The way we issue credit is an example of a “Tragedy of the Commons”.  The Commons in this case is a communities credit or trust in each other.  The way we issue credit is such that we each try to get as much of it as we can for our own purposes even though we know that if we issue too much overall there will be a tragedy (like a global financial crisis or depression).

An illustrated description along with a solution can be found at http://www.youtube.com/watch?v=wXqHSZOg3VA

The text of the talk is at

https://cscoxk.wordpress.com/2011/01/26/the-global-financial-crisis-is-a-tragedy-of-the-commons/

The solution is a variation of the general solution to the Tragedy of the Commons which is:

  1. Give people who consume less of the commons a reward of interest free credit.
  2. Require the interest free credit to be invested in ways to increase the commons.

2 thoughts on “Credit as a Tragedy of the Commons

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