The Commons and the Tragedy of Banking
In this article published as a mises.org daily on 12th November 2003, I apply the concept of the tragedy of the commons to banking.
Bioethicist Garrett James Hardin, who coined the term "tragedy of the commons," passed away this September at the age of 88. In his now famous 1968 essay, "The Tragedy of the Commons," Hardin describes how common, i.e., public, property, is overused until it deteriorates or is destroyed.
Because of his essay, many consider him to have fathered the concept of the tragedy of the commons; however, Ludwig von Mises describes this concept in relation to external costs in his 1940 Nationalökonomie and, later, in Human Action (1949):
"If land is not owned by anybody, although legal formalism may call it public property, it is utilized without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns—lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil—do not bother about the later effects of their mode of exploitation. For them the erosion of the soil, the depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down the trees without any regard for fresh shoots or reforestation. In hunting and fishing they do not shrink from methods preventing the repopulation of the hunting and fishing grounds."