, sharing can deliver self-interest dividends. It can be seen in the collective development of LINUX during the 90s, Wikipedia in the 2000s, and in the open platforms routinely used by IT leaders including IBM, HP and Sun. Not just restricted to the IT industry, other examples include:

  • car maker Toyota’s treatment of suppliers as a network of equals and training them in best industry practices, in the full understanding that such training will benefit the suppliers’ other customers – Toyota’s competitors;

  • Eli Lilly’s use of the Internet and a $25,000 financial incentive which gained the attention of scientists around the world and led to resolution of a complex chemical problem;

  • eBay opening its database to developers along with an invitation to develop new features and add-on services;

  • public involvement in distributed computing projects such as SETI, the Search for Extra-Terrestrial Intelligence.

However unlike the above examples, Rewards is not a single project; it is a system that can be used for any undertaking requiring the allocation and management of resources.

If it is to gain cooperation and achieve benefits for multiple parties, Rewards must be designed as a complex system, capable of creating new relationships along with a need to somehow predict and manage the results of those interactions. Scientists describe such systems as “adaptive” and in the next chapter we’ll explain why an adaptive system is such an ideal way to resolve our resource problems.

Chapter 2 – The economy as an adaptive system

Chapter 3 – The information content of money

Chapter 4 – Energy Rewards

Chapter 5 – Water Rewards

Chapter 6 – (to be written) Equitable distribution of the increase in the money supply

End Chapter 1

Garrett Hardin, “The Tragedy of the Commons”, Science, Vol. 162, No. 3859 (December 13, 1968), pp. 1243-1248.

Garrett Hardin, “The Tragedy of the Commons”.

Beryl Crowe, “The Tragedy of the Common Revisited”, Managing the Commons, W.H. Freeman, 1977

For more information see Howard Rheingold’s presentation “Way New Cooperation” at http://www.ted.com/index.php/talks/view/id/216 or visit his homepage at www.rheingold.com

11 thoughts on “A solution to the Tragedy of the Commons chapter 1

  1. Pingback: energochłonność
  2. Does having a money system based on earning interest mean that we end up driven to turn our last remaining social, cultural, spiritual and natural capital (i.e. our commons) into money because that’s the only way we measure value?

    Can we change what backs our money to be the things that are really important i.e. social, cultural, spiritual and natural capital?

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  3. The difficulty we have with money is that it has two uses. One is a means to facilitate exchange and the other as a way saving not consuming.

    When money is used as a means of exchange there should be no charge. (We can have transaction fees but it should be thought of like cash). Money used for exchange if it is not being used should not attract interest. This happens in many ways. One way is as interest on trading accounts, interest earned on interest and interest on brand new money tokens when they are first created.

    Money when it represents non consumption and is then lent can attract interest. However, it should not attract any interest while it is not lent. We fall into this trap because of the way we organise banks deposits. One way we can overcome this by making sure that interest does not earn interest. This means that whenever someone takes money from their deposit account they reduce the amount capital outstanding and leave the interest sitting there not earning interest.

    If we remove the concept of “the time value of money” from our thinking then it will start to remove its importance in our lives and people will start to accumulate other capital – like social capital – that we know decreases if we do not use it. Money, in the way it is organised, gives us something for nothing and we will take advantage of it if we can because we know others will do it if we don’t. In other words it is a Tragedy of the Commons.

    There is no need to have a backing for money because it is only a promise that we will give back something we have borrowed. The only thing that needs to back it is the promise. When people break the promise then we simply restrict their participation in some economic activities until they honour their promises.

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