The invisible hand needs an invisible “band”, constraining it for the common good. So suggested Garrett Hardin in his seminal 1968 essay, The Tragedy of the Commons. In it, he exposes the achilles heel in Adam Smith’s 1776 notion of the “invisible hand” – the assumption that “decisions reached individually will, in fact, be the best decisions for an entire society” – and links it to William Forster Lloyd’s lesser-known coining of the idea of the “commons”. In an obscure pamphlet in 1833, Lloyd described “a pasture open to all” supporting many herds, with natural forces keeping impacts “well below the carrying capacity of the land” – until the “day of reckoning” when:
"... the rational herdsman [sic] 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."
Replace “herdsman” with “company” and “animal” with “growth” and we have the 21st century dilemma.
The solution is to attune ourselves to thresholds and allocations. What does this mean? In simple terms:
- thresholds define how big a pie is (how much of a resource is available, within its carrying capacity);
- allocations define how big the pie slices are (which depends on the number of users sharing the resource, and their level of need.)
Read the full article in The Guardian.