Best for an Individual Is Not Necessarily Best for the Society

In 1968 the ecologist Garrett Hardin published an essay in the journal Science that began with a pasture open to all. Each herdsman, he wrote, asks what he gains by adding one more animal to the common. The gain is entirely his, since he sells the animal, while the cost of the extra grazing is shared by all the herdsmen. So every herdsman adds a cow, and the pasture is destroyed. Hardin called the result the tragedy of the commons, and the story captures the claim of the topic, that what is best for an individual is not necessarily best for the society.

The logic is that of a game. Mathematicians in the 1950s devised the prisoner's dilemma, in which two suspects are held apart and each is offered a lighter sentence if he betrays the other. Whatever the partner does, betrayal is the better choice for each, yet both betray and both end up worse off than if they had stayed silent. Each is acting rationally, and the outcome is irrational for the pair. The same structure appears when two firms cut prices, two countries build arms or two fishermen deplete a stock. Individual reasoning leads to collective loss.

Everyday life is full of examples. Traffic is a familiar case. Each driver chooses the quickest route, and the roads jam. In 1968 the mathematician Dietrich Braess showed that adding a new road to a network can make everyone's journey longer, since drivers shift to the new route and overload it. Pollution is another, where each factory finds it cheaper to dump waste in the river and each household finds it convenient to burn rubbish, while all suffer from the poisoned air. Delhi in winter is the image of it, where millions of reasonable decisions add up to a public health emergency.

Health offers sharper cases. A parent may judge that the small risk of a vaccine outweighs the benefit to his own child, given that most other children are vaccinated and the disease is rare. If many parents reason alike, vaccination falls, herd immunity is lost and the disease returns. The overuse of antibiotics follows the same pattern. A patient who demands a drug for a viral cold gets a fleeting reassurance, but the repeated use of the drugs breeds resistant bacteria, and the World Health Organization warns that resistance is one of the greatest threats to global health.

Individual reasoning leads to collective loss.

Finance shows it too. A bank holds only a fraction of its deposits in cash. If depositors believe the bank is sound, they leave their money, and it is sound. If a rumour spreads, each depositor judges that it is best to withdraw his money first, and when all do so the bank collapses. Douglas Diamond and Philip Dybvig modelled this in 1983. The run is individually rational for each and ruinous for all. The Indian experience with cooperative bank failures and with the collapse of chit fund schemes illustrates the damage when a crowd tries to leave at once.

How do societies escape? Elinor Ostrom, who won the Nobel Prize in Economics in 2009, showed that Hardin's tragedy is not inevitable. She studied communities that had managed shared resources successfully for centuries, such as the lobster fishermen of Maine, the irrigation farmers of Spain and the Philippines, and the forest users of Nepal. They succeeded by setting clear boundaries, agreeing rules, monitoring each other and applying graduated penalties. People do not always act as isolated egoists, and trust and communication can change the game. Their experience suggests that the tragedy is the default only when the herdsmen are strangers who cannot speak to each other.

The other solutions are regulation and pricing. A government can limit the catch, tax the emission or license the extraction, converting a hidden cost into a visible one. Congestion charges, such as those in London and Singapore, reduce traffic by making drivers pay for the delay they impose on others. Mandatory vaccination in schools, building codes and traffic laws all restrict individual freedom for collective benefit. Such rules are often resented, but they are the means by which a community escapes the traps that its own members set.

But the topic is not an unqualified truth. Adam Smith argued in 1776 that a person who pursues his own interest in a market is often led, as if by an invisible hand, to promote the interest of society. The baker bakes bread to make a living, and the town is fed. Voluntary exchange benefits both sides, and the pursuit of profit pushes firms to produce what people want at a lower cost. The best for the individual is frequently best for the society, and markets have lifted billions out of poverty by aligning the two. The difficulty arises only when costs and benefits fall on third parties, which economists call externalities.

The notion of best itself raises problems. What is best for society must be decided by someone, and the interests of society are not a single thing. A project that benefits the many may devastate a few, such as villagers displaced by a dam, and to say that their loss is for the social good may be an excuse for sacrificing the weak. Individual rights are partly a defence against the claim of the whole. A society that insisted on the best for itself in every case would trample those who had no voice.

The deepest answer is that individual and society are not separate. A person is shaped by the society in which he lives, and his own good includes the good of his family, village and country. Many who sacrifice private gain for public benefit do not feel that they have lost, but that they have found something worth more. The distinction in the topic is real, but it can be partly dissolved by an education that teaches people to see their interests as entangled with others. It cannot be wholly dissolved, and the tension between the two will probably last as long as there are commons.