The tragedy of the commons is an article of faith among a certain set of crypto people. It’s the dilemma in economics where unlimited access is granted to a limited resource. The oft-told parable goes thus:
Imagine a pasture open to any herdsman and his cattle. How does each herdsman decide on the number of cattle to keep? Adding more cattle results in more potential profit to the herdsman, while the costs of the additional cattle are borne by the open-access pasture, which are shared by all herdsmen. Therefore, the only logical course of action is to keep increasing the numbers of cattle—which is what every herdsman will do.
The logical outcome of each herdsman’s calculation leads to a constant increase in the heads of cattle, until the once verdant pasture is depleted—decimated by the grazing of each herdsman’s multiplying animals. “Each man is locked into a system that compels him to increase his herd without limit—in a world that is limited,” wrote the biologist Garrett Hardin in the 1968 journal article that popularised the concept.
How to avoid the tragedy of the commons? This is where cryptocurrencies and blockchains enter the frame. Decentralized cryptocurrencies are supposed to be able to generate “consensus”—a state of coordinated global agreement—in a “trustless” environment. That means every actor in the system, making their own calculations to maximise their self-interest, should create a state of equilibrium that adds to the shared resource rather than depletes it.
We see some examples of this type of thinking catalogued in the media theorist Rachel O’Dwyer’s 2015 article, The Revolution Will (Not) Be Decentralized. Bear in mind this is sort of the Middle Ages in crypto terms, so things like decentralised autonomous organisations, or DAOs, now relatively common, were just getting started.
The aforementioned DAOs are a prime example of blockchains being used to avoid a tragedy of the commons. Since they are organizations that don’t assume trust on the part of the participants, the rules governing their behaviour are encoded into smart contracts, which are in turn deployed onto blockchains like Ethereum. Once deployed, they can’t be changed unless a threshold of agreement is reached among participants. This holds out the possibility for “blockchain-based technologies such as Ethereum can support and scale distributed forms of cooperation on a global scale,” O’Dwyer writes.
Blockchains themselves use various schemes to bring participants to agreement. The so-called consensus mechanisms used by blockchains award cryptocurrencies to participants who perform certain actions satisfactorily. Bitcoin mining, for example, requires actors to run the bitcoin software in order to increase the computational power that secures the network, and to process transactions. In return, they get a chance to receive new bitcoin, and a cut of the transaction fees.
So, blockchains solve the seemingly intractable problem of the tragedy of the commons using clever incentive schemes and cryptography, right? Well, that would be the case, except the tragedy of the commons itself was already solved even before Hardin published his paper.
A political scientist named Elinor Ostrom published a paper showing how people in Los Angeles shared a groundwater source collaboratively three years before Hardin’s article came out. She would go on to win a Nobel prize in economics for her work on solutions to the supposedly intractable problem of rational humans leading to competition for a scarce resource.
The premise that grounds the tragedy of the commons—that humans can’t be trusted to act collaboratively when presented with unlimited access to a resource—may be as flimsy as the fences around Hardin’s imagined pasture. This is the contention of the author Michelle Nijhuis, whose book on conservation, Beloved Beasts, includes an analysis of Ostrom’s ideas and their adoption over time.
Nijhuis finds that Hardin’s problematic dilemma remains in the public imagination while Ostrom’s solutions to the supposed dilemma remain in the shadows. One of the criticisms that Ostrom faced over the years was that her solutions were simply “too complex.”
Ostrom observed examples of communities working together to manage access to a public good, and then developed a framework around her observations. This was codified as “Ostrom’s Law” in 2011, the notion that what works in practice also works in theory. This speaks to the lack of a single, and simplistic, unifying theory around how these community negotiations to the commons work. It also stands in contrast to Hardin’s own blunt conclusions: that rational actors can never successfully manage a commons without coercion.
Ostrom sketched out eight “design principles” for managing a commons, including defining a community clearly, predictable processes for rapid and equitable conflict resolution, and self-determination of the community. But she steered clear of providing generalized prescriptions for all communities and all common resources. Instead, she insisted that solutions are necessarily complex and rooted in the local. “There are many, many ways of doing things that work in different environments. We have got to get to the point that we can understand complexity, and harness it, and not reject it,” she said in 2010, according to Nijhuis.
Ostrom and Hardin’s notions around the commons stand in stark relief. Where Hardin saw man as homo economicus, trapped in a conundrum motivated by rational selfishness, Ostrom presented evidence that reality was far from the game theory Hardin and his ilk imagined. Instead of the “tragedy of freedom” Hardin theorized, Ostrom showed what was possible between groups of free agents. “‘We are neither trapped in inexorable tragedies nor free of moral responsibility,” she said in 1997.
Which brings us back to blockchains. Time and again in crypto-land, we see the neat solutions offered by codifying rules on a global computer program crack under the pressure of human wants and needs.
The DAO, for instance, was supposed to be an autonomous computer program that lived on the Ethereum blockchain and could, in theory, operate with minimal human intervention. But a mistake in the code meant its millions in funds were drained away by a vigilante hacker, and ultimately it was “off-chain” coordination—via Skype chat groups and in-person relationships, that provided restitution to early DAO investors. Ethereum’s first “hard fork” was the result of those efforts, creating a branch in the chain of those who accepted the manual intervention, and those who rejected it. The latter group stayed on the original chain, and called their version Ethereum Classic.
For all of the potential offered by blockchains and their decentralized versions of the truth, the reality is often messier than the theorists can imagine. The crypto community would do well to abide by Ostrom’s methods of careful observation and analysis, while being mindful of the local conditions that can make or break a solution. As Ostrom’s Law says, what is possible in practice, is also possible in theory.
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