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Introduction 4 Systems Thinking 5 6 Systems Thinking and Tragedy of the Commons Common Pool Resource Challenges 7 Local Solutions to Common Pool Resource Problems 8 Privatization (Free Market) as a Solution to Common Pool Resources 9 An Example: Catch Shares and Individual Transferable Quota (ITQ) FisheriesSustainability 2012, 4, 2443-2471; doi:10.3390/su4102443 sustainability ISSN 20711050 www.mdpicom/ j ournal/sustainability Article Tragedy of the Commons, Business Growth and the Fundamental Sustainability Problem Edward J. Garrity Marketing & Information Systems Department, Richard I . Wehle School of Busine ss, Canisius College, 2001 Main St., Buffalo, New York, 14208, USA; E-Mail: garrity@canisius.edu; Tel: +1-716-888-2267; Fax: +1-716-888-2525. Received: 6 August 2012; in revised er.' 5 September 2012 / Accepted: 20 September 2012 / Published: 28 September 2012 Abstract: This paper reviews the major issues involved in Hardin's [l] tragedy of the commons, written over 44 years ago, and examines whether these issues are still relevant today. We assert that this model still provides important insight to aid in the solution to our global problems. In particular, we maintain that the underlying issues of growth against limits and bounded rationality are still not adequately recognized and addressed; this underlies many of the reasons for our unsustainable world. Examples from sheries management are used to examine potential solutions and reveal weaknesses in current approaches. We show how our current, restricted mental models promote social injustice and blind us to developing sustainable solutions. Both the neoliberal economic view of business that directly seeks growth and the new sustainable development view that indirectly supports growth are leading our global economy in the wrong direction and away from prosperity and sustainability. Current thinking has not realized Hardin's message that sustainability is of the class of no technology soitttion problems. We conclude with recommendations to radically advance a new world view and business paradigm. Keywords: bounded rationality; business growth; common pool resources; growth against limits; social justice; sustainability; system thinking; tragedy of the commons 1. Introduction In Garrett Hardin's seminal essay, the tragedy of the commons, Hardin illustrates a dilemma faced by mankind when confronted with the freedom to make individual choices in situations where the sum total of individual, rational decisions has ramifications for the common good. The main focus of his Sustainability 2012, 4 2444 essay actually deals with the problem of unrestrained population growth. Hardin argues that the population problem belongs to the class of \"no technolog solution problems.\" He denes a technology solution as one that requires only a change in the techniques of the natural sciences, demanding little or nothing in the way of change in human values or ideas of morality [1]. The essential arguments for this case rest on several well understood concepts: (1) in a finite world with a given 01' reasonable level of technology, increases in the global population will result in a declining standard of living, or at some point \"will greatly increase human misery;\" (2) One cannot attempt \"to provide the greatest good for the greatest number\" because it is not mathematically possible to maximize for two or more variables at the same time [2]. If we attempt to maximize population then we have the problem with providing sufcient amounts of energy for this biological base. In addition, even if sufficient technology were developed to produce this level of energy (e.g. nuclear power, fusion, etc.) we then have to deal with the dissipation of this energy. Hardin seems to understand and implicitly advance the notion that a large and growing population will continuously push up against the limits of a finite planet. The population problem is intertwined with Adam Smith's notion of the \"invisible hand" or the idea that individuals\" acting in their own self-interest in free markets will generate behavior that is in the public interest [1]. The contradiction to Adam Smith's invisible hand is provided by the following scenario: The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reason ably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy. As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?\" This utility has one negative and one positive component. i. The positive component is a tnction of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1. 2. The negative component is a function of the additional overgrasing created by one more animal. Since however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making h erdsman is only a fraction ofl . Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to the herd. 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 limitin a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all [1]. Sustainability 2012, 4 2445 Both the population problem and the overuse of resources (tragedy of the commons) can be analyzed from the perspective of systems thinking. The next section explains systems thinking principles to help understand the situation and explicitly define the interconnected feedback structure involved. 1.1. Sysiems Thinking A system can be dened as a set of interdependent components organized by design to accomplish one or more objectives [3]. Systems may be comprised of and organized by subsystems and each of these may interact with each other as well as with their environment and share information. One of the features of complex systems that make their behavior difcult to understand or complex is that components, subsystems and systems are so interconnected. It is difficult to change just one thing (component) without it having an effect on many other components and systems. A more useful and truer picture of our complex systems will show the feedback structure involved. Although systems may involve many hundreds of variables or components variously interconnected, the long-11m dynamic behavior of complex systems is generated by the interaction of just two basic types of feedback loops, either reinforcing feedback that increases or amplies changes or balancing feedback loops that counteract or oppose change [4]. Figure 1 illustrates a reinforcing feedback loop where births lead to a higher population. This is a reinforcing feedback relationship and therefore a higher population (increase) also leads to higher births (increase) (i.e., the '+' symbol indicates the same direction of change, see Figure 1b). The graph (Figure la) demonstrates that this produces an exponential growth pattern. Such a graph over time can be generated from all reinforcing feedback loops: for example, the higher the amount on deposit in the savings account will lead to higher interest income that adds to a higher bank balance. Reinforcing feedback loops can also operate to produce a decay pattern over time. If a population is declining due to greater predation, limiting (or shing) or other inuences then a lower population level leads to a lower net birth rate. Thus, a decrease in births :_:: leads to a decrease in the population (i.e., the symbol indicates the same direction of change) which then leads back to a decrease in births. Naturally, rabbits do not generate innite or astronomical population levels as shown in Figure 1a. Eventually limits are reached. In Figures 2a and 2b, the reinforcing loop, R1, generates rapid growth in the rabbit population in the beginning, but the balancing loops, B2, and B3 and B4 (see Figure 2b), begin to dominate as the population pushes up against the carrying capacity of the environment (the '7' symbol indicates the opposite direction of change, so as the population increases the resource adequacy decreases. The reverse would also be true, if the population was decreasing then the resource adequacy would be increasing). When resources decrease and balancing feedback loops dominate, we observe the common S-shaped behavior-over-time graph (Figure 2a). This pattern is quite common in many natural populations since there are often many limiting factors to place a check on runaway (exponential) population growth. Sustainability 2012, 4 2446 Figure 1. Graph and Causal Loop Diagram of Reinforcing Feedback; (a) Rabbit Population Graph, Behavior over Time of Reinforcing Feedback; (b) Causal Loop Diagram (CLD) of Reinforcing Feedback. Population 10,000 7,500 rabbit 5,000 2.500 10 12 16 18 20 22 24 26 28 30 Time (Year) Population : growth + (a) births RI. Population + Population Growth fractional birth rate (b)Sustainability 2012, 4 2447 Figure 2. Graph and Causal Loop Diagram of Reinforcing and Balancing Feedback; (a) Rabbit Population and Behavior-Over-Time Graph; (b) Causal Loop Diagram of both Reinforcing and Balancing Feedback, Rabbit Population. Rabbit Population 4,000 3,000 3 2,000 1,000 10 12 Time ( Year) 18 20 22 24 26 28 30 Rabbit Population: baseCase (a) B2, R1, Limits to births Population Population Growth deaths Growth normal average B4, Limits lifetime B3, Limits to o Growth, Growth resources fractional birth rate births resource adequacy Canying Capacity (b) 1.2. Systems Thinking and Tragedy of the Commons Figure 3 displays the tragedy of the commons as a causal loop diagram. Reinforcing loops RI and R2 show the initial economic behavior of individuals in an open access, common pool resource situation. Actor A and actor B both pursue activities, such as adding cattle to the pasture and both actors receive economic benefit. Although total activity increases there is little or no loss in productivity since they are not near the resource limit and there is little or no effect on the "gain/individual activity." Eventually however, productivity drops as they move closer to the resource limit and actors A and B are faced with a decision. If they do what is "best for all concerned" then balancing loops B3 and B4 should dominate and activity should cycle down to an acceptable level. However, each actor, operating under economic rationality decides that they will receive theSustainability 2012, 4 2448 lll-beneflt of the activity but only bear a fraction of the cost. Thus, each actor is compelled to add more activity and reinforcing loops R5 and R6 dominate. Additionally, after a delay, the resources limit itself erodes (such as cattle overgrazing and destroying the regenerative capacity, R7 loop) which further decreases the \"gain/individual activity.\" The end result is economic ruin for all as growth activity in the commons exceeds the carrying capacity. In Figure 3 we see the two dominant features of the tragedy of the commons: (1) growth against iimits (in reinforcing loops R1 and R2 against resource limits), and (2) individual decision making that is dominated by botmdea' rationality (in reinforcing loops R5 and R6). Bounded rationality is a tndamental feature of individual decision making in organizations where individuals make rational decisions in situations where the choice set is simplified [5]. In organizations, simplification is necessary because of the large number of feasible choices and the large amount of information required for monitoring and coordinating actions [6]. In a tragedy of the commons dilemma, individuals make rational, local decisions based on their limited information. In essence, there is missing information feedback on the state of the commons resource itself and also on the behavior of the other users [7]. Bounded rationality means that seemingly rational choice by individuals as decentralized decision makers does not guarantee that their choices are consistent and mutually supportive [6]. In order to avoid tragedy Hardin concluded that the commons must either be privatized (free market) or kept as public property where rights to entry and use could be allocated and managed (a form of socialism) [1,8,9]. The next section reviews the solutions advanced since the original paper. Figure 3. Tragedy of the commons as a Causal Loop Diagram. res ounces limit Delay gaint lasagna actixity Sustainabiiirjy 2012, 4 2449 2. Common Pool Resource Challenges 2.]. Locai Soiutions to Common Poof Resource Problems Ostrom and her colleagues [10] viewed Hardin's conclusions as painting a dark, pessimistic view of commons resources and have disputed his implicit view that commons problems require some type of strong central control. In fact, Ostrom [11,12] and others [8] have documented numerous cases where local users have been able to self-organize to manage common property resources. Researchers have stressed that to properly understand commons problems one must separate concepts related to resource systems from those that concern property rights. The term common pool resource (CPR) is used to denote resources where: (1) exclusion of users through physical and institutional means is especially costly (evciusion property), and (2) exploitation by one user reduces resource availability for others (subtractabiiity property) [1 3]. The prediction for a tragedy of the commons dilemma rests 011 the belief that all resource users are selfish, noun-free, and inaxirnizers of short-run results [10]. This view of humanity, that we all adopt a narrow, self-interested, short-term perspective may hold true in many settings, however, people can also use reciprocity to overcome social dilemmas [14,15]. Reciprocal cooperation can be established, sustain itself and grow if the proportion of people in a community who behave in a narrow, self-interested way is not too high [14]. Solving CPR problems involves two distinct complications: (1) restricting user access to the resource and (2) creating incentives for users to invest in the resource instead of overexploiting it. When social interactions enable those who use reciprocity to gain a reputation for t1ustwoithiness, others will be willing to cooperate with them to overcome CPR or tragedy of the commons situations, which then leads to increased gains for themselves and their offspring [14]. Thus, close-knit communities of people that can identify one another are more likely than diverse, separated groups of strangers to use trust, reciprocity, and reputation to develop norms that restrict access and create incentives for proper use [11]. However, the ability of local communities to develop social institutions to manage CPRs may not be easily converted 01' scaled-up to broader 01' global social settings. In many cases, environmental resources span wide geographic areas and may encompass various political boundaries. When diverse groups are present or there are large numbers of participants, organizing may be more difcult and many of the requisite characteristics of local CPR solutions may be absent [11]. 2.2. Privatization (Free iMarll'et) as a Solution to Common Pooi Resources A common pool resource is any area such as a lake, an irrigation system, a forest, or in the case of global resources, the atmosphere or oceans, where it is difficult to exclude users (evcittsiort) and where one person's consumption or exploitation of resource units makes those units unavailable to others (subtractabiiity) [13]. Common pool resources are unique in that the difficulty in excluding users is a characteristic shared with public goods but the subtractability of the resource is shared with private goods [11]. A shery is an example of a common pool resource because it is difficult to exclude users and harvesting fish by one user means that those fish will not be available to others. The appropriation Sustainability 2012, 4 2450 problem is the natural incentive for individual users to appropriate more resource units when acting independently than if there were some way of cooperating and coordinating appropriation among the group of users [11]. One such scheme of coordinating activities and cooperating is provided by (virtual) privatization in the form of individual transferrable quotas (ITQs). 2.2.1. An Example: Catch Shares and Individual Transferable Quota (ITQ) Fisheries Catch shares are allocated privileges to land a portion of the total allowable catch (TAC) [16,17]. ITQ programs are a form of catch shares where the shares are transfenable; share-holders have the freedom to buy, sell, and lease quota shares [18,19]. Many researchers have hailed ITQ programs as the best solution for sheries as it combines economic success while also avoiding overexploitation. The success of ITQ programs is linked to the increased incentives for long-term management due to a fonn of property rights or virtual ownership. Since the economic value of quota shares increases when sh stocks are well managed, ITQ shares create an economic incentive for stewardship [1822]. ITQ programs have shown success toward many goals including biological sustainability and economic prots and output [16,19,2123]. In addition, Costello er a]. [17] examined over 11,000 global sheries and found evidence that ITQ managed sheries are less prone to collapse. Despite such claims of success ITQ programs have several shortcomings. First, if ITQ rules allow for large external shareholder's then local community shermen can lose their livelihoods. Fortunately, through careful planning, rules to restrict share ownership can prevent this problem and can help local communities to thrive and promote social equity. Second, cheating activities benefit individuals directly but the negative utility of cheating is shared by all. In other words, the classic tragedy of the commons is not entirely eliminated. Such activities include quota busting (catching above quota) and the concomitant misreporting of catch, as well as high-grading (throwing away under-valued catch so it doesn't count toward quota). Thus, critics argue that ITQ programs do not create true property rights. Holding a quota share only provides a right to harvest, but confers no real control over the resource itself [16,24,25]. Third, the cost of any short-term sacrice is borne by the individual. However, long-term benefits that accrue from stock rebuilding are shared by all sheiy paiticipants. 2.2.2. Rebuilding Global, ITQ Fisheries Rebuilding global sheries is a problem for free market approaches like ITQ programs. Although there has been strong evidence that ITQ programs have been successil at preventing sheries collapse [17] there has also been evidence that ITQs are less helpil in rebuilding stock levels. Chu [20] found that in 20 stocks managed by ITQ systems, 12 stocks showed improvements in stock biomass but 8 of the 20 stocks continued to decline after ITQ implementation. Some of the declines in sh stocks may be due to inappropriate TACs or low levels of enforcement and harvest compliance [20]. Rebuilding fish stocks with free market approaches brings to light the fundamental dilemma between private interests and public interests. Fishermen must be concerned with their shoit-teim Sustainability 2012, 4 2451 results and profits while in contrast, public interests are primarily with managing resource stocks for the long-term to benefit the common good [26]. The perspective of public management of fish resources for the long-term, common good means that a more conservative or precautionary TAC must be used. Figure 4 displays a comparison of long-term, total fishery profit for two TAC policies that were generated from a computer simulation of an ITQ fishery (see [26]). The precautionary policy (lower TAC) allows the fish stock to rebuild and produces a higher long-term pattern of total fishery profit. Precautionary TAC policy is thus judged to be far superior for the public and common good However, since ITQ holders must remain profitable and competitive, discounted cash flow results will dominate their decision process. Because precautionary TAC policy produces a "worse before better" pattern ITQ fisheries will resist management approaches that seek rebuilding. Figure 4. Rebuilding fisheries with precautionary policy, adopted from [26]. Total Fishery Profit: Precautionary Policy is Worse Before Better 4M 3 M dollars/Yea 2 M 1 M 10 15 20 25 30 35 40 Time (Year) 60 65 70 75 SO 85 90 95 100 total fishery profit : RebuildStock1 0000 Ships 200preCaution10 total fishery profit : RebuildStock1 0000Ships 200Liberal10 Figure 5 displays the CLD that summarizes some of the inherent shortcomings with ITQ programs, and the dilemma between short-term, private interests of fishermen and the local community versus the public and long-term goals of fishery management. Figure 5. Policy resistance, diffused responsibility, and ownership, adopted from [26]. Systemic Cheating R6, Un Behaviors fishermen expenses levels 2. community delay fishermen economic health lobbying revenue TACs pressure to raise pressure to lower B1, Quota TAC TACs B3 busting debay Behavior Management Sustain ability catch enforcement Goals fish stock quota busting Declin TAC 1. bio-economic sustainability delay management target stock goal control owners hipSustainability 2012, 4 2452 In Figure 5, if we examine a stock rebuilding situation with decreasing bio-economic sustainability (labeled variable 1) relative to a target stock goal, we can then trace this to an increase in pressure to lower TACs, then to a decrease in TACs, causing a decrease in catch, and to an increase in the fish stock, nally leading back to an increase in bio-economic sustainability. In essence, tracing through this causal path shows shery management's response to this problem or gap between the desired and actual state. Of course, management's actions are not performed in isolation, but rather they are interdependent and linked to impacts in the shery community. Thus, lower catches also lead to lower revenue and reduced levels of community fishermen's economic health. Reductions in economic health can set off various systemic cheating behaviors such as lobbying the political authority, applying direct pressure on management to raise TAC, and quota busting behavior (illegal catches above quota). All of these actions are policy resistance as the local community responds to their short-term economic interests [2 6]. 3. Global Challenges: Environmental Impact, Sustainability and the Global Economy The tragedy of the connnorrs has been viewed by researchers as primarily a dilemma facing users of common pool resources. However, a number of fundamental concepts that underlie the tragedy of the commons can be used to provide insight into global problems of sustainability. Sustainability is broadly dened as the ability for humans and other life forms to flourish on the Earth forever [27]. The primary global sustainability challenge is to find ways to limit our environmental impacts and live within the finite limits of the planet. An important theory on how economies can achieve sustainability is the viewpoint of environmental Kuznet curves (EKC). The EKC theory is that there is an inverted Ushaped relationship between economic development and environmental impacts. Specifically, the theory predicts that environmental impacts will increase in early economic stages of development, but as economies mature and technologies are adopted, impacts will level-off and decline (see [2830]). In essence this theory views environmental quality as a luxury good that more advanced societies can afford. Additionally, both ecological modernization theory (EMT) [31], and industrial ecology (IE) [32] also share the belief that material and energy ows of modem production systems can be dramatically decreased [33]. The three theories support the notion that economies can grow and still maintain the same level (or even less) of environmental impacts through advances in technology. We assert that these theories are simply wrong in the belief that economic growth can continue without increasing negative impacts on the environment and taking us further away from sustainability. 3.1. Environmental? Irrrpaci and Growth Hardin's basic arguments regarding the population problem also apply to the general problem of global environmental impact and sustainability. Environmental impact is dened as increases in use of resources (renewable and non-renewable), and degradation of the environment (land, water, air, and resources). The classic IPAT formula defines environmental impact as arising from the interaction of 3 major factors [34,35]: Sustainability 2012, 4 2453 I:P>